NCPA - National Center for Policy Analysis

Amid Backlash and Budget Deficits, Government Workers' Pensions are Targets

October 7, 2010

Faced with deep budget deficits and overextended pension plans, state and local leaders are increasingly looking to trim the lucrative retirement benefits that have long been associated with government employment, says the Washington Post.

  • In California, where an estimated 80 cents out of every government dollar goes to employee pay and benefits, Gov. Arnold Schwarzenegger (R) has proposed a two-tier system of pensions that offers new state workers reduced benefits with tighter retirement formulas.
  • Schwarzenegger also wants state workers to kick in higher pension contributions to help deal with California's staggering deficit.
  • New Jersey Gov. Chris Christie (R) calls reform of public employee pensions essential to fixing the state's enormous fiscal problems.
  • Michigan Gov. Jennifer M. Granholm (D) recently signed a change to her state's teacher pensions that increases employee contributions, and Illinois has pushed back the retirement age for new employees.

The move to curtail retirement benefits for public-sector workers is fueled both by stark budget realities and by the resentment felt by private-sector workers who have seen their pay diminish in recent years.

  • State and local government employees earn an average of $39.74 an hour in wages and benefits, about 45 percent more than private-sector workers, whose total compensation averages $27.64 an hour, according to the Labor Department.
  • The vast majority of private workers rely on defined-contribution retirement plans such as 401(k)s, while 84 percent of public-sector workers have access to guaranteed pensions, which are more expensive to employers.

Source: Michael A. Fletcher, "Amid Backlash and Budget Deficits, Government Workers' Pensions are Targets," Washington Post, October 6, 2010.

For text:


Browse more articles on Tax and Spending Issues