And another reason to reject AB 1383
What’s the average period of time from when a pension benefit is promised to a California government employee to when the benefit is paid out? That period of time is the duration over which a public pension fund must earn the rate of return it assumed when the promise was made to the employee. Anything less and taxpayers must pick up the difference, as explained here.
Here is Claude’s answer to my question:
“You’re describing the full time horizon from when a benefit is earned to when it’s finally paid out and exhausted. It has two legs:
“Leg 1: Accrual to retirement (deferral period)
This depends on when in a career the promise is made. A benefit earned in year one of a 30-year career sits unpaid for decades; a benefit earned in the final year is paid almost immediately. Averaged across a full career, this leg alone often runs 15–20 years.
“Leg 2: Retirement to death (payout period)
Once benefits start, they continue for the retiree’s remaining life plus any survivor benefit period for a spouse. For a plan with normal retirement around 62–65, this is typically another 20–25 years given current life expectancy and survivor continuation.
“Put together: the average promise-to-final-payment span for a benefit earned mid-career is often 35–45 years. This is why:
- Pension mistakes compound so severely — a benefit enhancement enacted today (like SB 400 in 1999) doesn’t fully reveal its cost consequences until the people it applies to have all died, which can be 60+ years after enactment for someone hired the year it passed.
- Discount rate assumptions matter enormously — small changes compound over a 35-45 year horizon.”
In California, pension “mistakes” — ie, earning less than assumed rates of return — are paid for by taxpayers, not by employees. That gives employees, whose unions control the boards of state pension funds, an incentive to make such mistakes by high-balling investment return assumptions so as to low-ball upfront (“normal”) pension costs, which are the only pension costs shared by employees. Pension “mistakes” have already saddled California taxpayers with hundreds of billions of dollars of unfunded pension liabilities that, in 2025 alone, cost them an extra $25 billion on top of normal pension costs.
The California State Senate is considering Assembly Bill 1383, which would allow local governments to enhance pension benefits for public safety employees. The only safe way for taxpayers to promise, much less enhance, pension benefits is to pre-fund those promises with risk-free assets such as US Treasuries or to be held harmless if pension funds fail to earn their assumed rates of return. AB 1383 would provide neither of those protections. Unless amended, it must be rejected.
