New Report on Controlling Rising Government Compensation Costs

New Report on Controlling Rising Government Compensation Costs

The Pacific Research Institute (PRI), a free-market think tank based in San Francisco, today released a new report providing policy reforms to help control the rising compensation costs of state government employees. The report “Policy Reforms to Control Rising Government Compensation Costs” was authored by Wayne Winegarden, Ph.D., a senior fellow at the Pacific Research Institute.

California’s state and local governments continue to face historic budget crises, as exemplified by the persistent state deficit as well as the bankruptcy of the cities of Stockton, San Bernardino, Mammoth Lakes, and Compton. While the crises have many causes, a key driver is overly generous government compensation packages. As a result, California’s budget crises will never be sustainably resolved without addressing the problem of overly generous state and local compensation.

The report recommends that California should consider switching its current defined benefit system to a defined contribution system. Since such a move is a political challenge and likely unachievable at this time, Dr. Winegarden recommends reforms to the current defined benefit system. They include: 1) increasing the number of years used to calculate the retiree pension benefits; 2) raising the retirement age while accounting for the different needs of different professions; 3) disallowing retirees to draw both a state salary and a state pension; 4) create salary increase caps for the purpose of calculating pensions to protect taxpayers against pension spiking; and 5) increasing employee contributions to their own retirement.

Dr. Winegarden said: “Following this reform model will not only help address California’s pension funding problem; it will also help level the playing field between public sector compensation by eliminating a key driver of excessive state and local government compensation.”

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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