Brown's Pension Musings: From Ponzi to Castor Oil

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Getty/Max Whittaker

Few governors could probably pull off an appearance like Governor Jerry Brown's visit to a legislative committee examining his proposal to rework the public employee pension system.

But as he's proved before, Brown often seems to believe that when it comes to explaining his ideas... he's best the guy for the job.

His appearance before a packed hearing room was part sales pitch, part tough love, with a dash of lamentation thrown in for good measure.

Brown defended his 12-point plan but also tacitly acknowledged that it may not do enough, all while urging quick legislative action to help restore the public's faith in its elected officials.

The governor arrived in the state Capitol's Room 4203 almost midway into the afternoon long hearing of the joint committee on public employee pension reform. And he wasted no time warning legislators that the issue is yet another tough row to hoe in fixing California's fiscal problems.

"This is more Castor oil, I'm afraid," Brown said. "Allocating less is not as much fun as allocating more."

But there were hints that his pension plan isn't as bitter a medicine as the governor would dole out were it not for legal and political hurdles to even more austere proposals. "In my opinion, this is the minimum," he said.

Brown's most pointed comments about the existing system came in his criticism of concerns voiced Wednesday by CalPERS about the future liability of existing pension promises if traditional 'defined benefit' packages are eliminated.

"Well, that tells you you've got a Ponzi scheme," said the governor. "Because if you have to keep bringing in new members, then the current system itself is not in a sustainable position. I don't accept that."

And in an exchange with Sen. Mimi Walters (R-Laguna Niguel), Brown offered a pretty frank reason for why his proposal avoids what Walters and other strident pension critics want: a revision of the benefits promised to current workers.

"I'm trying to write a plan that I think has the real possibility of getting enacted," he said.

That response seemed to be a nod not only to the belief that long standing legal rulings preclude those kinds of changes, but also to the political war that such a strategy would set off with public employee unions.

Governor Brown is by no means a critic of traditional pensions, and he affirmed his support for them during his back-and-forth with legislators.

Nonetheless, he offered several lamentations of the status quo.

On the 1999 law that enhanced many public employee pensions, Brown said, "I was incredulous at the time and I'm still incredulous."

And on the aforementioned legal bindings on pension benefits for current public employees, the quotable governor offered this gem:

"I don't like these kind of irrevocable commitments. I waited a long time before getting married, to 67. And you still have divorce. There's no divorce with a defined benefit pension plan."

If Brown's fellow Democrats hope the chief executive will eventually dial back his proposal, he didn't give any hint of it today -- though administration officials who testified earlier had admitted that many key elements, including the idea of a "hybrid" pension/401k system for future state employees, are still very much a work in progress.

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About John Myers

John Myers is senior editor of KQED's new California Politics & Government Desk. He has covered California politics for most of the past two decades, serving previously as Sacramento bureau chief for KQED News and most recently as political editor for KXTV News10 (ABC) in Sacramento. In 2014, he was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.
  • Anonymous

    I must admit that Jerry Brown’s presentation was impressive, but there was an additional 3 1/2 hours of other testimony that seems to have been under reported in the news media. I felt that the lady from CalPers made a good point that you can’t ban payment holidays, because if a pension fund becomes over funded, then it loses it tax exempt status. I felt that the testamony from the LAO office that the proposal doesn’t necessary save any money in the near term, because if you raise employee contributions to pension during negotations, then you are most likely going to need to provide those employees with other compenstation or benefits.

    I was there, because I feel that the debate suffers from the mistaken impression the public employees are overpaid. The gold plated pensions are a myth enjoyed by police chiefs and general managers. The average public pension in California is just $26,000 a year. I also feel that that the debate ignores the many concessions that most public employees have already made. We have been furloughed, had our wages frozen, and pay more for health care and we weren’t that well paid to begin with.  

  • http://camod.org Ash Roughani

    This Governor is pretty golden sometimes.  Much kudos.

  • http://blogs.kqed.org/capitalnotes John Myers, KQED

    Tim,
    I think you raise an important point about media coverage of the hearing… and of the pension debate in general.

