Schwarzenegger Proposes Pension, Retiree Health Care Cutbacks

June 30, 2009 ( - With California facing a $24.3-billion shortfall, Governor Arnold Schwarzenegger has proposed a new system for lower pensions and retiree health care benefits for new state workers

A Sacramento Bee news report said the proposal was included in a package of Schwarzenegger proposals submitted to Democratic leaders over the weekend.

According to the newspaper, the proposal for future state workers would:

  • Alter the pension formula to ensure lower benefits or longer public service. For example, most state workers who are not public safety employees now may retire at age 55 with a pension totaling 2% of their salary multiplied by number of years worked. The new formula would pay that benefit at age 60.
  • Compute pensions for police officers, firefighters and highway patrol officers based on the highest three years of compensation earned, rather than the highest single year.
  • Provide lifetime health care benefits only for retirees who have worked 25 years. Currently, the state pays 50% of retiree health insurance costs for employees with 10 years of service. The percentage rises 5% annually, to 100% for 20-year employees.
  • Lower the state’s contribution for retiree health care benefits from 100% of the average HMO premium to an amount that matches the contribution for active state employees – generally 85% of the insurance premium.

Estimated Savings

David Crane, a special adviser to Schwarzenegger on jobs and economic growth, estimated that the proposals could save taxpayers about $95 billion over the next 30 years.

Aaron McLear, Schwarzenegger’s spokesman, said the proposals were necessitated by Democrats’ rejection of about $5 billion in program cuts sought by the governor. “What the Democrats have said up to this point is, ‘We don’t want to eliminate (some programs targeted by Schwarzenegger), and we don’t want to make them run more efficiently – what we want to do is raise taxes to pay for them.’ And that’s unacceptable,” McLear said, according to the Bee.

State worker unions were particularly unhappy with the move in light of the salary reductions workers have already suffered. “Attacking hard-earned pensions, on top of a pay cut, does not solve the crisis,” said Yvonne Walker, president of the Service Employees International Union Local 1000.

Carroll Wills, spokesman for California Professional Firefighters characterized the Governor’s proposal as “manifestly unfair.”

“Essentially what you’re talking about at its core is unequal pay for equal work,” he told the Bee.