Scores of California government agencies continued to sweeten employee pension plans even after the state’s economy began collapsing into recession in 2008, a decision that is now haunting them as they struggle with deficits and deep budget cuts.
A state oversight panel has identified about 180 local governments that increased pension benefits at a time when the state’s unemployment rate was rising, housing prices were falling and the nation’s banking system was in crisis. The enhancements covered thousands of public employees, adding tens of millions of dollars of new debt to local governments, analysts say.
At the time, officials thought the deal made financial sense because the firefighters union agreed to forgo more raises in exchange for new pensions rules that would allow them to retire at age 50 with 85% of their salary if they’d been on the job 28 years. Now, Costa Mesa says it’s facing a $1.4-million deficit and has sent layoff notices to half its employees. Officials plan to eliminate the Fire Department, contracting with the Orange County Fire Authority in a move they say will save money.
Read the Hoover report. More evidence that government worker monopoly bargaining is a bad deal for taxpayers who foot the bill for the political deals cut between the politicians and big labor.