53%
47%
Summary
OPPOSE
Deferred Retirement Option Programs (DROP) are, at their core, a form of double-dipping by allowing retirement-eligible employees to simultaneously collect a pension deposited into a separate account and continue drawing a full salary for the same work. This practice is out of line with what the private sector offers and is patently unfair to taxpayers who foot the bill. Rather than incentivizing experienced employees to transition out of government service at the appropriate time, DROP programs perversely reward them for staying on while collecting two streams of public compensation and increasing the government’s unfunded liability.
The deeper fiscal danger of DROP programs lies in how they interact with California’s already chronically underfunded pension systems. Pension costs that appear manageable under optimistic actuarial assumptions can deteriorate rapidly when market conditions shift. Layering a DROP benefit on top of an already stressed defined benefit system — as AB 1054 proposes for CalPERS — adds new actuarial complexity and cost exposure at precisely the moment when the state should be moving in the opposite direction. The bill’s requirement of a cost neutral actuarial analysis before implementation offers cold comfort given California’s well-documented history of pension actuaries producing optimistic assumptions that consistently understate long-term costs.
The broader lesson from successful pension reformers is that sustainable retirement systems require moving away from benefit structures that shift unlimited risk onto taxpayers, not by creating new mechanisms for retirement-eligible employees to maximize their compensation at public expense. AB 1054 moves California’s pension policy in precisely the wrong direction, extending a benefit structure that is a contributor to pension instability rather than a solution to it. California’s public pension obligations are already among the highest liabilities in the nation; this is no time to be adding new flavors of double-dipping to the menu.
Last Action
Referred to Senate Labor, Public Employment and Retirement Committee
