To erase a $19 billion state budget deficit, the governor has proposed a reduction in public worker pensions to 1999 levels, refusing to sign any budget that doesn’t contain the cuts.
Schwarzenegger would count the $2 billion as an advance on the roughly $74 billion he estimates in savings during the next three decades from his proposals to roll back pension benefits for government workers, Bloomberg reported. The advance would come from pension cuts projected to save $93 billion over 30 years.
Still, Republicans and Democrats lack a solution over whether to use higher taxes or spending reductions to lower the state’s deficit. With California still lacking an accepted budget, negotiators are considering alternatives to generate savings, such as borrowing or deferring payments, The Sacramento Bee reported.
According to the Bee, the last time the state borrowed from CalPERS, it had to pay the pension fund $400 million in interest. “CalPERS is obliged to “treat the loan as they would any investment,” Keith Brainard, research director at the National Association of State Retirement Administrators, told the Bee.
The state is required to pay $3.9 billion this fiscal year to CalPERS to finance retiree costs, up from $145 million a decade earlier.
– By Paula Vasan