State Pension Overhaul ‘Reins In Costs,’ Says Governor

By City News Service

Gov. Jerry Brown unveiled a proposed overhaul of the state pension system Tuesday during a Los Angeles news conference, saying it would save billions of dollars and require state workers to pay at least half of their pension costs.

But the plan was met with a tepid response from Republican leaders, who said the proposal was a step in the right direction, but the details remained “foggy.”

Brown said the pension proposals “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,” he said. “If the Legislature approves these reforms, public retirement benefits will be lower than when I took office in 1975. Additional changes would require a vote of the people.”

The governor’s proposal caps at $110,100 the salary amount that can be used to calculate pension payouts for retirees who collect Social Security. For those who don’t collect Social Security, the amount is roughly $130,000. The proposal also requires all new employees to contribute 50 percent of their pension costs. The requirement will also apply to current employees, subject to union negotiations.

The retirement age would be pushed back by two years for new employees. According to the governor’s office, workers who retire at age 62 would receive 2 percent of their highest annual salary for every year worked, but the rate would increase to 2.5 percent for people who retire at age 67. Police and fire department employees would receive 2.7 percent at age 57.

Senate Republican Leader Bob Huff, R-Diamond Bar, said the proposal represents a scaling back of the Democratic governor’s 12-point pension plan introduced earlier this year.

“Absent specific language, the details of this new arrangement between him and legislative Democrats remain foggy,” Huff said. “One thing that is clear is that the governor has settled for far less than the comprehensive overhaul he sought out to achieve.”

Sen. Mimi Walters, R-Irvine, said that while Brown claims the proposal will save the state between $18 billion and $30 billion over the next few decades, “the state’s unfunded pension and retiree health care liability is in the hundreds of billions of dollars.”

“While this is a small step in the right direction, we are disappointed that this plan does not address those liabilities in any meaningful way,” she said.

Bob Schoonover, president of Service Employees International Union Local 721, which represents city and county workers from Riverside to Los Angeles to San Luis Obispo, said he was still analyzing the proposal to determine its impact on workers.

“However, we do know that elements of this package address issues that should be negotiated at the bargaining table, not in the back rooms of the state Legislature,” he said. “Our members have sacrificed so much over the past few years in order to help balance city and county budgets.”

Assembly Speaker John Perez, D-Los Angeles, hailed the proposal.

“We will outlaw the most objectionable pension practices, impose a cap on the maximum value of pensions and generate the long-term savings that will ensure the fiscal health of state and local pensions,” he said.

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August 30, 2012  Copyright © 2012 Eastern Group Publications, Inc.


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