Not a Lexis+ subscriber? Try it out for free.

Estate and Elder Law

State Net: Brown Pitches Major CA Pension Overhaul

California Gov. Jerry Brown (D) has proposed a 12-point plan to reform public employee pensions in the Golden State. Brown says he wants to put his proposal before voters in November 2012. 
The linchpin of Brown's plan would involve moving future workers from a defined benefit plan enjoyed by current state and local government employees to a "hybrid" model that would combine benefits from a standard state pension, the Social Security system and a 401(k)-style savings account. Other key elements to his proposal include raising the retirement age for new non-safety workers; requiring both current and future employees to split the cost of their monthly pension contributions, which are now predominantly paid for by employers; limiting workers' ability to "spike" their pensions with one-year pay increases; and lengthening the time a worker must be employed with the government before being eligible for retirement health care benefits.  
Critics have long contended that the government pension plans, which include both state and local government employees, are building a massive unfunded liability that could eventually prove catastrophic to the state's economy. Figures vary, but worst case scenarios for the Golden State's three largest public employee retirement funds - CalPERS, CalSTRS and the University of California Retirement System - place the gap between assets and obligations to retirees at around $500 billion.  
The proposed reforms drew immediate skepticism from labor leaders and Legislative Democrats, who questioned whether any of the changes could be done outside of the collective bargaining process. Senate President Darrell Steinberg (D) called the governor's proposal "provocative" but also cautioned that "the vast majority of public sector employees are middle class workers and their average pensions are far from exorbitant."  
Assembly Speaker John A. Perez (D) seemed even less enthusiastic. The Speaker said lawmakers would "carefully consider" the governor's proposal and "work with him to bring stability to our pension system," but offered little else.  
Republicans, meanwhile, generally embraced Brown's plan, though mostly as a good start rather than a comprehensive solution.  
"Brown's plan, while a small step in the right direction, proposes to save only $1 billion per year. California can't wait 500 years for a solution," said California Republican Party Chairman Tom Del Baccaro. Former state finance director Mike Genest also issued limited praise, calling the plan "more substantial than I expected, particularly with regards to new employees" before adding that it fell short of what is needed.  
"Any proposal that does not require current employees to share in the responsibility of reducing our unfunded liability falls short of averting this crisis," he said.  
Brown's proposal will also likely have competition on the ballot. A group calling itself California Pension Reform has submitted two versions of a pension overhaul ballot measure to the state attorney general's office. Both have stricter elements than the governor's, including a higher retirement age for public safety workers and a requirement that employees pay a greater share of their pension contributions if their fund's assets equal less than 80 percent of its obligations. Once the measures have been analyzed by the state Department of Finance and the Legislative Analyst's Office, the group will choose one of the two and begin collecting signatures to get it on the ballot.  
Brown, however, has made it clear he thinks his plan offers the best of both worlds.  
"I've laid out what I think is a minimum that any plan in California ought to meet," Brown said. "And the minimum protects the taxpayer while being fair to the employees." (LOS ANGELES TIMES, SACRAMENTO BEE, BLOOMBERG BUSINESSWEEK, NEW YORK TIMES, SAN FRANCISCO CHRONICLE) 

The above article is provided by November 7th's State Net Capitol Journal. State Net is the nation's leading source of state legislative and regulatory content for all states within the United States. State Net daily monitors every bill in all 50 states, the District of Columbia and the United States Congress - as well as every state agency regulation. Virtually all of the information about individual bills and their progress through legislatures is online within 24 hours of public availability.

If you are a subscriber, you can access State Net Bill Tracking, State Net Full Text of Bills, or State Net Regulatory Text. If you are interested in learning more about State Net, contact us.

. . . .

Explore the Estates, Gifts & Trusts and Elder Law resources

Discover the features and benefits of LexisNexis® Tax Center

For more information about LexisNexis products and solutions connect with us through our corporate site.