California’s pension expansion bills will burn taxpayers, investors | Opinion

After 30 years advising wealthy investors on private equity, private credit and fixed-income allocations, I have learned to recognize when a state’s fiscal condition shifts from stressed to structural. California crossed that line some time ago.

Two bills now advancing through the Senate — Assembly Bill 1383 and Assembly Bill 1054 — would expand public safety pension benefits at the worst possible moment for systems already straining under a $265 billion funding gap.

AB 1383, authored by Assemblymember Tina McKinnor, D-Inglewood, dismantles key safeguards from the 2013 Public Employees’ Pension Reform Act. It lowers the retirement age for safety members from 57 to 55; raises benefit multipliers from as low as 2% to as high as 3%, depending on employer contracts; and increases the pensionable compensation cap.

AB 1054, authored by Assemblymember Mike Gipson, D-Gardena, creates a Deferred Retirement Option Program for California Highway Patrol officers and Cal Fire firefighters. Eligible workers freeze their pension at its current value, keep working for up to five years and collect a lump-sum payout in addition to their regular monthly California Public Employees Retirement System (CALPERS) benefit.

The California Assembly passed AB 1054 by 68 to 1.

The fiscal picture is not ambiguous. A December 2025 Reason Foundation analysis places California’s total unfunded pension liability above $265 billion — more than $6,000 for every state resident. CalPERS accounts for $166 billion of that total.

CalPERS actuarial staff projects that AB 1383 would add at least $9 billion over 20 years; independent 30-year modeling puts the cost above $14 billion. Those contribution rate increases fall on local government budgets that also fund roads, schools and emergency services.

The state currently contributes 70 cents to CalPERS for every dollar paid in California Highway Patrol officer salary and 51 cents on the dollar for Cal Fire. Every additional benefit layer tightens those ratios further.

History lesson

History is worth consulting: In 1999, Sacramento enacted Senate Bill 400 at the height of the dot-com boom, sweetening benefits under the assumption that investment returns would keep pace. They did not. Unfunded liabilities ballooned, cities cut services, some raised taxes and several filed for bankruptcy.

The 2013 Public Employees’ Pension Reform Act (PEPRA) reforms were Sacramento’s acknowledgment that the 1999 bet failed. AB 1383 proposes to reset the table to before PEPRA existed.

The demographic trend compounds the fiscal pressure. U-Haul ranked California last in net migration for the sixth straight year, with a net loss of approximately 216,000 residents in 2025. High-income households are overrepresented in that outflow, heading to states without income taxes.

California’s top rate of 13.3% remains the highest in the country. Every departing high earner takes income and capital gains tax revenue with them. The base that funds growing pension obligations is contracting.

Understated costs

On Assembly Bill 1054, supporters argue that the Deferred Retirement Option Program structure is cost-neutral because pension accrual stops during the deferral period. Los Angeles heard the same argument before its own Deferred Retirement Option Program variant generated seven-figure payouts for officers on disability leave. San Diego’s version drew fire for allowing officers to draw pension income while returning to active duty pay.

AB 1054 requires CalPERS to certify cost-neutrality before the program launches, but that certification depends on the same actuarial assumptions that have understated costs repeatedly.

Reject both bills

California leaders must reject both bills and concentrate resources on the existing $265 billion gap. Move new public employees into hybrid or defined-contribution plans that distribute investment risk more equitably between workers and taxpayers — the federal model since 1986.

Expand access to Transparent California so that residents can see what has been promised and what it will cost. If recruitment is the genuine concern, address the incentive structures that make early retirement rational. We should not add another benefit layer to a system still working through the consequences of the last round.

Expanding pension benefits that future generations will have to fund is not appreciation toward public servants. It is a political transaction — benefits paid for today, bills sent to people with no vote on the matter.

The liability you defer today becomes the structural constraint that limits your options tomorrow. California has been running that experiment for 25 years. The results are already in.

Jay Rogers is a financial professional with more than 30 years of experience in private equity, private credit, hedge funds and wealth management. He has a Bachelor of Science from Northeastern University and has completed postgraduate studies at UCLA, UPenn and Harvard.

This story was originally published April 20, 2026 at 5:00 AM with the headline "California’s pension expansion bills will burn taxpayers, investors | Opinion."