A surge of California public workers called CalPERS to check their retirement options as Gov. Gavin Newsom and the state Legislature talked about pay cuts last month, according to call data.

Newsom announced plans in May to temporarily reduce state workers’ pay to help close a projected $54 billion deficit caused by the coronavirus outbreak.

In June, 10,266 state and local government workers called the California Public Employees’ Retirement System with retirement questions, an increase of 66% from the month before, according to data kept by the system.

The spike reflects a management challenge for the state as it trims pay to save money while trying to retain workers who are critical to its emergency response efforts. In each of the last two years, fewer than 6,000 people called about retirement in June, according to CalPERS data.

Retirement-age workers, many of whom provide valuable expertise to the state, were worried pay reductions could negatively affect the calculations that determine the size of their pensions, according to union leaders. Public workers’ pensions are calculated based primarily on final pay and years of service. If their pay drops at the end of their careers, their pensions will be smaller.

“When the state experiences budget problems and state employees share in that uncertainty, including reductions in pay, it’s not surprising that they would explore their retirement options,” said Ted Toppin, executive director of Professional Engineers in California Government.

CalPERS data showing how many public workers actually retired in June is not yet available. The uncertainty around pensions was resolved, at least for the short term, when all of the state’s unions reached pay-cut agreements that specify pensions will be calculated as if workers’ pay hadn’t been reduced.

Yet the agreements suspend most workers’ raises, eliminating an incentive for retirement-age employees to keep working to grow their pensions, said Tim Edwards, president of Cal Fire Local 2881.

A bump in retirements among older, better-paid workers would save the state more money as it faces an indefinite recession due to the coronavirus, but the exits also represent losses in experience and expertise.

Many of the fire chiefs and captains who inquired about retirement have experience that helps them make decisions about where to place fire crews, engines and equipment to minimize fires’ spread in the regions they cover, he said.

“If you have a fire in a certain area, you know 95 percent how that fire is going to behave based on terrain and topography,” he said.

Toppin, from the engineers’ union, said the union retained longevity pay in its agreement, which should help keep experienced engineers from leaving behind work related to climate change and other initiatives at departments like the Department of Water Resources, the Air Resources Board and Caltrans.

“That’s work that PECG members want to do and it’s challenging for them, so hopefully the longevity differential gives them some incentive to stick around,” he said.

Public service retirements accelerated during the Great Recession, when former Gov. Arnold Schwazenegger instituted furloughs. In the summer of 2009, public service retirements were up by 16 percent compared to the year before.

The state’s pay-cut agreements add to its long-term liabilities, according to a recent report from the Legislative Analyst’s Office. The agreements reduce pay by up to about three-quarters of what workers make in two days of work, and in exchange give them two days off per month to use at their discretion.

Part of the impact to the state’s liabilities comes from preserving pension benefits, according to the report. The state and employees each pay a percentage of workers’ salaries toward CalPERS. Under the pay-cut agreements, the state is paying less toward the pension system while preserving pension benefits, contributing to underfunding of pension liabilities, according to the report.

CalPERS covers about 875,000 active public employees, including about 230,000 state workers.

State workers become eligible to retire as early as age 50, depending on their job and when they were hired. Those hired after Jan. 1, 2013, are eligible to retire as early as age 52.

Retirement formulas create extra incentives to work longer than that by offering a higher percentage of pay per year of service, up to given limits. The average state worker retires at age 60 with 24 years of service, according to CalPERS data.

About 37 percent of California state workers are over 50, while about 11 percent are over 60, according to Human Resources Department data.

This story was originally published July 27, 2020 at 6:00 AM with the headline "CalPERS got 10,000 calls about retirement as California leaders talked about pay cuts."