Major Pension Reforms to be Introduced to California Legislature Soon

Skippy Massey
Humboldt Sentinel

William Dotinga
Courthouse News Service

LOS ANGELES (CN) – Gov. Jerry Brown on Tuesday unveiled a “sweeping pension reform agreement” he claims will save taxpayers billions of dollars by capping benefits and increasing the retirement age for state workers.

Brown said the agreement with state Democratic leaders will stop abuses and require state employees to pay at least half of their pension costs.

“These reforms make fundamental changes that rein in costs and help to ensure that our public retirement system is sustainable for the long term.  These reforms require sacrifice from public employees and represent a significant step forward,” Brown said.

Brown said that if the Legislature passes the reforms, public retirement benefits would be lower than when he took office during his first go-round as governor in 1975.

Brown said the agreement includes benefit rollbacks for public employees.  It will require all current and future state employees to fund at least 50 percent of their own pensions, something Brown hopes becomes “the norm for all public workers in California,” since the agreement removes state barriers that prevent local governments from increasing employee pension contributions.

Brown’s plan also raises the retirement age for new state workers by two years and allows cities and counties to raise the retirement age of their employees as well.

The governor said the agreement bans abusive practices state workers have used to enhance pension payouts, such “spiking” and “air time.”

Spiking gives employees big raises during their last year of employment to inflate their pensions.

Air time – which allows state employees to pad their retirement benefits by buying service credits – is one of several scandals rocking California’s Parks Department.

“No more spiking, no more air time, no more pensions earned by convicted felons,” Brown said.  “We’re cleaning up a big mess and the agreement reached with legislative leaders today is historic in its far reaching implications.”

Pension reform has been on legislators’ minds this year, particularly since the state’s two main pension funds are underfunded by at least $150 billion.

Democrats seek to appear fiscally responsible as voters prepare to decide the fate of Brown’s tax hikes in November.

If the initiatives fail, another sweeping round of trigger cuts will sting the Golden State again.

It remains to be seen whether the Legislature will send a bill to Brown’s desk before the session ends Friday – especially in light of disapproval from of California’s powerful public employee unions.

“We’re upset that a Democratic legislature and Democratic governor feel obligated to take this out on working men and women in California,” SEIU spokesperson Terry Brennand told KGO-TV Monday.  “That’s going to damage the ability of working men and women to retire in dignity.”

(Article by William Dotinga and courtesy of the Courthouse News Service.  Pictures by the Humboldt Sentinel)

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With municipalities struggling with pension costs overwhelming local budgets, it looks like Governor Brown’s pension reform is on the table a year earlier than he promised.  With the bankruptcies of Stockton, Vallejo, and San Bernardino, the Governor is promptly getting down to the brass tacks of fiscal responsibility.

It’s happening.  Voters in San Jose and San Diego Tuesday overwhelmingly approved public pension reform for their cities.  These results send a clear and unmistakable message to municipalities everywhere failing to meet pension obligations.  If pension reform can pass in major California cities, it can pass anywhere.  Cities and counties across the country will surely  follow suit putting pension reform on their ballots, too.

The subject isn’t so much about unions as it is about finance and cities struggling to remain solvent.  Public unions did put up some resistance to these measures, but they, too, appear resigned to the fact they would pass.  It’s a fiscal reality and quite the pickle we’ve found ourselves in.

San Diego, for example, currently spends 20% of their general fund budget on their retirement fund.  In San Jose, it is 27%.  Clearly, these kinds of obligations are unsustainable.  This means the cities are forced to spend money on pensions badly needed elsewhere.  Looking forward, their financial situations are even direr. Unfunded public pension obligations reach into the billions for both cities.

The reforms?  In San Jose, public employees will now pay more to keep existing pensions or accept more modest benefits.  New hires would get less comprehensive benefits.  The San Diego pension measure freezes pay levels for six years which will lead to lower costs– but can be overridden by a city council vote each year.  New hires get 401k-type plans rather than the current defined benefits packages.  Both plans are noteworthy because they address what was once untouchable:  lowering benefits for existing employees.

It’s not a pretty picture.  When times were good, no one complained.  Now it appears everyone’s leaping on the bandwagon to shrink the State’s pension envy with a cold shower.

The Humboldt Sentinel received from sources the following semi-confidential letter below, signed by the eight mayors of California’s largest cities pleading to the Legislature and Governor for help and fast tracking the issue– lest they, too, become overcome by the rising tide of their unfunded pension obligations. 

Shhh– this is for your eyes only:

Pension Reform Letter

Pension reform has arrived.  Except in Humboldt County.

How will Humboldt County, Eureka, and our other cities handle their pension obligations in their administrative top-heavy pension hierarchy?  Good question.  The figures may surprise you.  No wonder Eureka streets are crumbling while City Hall needed Measure O to pass.

The Sentinel will be having a report on the surprising sums of the city of Eureka soon.  Stay tuned.