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Increased pensions expected to wallop state, local budgets Now that law, debated for only a few minutes in the frenetic closing days of the 1999 legislative session, has come back to haunt California. Those greatly improved retirement benefits -- and a stock market in the tank -- are about to devour billions of dollars that could otherwise be used for education, police and fire protection and road improvements. Although the issue of pensions has received scant attention amid Sacramento's boiling budget debate, many local government officials say future payments to the California Public Employees' Retirement System represent their No. 1 worry during these scary fiscal times -- more than declining sales tax revenue or state raids on local treasuries. ``The single largest driving force is the CalPERS increase,'' said John de Russy, San Mateo's finance director. ``It's kind of the silent killer.'' With 30 years of service, many local government workers can now retire at age 60 with pensions equal to 90 percent of their final salary. Firefighters and police officers can retire at 90 percent of their salaries at age 50, resulting in benefit increases of 50 percent and making the peace officers' pensions among the most generous in the nation. Carroll Wills of the California Professional Firefighters noted that public safety officers had waited a long time -- 16 years -- under two previous Republican administrations to improve retirement plans. ``They deserved these new benefits,'' he said. ``A lot of our member unions gave up pay raises to allow them to retire at 50.'' Randy Perry, lobbyist for the Peace Officers Research Association of California, agreed. ``You have to understand how important these guys are to California, especially with today's terrorist threat,'' he said. ``They risk their lives every day. They're often injured on the job.'' But the costs to cities and counties are mounting. Fremont, the Bay Area city that has done the longest-term projections on retirement costs, predicts it will spend $11.4 million more in the next five years. That $11.4 million -- roughly equivalent to 10 percent of Fremont's general fund budget for this fiscal year -- could pay the salaries and benefits of 95 firefighters or 88 police officers for a year, according to Mark Moses, the city's financial services manager. It could repave 80 miles of the city's residential streets. It could maintain all city parks at last year's level for 2 1/2 years. Moses said cities and counties are only starting to see the increases because the amounts employers must contribute to retirement coffers are based on figures that lag two years behind the results of pension fund investments. ``It's California's ticking time bomb,'' said Jon Coupal, president of the Howard Jarvis Taxpayers Association. ``I honestly believe that these irresponsible pension increases will make California's energy crisis pale in comparison. The problem with public employee pensions is they're locked in. They're a vested, contractual right.'' How did this happen? Remember life in 1999? Remember irrational exuberance? CalPERS, heavily invested in the stock market, was awash in cash after its investment portfolio soared for five years in a row. The companies of the New Economy were boosting salaries, handing out stock options like licorice, throwing lavish parties. In June of that year, the 13-member CalPERS board decided to share the wealth with retirees.
Board President William Crist pointed out that most benefit formulas for state and school workers hadn't been revised in nearly 30 years. In addition, the system was then operating under a two-tier system in which employees who came to work after
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