    On the hearing yesterday, I’m still baffled why legislative leadership chose to convene a 4+ hour event at 1 p.m. During legislative session, afternoon hearings are commonplace and necessary, but I’ve heard no good reason for this one to be pushed into such late hours. For those of us in the news world, that’s just about the worst time possible to cover something and meet afternoon/evening deadlines. While some in the news media would have only covered the top-layer of the governor’s comments regardless, others would have been able to at least stick around and mull the many other policy points offered… if only the event had been earlier in the day.

    Having said that, I also think the hearing would have generated far less coverage if Brown hadn’t attended. That, too, offers an unfortunate commentary on the overemphasis on daily “spot” news.

    Thanks for reminding me to go back and review the discussion that took place once we all had to run for our bureaus to file stories.

  • AC

    I hope you recognize that the average you mention includes PERS employees who retired years ago (before the sweetened pension formulas) and also includes those who have just five years of service.  The 2008/09 (latest available data) average PERS pension for a 30-year employee is $66,828.  The average social security pension right now is a little more than $14,000.

  • AC

    I’m a local elected official, a Democrat, and a union member.  The governor is correct.  This is the minimum that should be done.  Realistically, the formulas for current employees need to be lowered going forward.  But legally and politically, that’s not liable to happen.

    On this topic, John, you might want to report on the City of San Jose.  On 12/6, the council there under the leadership of Mayor Reed will likely place on a special March ballot an extremely aggressive pension measure.  For current retirees, it would mean no COLA increases for at least 5 years.  For future employees, it would mean a combined defined benefit/defined contribution pension with the City contributing no more than 9% of pay.  Existing employees would be given a choice to move to the new program or pay half the cost (up to 25% of pay) for their current defined benefit only plan.  Mayor Reed seems confident the measure will pass at the polls.  It will be challenged in the courts and we’ll finally get a read on how the California Supreme Court interprets the vested rights of existing employees.

  • Tim_R

    Any how many people do you know that have stayed with one employer for 30 years? I have been with my employer for 17 years, but of my college friends I am the only one who can say that.

  • Tim_R

    Taking cost of living adjustments away from retirees is pretty low. I view not paying retirees what you promised them is equal to defaulting on your mortage. Why is it okay to break one contractural promise and not the either?

  • Anonymous

    That is a cherry picked group, and is but a small drip, in the total number, of other public employees, who also retired in 2008/09.  My own pension includes 36.4 years service credit, and I do not get that much.  My pension is also in the above average category for all CalPERS current beneficiares.  The average age of CalPERS pensioners, in the miscellaneous category is 60–you wont find many who had just five years’ service.

  • Anonymous

    What makes me think you are probably an official in the City of San Jose.  I’m sure you already have your pension, and you enjoy sticking it to others, since your punitive actions won’t hurt you, in the least.

  • Rtorchia

    This is interesting AC but as a Union member  don’t you think that management and the Mayor and Council should change their retirement system? Change it so they receive say 25 % for one term & 30 % for two terms and that their Medicals should be the same as the non-management worker in the city. Don’t you believe as a good union man that the people should vote on all pay raises the Mayor or Council come up for? As for Management they should have the same Medical choice as the average worker and retirement system. I hope you don’t believe that you are doing the best for your position and the people who voted for you. If you do open your eyes and look around you. Brown and the rest of the Democrats as well as Republican are fiddling well Rome Burns. Believing in Browns ideas is like the Hebrews giving into their evil nature in the desert while Moses was getting the Lords Laws. Wasn’t Brown a drop out from the Priesthood hum then enters government making sure he could not be drafted. Why was  Brown called Governor Moonbean  I won’t guess but all those from that generation know why and you follow. Isn’t it the Unions that want illegals unionized and have not held American Tax paying worker jobs? Isn’t it the Democrats giving Illegals financial help using American Union Tax paying workers hard earned money and giving Republicans fodder to gain offices. I’am a Democrat and  don’t trust or believe you or the rest of your democratic party. I was a Union steward  and saw how unions betrayed their members for the sake of the union organization. The workers are used as pawns for the union organizational political control and not the membership.