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.