Brown Gets Partial Win In California Pension Reforms
Tuesday, August 28, 2012
Gov. Jerry Brown on Tuesday announced systematic reforms to California's badly underfunded public pension system that he says will save taxpayers billions of dollars over time, but he also was unable to persuade his fellow Democrats to give him some of the fundamental changes he had sought.
The reform deal does not include putting new government workers in a hybrid system that includes a 401(k)-style plan, greater independence for the board that oversees the state's main pension fund or a reduction in retiree health care costs, which are skyrocketing.
Nevertheless, Brown hailed the deal as a landmark achievement and said it will make pension benefits for public employees lower than they were during his first term in office, in 1975.
"These reforms make fundamental changes that rein in costs and help to ensure that our public retirement system is sustainable for the long term," the governor said in a statement. "These reforms require sacrifice from public employees and represent a significant step forward."
Pension reform has been an undercurrent throughout the entire legislative session this year, in part because the state's two main pension funds, the largest in the nation, are so badly underfunded - by at least $150 billion - and partly because the governor promised the reforms when he rolled out his 12-point plan last October.
As he asks voters to increase sales and income taxes in November, Brown also wants to demonstrate that he is being fiscally responsible.
His original plan was projected to save $4 billion to $11 billion over 30 years. On Tuesday, the governor said the changes, if enacted by the Legislature, would save $30 billion, although the time period for that savings was not clear.
"We've lived beyond our means. The chickens are coming home to roost," Brown said during a news conference in Los Angeles, referring to the difficulty of negotiating a large package with the Legislature's Democratic majority and the public employee labor unions that fund their campaigns.
The reforms include a cap on annual pension payments, a requirement that new employees contribute at least half of their pension costs and increases the retirement age for public safety and non-safety employees.
It also ends some of the most egregious abuses of the pension system, including a practice known as "spiking" in which employees are given big raises during their last year of employment as a way to inflate their pensions.
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