LAO: "Significant Effects" from DeMaio/Reed Plan to Eliminate Retirement Security, Pension

State and local governments could be hit with significant new costs as the result of the ballot measure affecting retirement benefits of workers proposed by former San Diego City Council member Carl DeMaio and former San Jose Mayor Chuck Reed, according to a new analysis from the state’s independent Legislative Analysts Office (LAO).

The LAO found that while there is the potential for savings from the measure, it also could have other costly impacts for taxpayers and workers. These include:

Reductions in pension contributions by employers could result in increased compensation in other areas to attract and retain workers, including wages and health benefits;

Taxpayers could be forced into paying for the Social Security benefits of many workers, since many are not now included in the program;

Many existing pension plans would be closed to future workers, which could increase taxpayer contributions to pay for the pensions of existing employees; and

The cost of death and disability benefits for firefighters, police and other public safety workers could increase.

“The magnitude, timing, and direction of the fiscal effects of this measure depend heavily on future actions,” concluded the LAO.

“Like its previous incarnations, this measure is fundamentally flawed on every level,” notes Dave Low, Chairman of Californians for Retirement Security. “It opens a Pandora’s box that will eliminate retirement security for teachers, firefighters, school employees and other workers while likely costing taxpayers billions of dollars more in everything from increased expenses for death and disability benefits to increased payments for the pensions of existing employees. If Chuck Reed and Carl DeMaio were looking for a silver bullet that would win voter approval, they’ve failed once again.”