California committee defeats pension-reform bill
June 15, 2010
SACRAMENTO, Calif. (AP) – Gov. Arnold Schwarzenegger’s drive to cut California’s pension costs stalled Monday when a Senate committee derailed a bill that would have reduced benefits for newly hired state employees.
The legislation by Senate Minority Leader Dennis Hollingsworth failed on a 4-2 party-line vote in the Senate Public Employment and Retirement Committee.
It would have required new state employees to contribute more toward their retirement. Most would have had to work 10 years longer, until age 65, to be eligible for retirement benefits. Public safety employees would have had to work an extra seven years – to age 57 – before they could retire.
Hollingsworth said his bill, SB919, would have saved the state $110 billion over 30 years. He said the issue is not dead, despite being rejected by the committee. He plans to make it a point of budget negotiations this summer as the state tries to close a $19 billion deficit.
“It wouldn’t be a sanely crafted budget without pension reform,” Hollingsworth, R-Murrieta, said in a telephone interview.
California’s two major public employee pension funds estimated their unfunded liabilities at $61 billion in July 2008. That drives up the cost to taxpayers, who must cover the shortfall.
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The California Public Employees Retirement System, the nation’s largest pension fund, is considering imposing $600 million in additional costs on the state to cover its shortfall.
A study by graduate students at Stanford University commissioned by the administration and released in April put the unfunded pension liability at nearly $240 billion for the public employees’ retirement fund and $157 billion for the teachers’ retirement fund.
The committee’s chairman, Sen. Lou Correa, D-Anaheim, said pension changes should be negotiated through collective bargaining agreements rather than imposed by lawmakers. Those changes already are being discussed through negotiations with state and local public employee unions, he said.
Schwarzenegger has made pension reform a priority of his final year in office and has said he will not sign a budget agreement without it.
“Every year we are diverting more and more money away from higher education, health and human services, public safety, parks and environmental protection to pay for unsustainable retiree costs, and without action, those costs will keep skyrocketing,” the Republican governor said in a statement. “This is a classic example of Sacramento promising more than it can afford.”
Associated Press Writer Robin Hindery contributed to this story.