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
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
"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
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)
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