The dirty little secret - and one that elected officials are reluctant to acknowledge - is that the crisis in underfunded obligations cannot be resolved without changes in the benefit structures for current state and local employees. But the courts have held that government pension promises can't be adjusted. So now the California Foundation for Fiscal Responsibility has come up with a possible way around that problem. From the Sacramento Bee:
Say that a 55-year-old state employee, Myra, has 20 years of service. She plans to retire at age 63 and will receive 2.5 percent of the average of her highest three years' pay (let's say $50,000). So her annual pension would be $25,000, about $2,100 per month when she retires in 2019. The foundation's idea would force every public employee pension plan in California to use tougher standards to figure out the spread between their pension promises to people like Myra and the assets they have to make good on those promises.
The foundation's proposal would freeze Myra's pension formula. The money she accrued to that point would stay in place, but her benefit going forward would build up at a much lower rate, maybe half. When the fund could cover all its obligations, Myra's old formula would kick in from then on. Of course, she might retire before that happens.