Governor Proposes 12-Point Pension Reform Plan; Wants Voter Approval; Labor Balks

After months of waiting, Governor Brown has finally announced his plans for pension reform. A cursory look shows that the 12-point outline is similar to the proposal that Brown released in the spring. In a statement to the press, Brown commented that “It’s time to fix our pension systems so that they are fair and sustainable over a long time horizon. My plan raises the retirement age and bans abusive practices like ‘spiking’ and ‘air time’ while mandating that public employees pay an equal share of pension costs. I look forward to working with the legislature to enact these major reforms.” The question is whether or not the governor will find support in the Legislature to place the proposals on a ballot so that voters can have the final say during the November 2012 election. During a press conference, the governor indicated that he wanted officials to “chew on” his plan for now and he acknowledged that support would not necessarily be easy to come by. The administration is claiming that if the changes are adopted, the cost of pensions to taxpayers will be cut in half.

Right out of the gate, labor leaders have already expressed their disappointment with Brown’s plan. Brown briefed labor on his proposal before it was released to the public. In a prepared statement, Dave Low, chairman of the union coalition Californians for Retirement Security, commented the following about Brown’s 12-point plan:

“The governor has indicated that labor will not like many of his proposals. He is right. Unions across California have negotiated major retirement concessions, including increased payments by employees and two-tier benefits. These concessions have already saved the state, cities, counties and other entities hundreds of millions of dollars. We are strongly opposed to imposing additional retirement rollbacks without bargaining.”

So what are the specifics of the plan? See below for some details and a link to the full proposal:

1. Equal Sharing of Pension Costs: All Employees and Employers; all new and current employees transition to a contribution level of at least 50 percent of the annual cost of their pension benefits. Given the different levels of employee contributions, the move to a contribution level of at least 50 percent will be phased in at a pace that takes into account current contribution levels, current contracts and the collective bargaining process.

2. “Hybrid” Risk-Sharing Pension Plan: New Employees; a reduced defined benefit component and a defined contribution component that will be managed professionally to reduce the risk of employee investment loss. The hybrid plan will combine those two components with Social Security and envisions payment of an annual retirement benefit that replaces 75 percent of an employee’s salary

3. Increase Retirement Ages: New Employees; all new public employees will work to a later age to qualify for full retirement benefits. For most new employees, retirement ages will be set at the Social Security retirement age, which is now 67. The retirement age for new safety employees will be less than 67, but commensurate with the ability of those employees to perform their jobs in a way that protects public safety.

4. Require Three-Year Final Compensation to Stop Spiking: New Employees

See the rest of the proposal’s 12 points here.

Comments

[Randy]

Pension reform is needed. The spiking and air time practices are not appropriate. However, the retirement age of 67 should be reconsidered in light of the blatant age discrimination hiring practices throughout the State.

Public employees laid off in their late fifties or early sixties have little or no chance of gaining new employment. If the ages of public employees being hired over the past two years were studied, very few in that age group would be found to have been hired.

Employees in their early sixties do not have the time nor the resources to sue for age discrimination and the State does virtually nothing about the issue.

If the retirement age is increased from 55 to 67 as proposed, there would be significant layoffs of older employees to further reduce salary costs and retirement expenditures.

[Dave Hook]

The Guv, like most people, just doesn't "get it". Public employees already make 100 percent of their retirement contribution. This is deferred compensation. For years we've taken less than our private-sector counterparts with the promise it would be made up later. Asking for more from employees amounts to a pay cut. Sustainability issues aren't because of the cost, it's because those in charge didn't fund retirements properly (i.e. stole money) when times were good. Now their folly has come home to roost, and they blame the same employees who agreed to work for less. What crap!