The financial crisis has shaken the foundations of retirement security in both the private and public sectors, and nowhere more than in California. Generous public pension promises are straining the finances of cities and counties while private sector workers have little prospect of secure retirement. The contrast between the guaranteed and increasingly expensive pensions and retiree health benefits enjoyed by most public workers in California and the less secure (and often missing) retirement plans of private-sector workers has touched off pension envy.
In Public Affluence, Private Squalor, Mark Paul and Micah Weinberg examine the roots of California’s pension crisis and the legal obstacles to reform. Change is desperately needed to avoid further overpromising and underfunding of public pensions and to mend the broken social contract for private sector employees with inadequate retirement savings. Although the road to reform will be rocky, Paul and Weinberg suggest that, in the long-term, a cash balance plan can create a stable public pension system while restoring the balance between public and private pensions.
Read the full policy paper here.