Borenstein: California taxpayer pension costs grew eightfold since 1999; new plans add billions more

California lawmakers are pushing forward with legislation that threatens to increase the state’s already significant public pension debt. Assembly Bill 1383, introduced by Assemblymember Tina McKinnor, aims to roll back pension reforms implemented in 2012. If passed, the bill would increase salary limits for pension calculations and expand retirement benefits for police and firefighters. Estimates from CalPERS suggest these changes could cost state and local governments more than $8 billion.

This move comes after decades of rising costs. In 1999, the state expanded public pension benefits under the assumption that a booming stock market would cover the expense. That projection failed, and subsequent market downturns left taxpayers to cover the shortfall. Annual contributions to the California Public Employees’ Retirement System have jumped from $1.6 billion in 1999 to $26.7 billion today. Real costs, adjusted for inflation, have increased by a factor of 8.3.

Local governments feel the strain of these payments acutely. In many cities and counties, pension contributions now represent a significant portion of the total payroll. Oakland, Santa Clara County, and BART currently pay high rates for every dollar of employee salary, with costs for police and firefighter pensions reaching as high as 84 cents per dollar for some agencies. These mandatory payments often displace funding for core services like public transit and road maintenance.

Critics argue that the legislature is ignoring past failures. The system’s reliance on optimistic investment forecasts has historically created massive unfunded liabilities. When these investments underperform, the burden falls exclusively on employers and taxpayers rather than employees. Despite these risks and warnings from financial analysts, the bill has already received bipartisan support in the Assembly and is moving toward a vote in the Senate.

State officials have a long history of underestimating the long-term impact of benefit expansions. With CalPERS currently holding only 85 percent of the funds needed for future obligations, further increases to the normal cost could place the entire system on unstable ground. The current legislative push suggests that the cycle of debt creation remains a primary feature of California’s approach to public employee compensation.