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Dems’ Pension Reform Plan Now Up For Discussion

| August 29, 2012
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Update Thursday KQED’s Rachel Dornhelm reports:

The two biggest Bay Area cities are exempt from Governor Jerry Brown’s pension reform. San Francisco and San Jose are charter cities, with their own pension plans and bruising pension battles. Just this week San Jose’s city council enacted a two-tiered pension plan to help rein in costs.

The Board of Administration of the California Public Employees’ Retirement System (CalPERS) is discussing the Democratic pension reform plan today. You can watch here live.

Update: This seems to be the headline coming out of the meeting, which is now over, at least on Twitter…

CalPERS is a government agency that manages the state’s pension fund. The board is made up of labor representatives, ex-officio members, and gubernatorial appointees. It has issued a preliminary analysis of the main components of the plan, announced yesterday but yet to be voted on. As Ben Adler reported on KQED Radio today, the plan’s “proposed changes include higher retirement ages, reduced payments, and a requirement for employees to pay at least half of their pension costs.”

The legislation is expected to be taken up by the Legislature in the next couple of days.

News10 Sacramento’s John Myers laid out the significant changes the plan is proposing in a post last night:

Unlike pension changes in years past, this one would apply both to state and local workers — the vast majority of government workers in California. And while most of the changes would focus on future workers, current employees would also feel the impact.

The proposal hinges on three major changes: new pension salary caps, new cost sharing, and less retirement cash.

It caps the amount of a public worker’s salary that can be used to calculate a pension — about $110,000 for general workers and about $130,000 for public safety.

It pushes for an equal split of pension costs to be borne by government and by workers. And in a provision the unions are especially angry about, it would allow for a mandatory 50/50 cost sharing on workers who fail to agree to changes at the bargaining table after five years.

And finally, it means less cash for future retirees after longer careers. Local workers would, like many state workers before them, see controversial pension enhancements enacted in 1999 rescinded. Future workers in local government would have to stay on the job until 67 to get the same benefit a worker now can get by retiring at 55; the shift for local public safety would be from 50 to 57 for a similarly sized pension. Full post

KQED’s Rachel Dornhelm talked to Brown labor secretary Marty Morgenstern today. He said the part of the plan that will require employee contributions will have to be negotiated with the unions — but within a five-year deadline. Morgenstern said, “At the end of that time, management has the right to impose that as a last best and final offer if they go through the bargaining process.”

Republican legislators, by the way, are not impressed with the proposed changes. And unions, by the way, are really not impressed.

Brown’s original proposal was harsher, but his fellow Dems balked, so the agreement between them is considered a compromise measure. As is the case with state and local governments around the country, the gap between California’s pension liabilities and its available funds has been driving the “somebody-do-something” debate. Last year, the Little Hoover Commission, a bipartisan state oversight agency, released a report on the public pension system that started out this way…

California’s pension plans are dangerously underfunded, the result of overly generous
benefit promises, wishful thinking and an unwillingness to plan prudently. Unless
aggressive reforms are implemented now, the problem will get far worse, forcing
counties and cities to severely reduce services and lay off employees to meet pension
obligations.

…and then went into gruesome details.

Conventional wisdom is that Brown wants a pension reform deal in order to make his Nov. tax-increase ballot initiative more palatable to the electorate. Last month, Senate Majority leader Darrell Steinberg, discussing the notion that state funding for high-speed rail would eat into support for the tax measure (a notion later shown to be accurate in polling data), said as much when he told the LA Times that “the vote…will be seen in a broader context. We’ll have pension reform, which is much more important to voters…”

Finally, apropos of pension reform, here’s a pretty interesting Mercury News article that contends the San Jose police department has been losing officers at an unprecedented rate partly because of salary and pension cuts…

[Police Chief Chris] Moore and union officials say… (a)fter pension reform and pay cuts, officers can make more money and better benefits elsewhere, even at smaller departments…Moore said that employee contribution of nearly 20 percent for pension and retiree health care, coupled with the 10 percent pay cut, is driving officers to look elsewhere. Since 2011, 79 officers have resigned, compared with 47 from 2007 to 2010.

“They all say the same thing,” Moore said. “I love the city. I love this department. But I can’t afford to work here.”

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Category: Pension Reform, State Budget

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