CA lawmakers balance taxpayers, public employees
October 27, 2011
SACRAMENTO, Calif. (AP) – Gov. Jerry Brown on Thursday unveiled his plan for overhauling public retirement benefits requiring California lawmakers to tread carefully between protecting taxpayers and the public employees who serve taxpayers.
While Republican lawmakers were cautiously optimistic, Brown received a more tepid response from his fellow Democrats who hold a majority of seats in both the state Assembly and Senate. Some public employee union leaders who hold a lot of influence in the Legislature quickly lined up to oppose his plan.
“Some of the governor’s proposals go too far and run the risk of undermining retirement security for thousands of California school bus drivers, special education aides, custodians, school cafeteria workers and their families,” said Allan Clark, president of the California School Employees Association, in a statement.
The Democratic governor is seeking to move new state workers to a hybrid system where guaranteed benefits are combined with a 401(k)-style plan. He would raise the age civil state employees are eligible for full retirement benefits from 60 to 67.
Newly hired public safety employees would have to work beyond the current minimum retirement age of 50 depending on their ability to perform the job.
While Brown’s plan deals mostly with new state hires, he also wants current employees to contribute at least half of the cost of their pension benefits because some local government workers currently put in nothing of their own.
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“Applying this is going to take some care,” Brown said at the state Capitol in outlining his 12-point plan. “But I’ve laid out what I think is a minimum that every plan in California ought to meet – at a minimum protects taxpayers while being fair to the employees.”
Brown’s finance director Ana Matosantos estimated that changes would reduce the state’s contributions by $4 billion to $11 billion over the next 30 years as the plan is implemented. She said all other aspects of government – from courts and schools to cities and counties – would see their own savings, too.
The Brown administration said it was still working out finer details of the proposal but the governor said he is asking the Legislature to put a measure on a statewide ballot so the changes would impact both state and local government employees.
Other aspects of this proposal would be passed through legislation.
Sen. Bill Emmerson, R-Hemet, said if the governor and Democratic lawmakers can ensure the changes include legislative protections so that Democrats can’t renege on the plan, then he would endorse it.
“Put it before me, and if that’s all there, I’m in,” Emmerson said in a statement. “I’ll vote for it.”
Senate President Pro Tem Darrell Steinberg, D-Sacramento, said the governor’s proposal is worth exploring but Steinberg expressed concern that public workers may be unfairly targeted because of headline-grabbing pension and salary scandals such as in the city of Bell.
“The abuses that a small number of people take advantage of absolutely must be resolved,” Steinberg said in a statement. “But we can’t forget that the vast majority of public sector employees are middle class workers and their average pensions are far from exorbitant.”
Jack Pitney, a political science professor at Claremont McKenna College, said it’s no surprise lawmakers are unhappy at the prospect of rolling back benefits for public employee unions who carry a lot of influence in the Legislature.
“Just about every provision is going to make somebody unhappy but a failure to act would make everybody unhappy,” Pitney said.
Union officials said at legislative hearing that a typical state worker earns an annual pension of about $31,000, but benefits can vary widely. A highway patrolman with 28 years of service can take home a pension of more than $90,000 a year, said David Lamoureux, a deputy chief actuary with the state Public Employees’ Retirement System.
According to one tally cited by Republicans, more than 9,000 state employees are receiving six-figure pensions.
On Thursday, Brown said he went as far in scaling back benefits as he believes is legally possible, blaming lawmakers over the decades for gradually increasing benefits and approving “very generous and unaffordable ground rules that then the collective bargaining process took advantage of.”
The governor read a 1999 memo from his now-Labor and Workforce Development Agency Secretary Marty Morgenstern warning the state it would be imprudent to hand out enhanced retirement benefits retroactively to state workers based on assumptions that pension funds would continue to earn record-high investment returns.
Pension talks with the GOP broke down this spring as Republican lawmakers sought deeper rollbacks than Brown had proposed, including the mandatory “hybrid” system he is now seeking. By shifting to a mandatory hybrid system, employees with at least 30 years of service would replace about 75 percent of an employee’s salary through retirement funds and Social Security, according to the governor’s plan.
Several parts of the plan would require voter approval, including extending many of its provisions to employees at California’s public university systems, and Brown’s goal to add two independent, public members to the board of the California Public Employee Retirement System, the nation’s biggest public pension fund.
The board has come under scrutiny during an influence-peddling investigation by the attorney general’s office alleging fraud and kickbacks through middlemen known as placement agents who seek investment business.
The plan also would end so-called pension “spiking” that lets employees boost their payouts by including overtime and other benefits, and end the practice of buying additional service credits to inflate pension checks.
Estimates for the gap between what is owed to current and future public retirees, and what will be available to pay them, have varied widely with the fluctuating economy.
A report last year by the Stanford Institute for Economic Policy Research said that retirement funds for 2.6 million California teachers, state workers and university employees together faced long-term gaps of over $500 billion.
The California Public Employees’ Retirement System has $75 billion in unfunded future pension liabilities, and the state is on the hook for an estimated $51.8 billion in unfunded retiree health care costs.
The administration estimated that if its proposal were in place, the state would save about $900 million annually, or half of the state’s current $1.8 billion pension cost.