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Pension reform isn't as dead as the state budget deal

Brown Gov. Jerry Brown, trying to seize the reform high ground from Republican lawmakers, released today seven specific legislative proposals to curb abuses with public employee pensions and shore up pension-fund reserves. None of them are as dramatic as the Little Hoover Commission's proposal to roll back the future benefits accrued by current state employees, but they're meaningful nonetheless. Brown also indicated that he's developing five more pension proposals, including potentially contentious plans to cap pensions and create an optional "hybrid" plan that combines a smaller pension with Social Security benefits and a 401(k).

The announcement has intriguing implications for Brown's effort to close the state's $26.6-billion budget gap. Negotiations with GOP lawmakers over a ballot measure to extend about $12 billion in temporary taxes broke down this week, all but assuring that voters will not consider the tax extensions in June. Pension reform was of the top items the GOP had sought in exchange for letting voters consider the tax issue. If the legislature moves ahead on significant changes to state worker pensions, that bargaining chip would effectively be taken off the table.

The proposals Brown announced Thursday include ones to bar current and future state and local government workers from buying "airtime," or service credit that inflates their pensions; require workers to cover all the "normal cost" of their pension plans, rather than having their employers pay all or part of it; consider only base pay, not pay plus bonuses or payments for unused leave, when calculating pensions; ban retroactive pension increases; and base benefits on the average annual pay over 36 months, not 12 as in current law. All of these steps would reduce the potential size of pensions or their cost to the taxpayers.

Brown also would bar agencies from waiving their own contributions to pension funds, requiring instead that they cover at least the annual cost. And he would ban pensions for public employees who commit a felony "related to their employment."

The additional bills still under development would, in addition to capping pension benefits and creating an optional hybrid plan, limit the ability of state workers to hold public jobs while collecting a pension and make unspecified improvements to pension-fund governance and the financial health of the state teacher retirement fund.

RELATED:

Both sides must get back to the negotiating table, or the state will suffer

Two ways to a tax vote

Fixing a harebrained tax system

Holes in the safety net

-- Jon Healey

Credit: AP Photo / Rich Pedroncelli

 

Comments () | Archives (21)

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Realist

Does anyone else notice these offers of reform only materialize AFTER a complete budget stalemate? Can anyone answer why these reforms were not pursued last week, or last year, or 5 years ago for that matter?

Also, whenever these pension reforms are mentioned, why is it that they conveniently ignore the fact that an overwhelming majority of all party members support these reforms? Hmmmm, I wonder why that is...

TooLate

Better late than never. We are still going to be broke for another 20 years paying the pension contracts that were not re-tooled five or more years ago.
All I see is trouble and bankrupcy! I am tired of paying for everyone else. I have no pension and pay 92. a month for health ins. plus co-pays.
I am sick to death of corporate welfare and welfare. Beef up the middle class but not at the private workers expense.
I work for the county and man, medi-cal needs to be seriously capped. Ten years of therapy services and more for some patients, are you kidding me? We get threatened to make productivity (charge medi-cal), even if there is nothing to charge for! What a racket!!!
I have always been an independant but after working in county mental health- I see what conservatives mean regarding waste. When you give people services for free they do not appreciate it. Plus, the whole disability criteria needs to change-a solid 1/4 on it do not need to be. AND we need to randomly test for drug use! This is crazy! Not to mention a law against requirments that one speak Spanish to get a job in mental health-so enabling.

MICHAEL WHITE

The reforms in general sound fairly solid. As long as the details work out the same and it saves the state money and stabilizes the system, I'm all in favor.

WhataJoke

Funny, these changes are common sense but it takes such desperate times to bring them forward.

Until I see them as LAW I will never vote for another tax increase.

While these changes may not solve our budget mess it's a start in the right direction.

REALITY CHECK-101

I worked in private industry for 13+ years making great money with a superb profit sharing match and pension. About 8 years ago, I left by choice the private world to work for a government agency taking an immediate 50% pay cut with NO profit sharing but I got to spend much better quality time with my family. Back then, I scoffed at the public employee but it was the job security and quality of life that swayed my choice. It was a trade off. Bottom line people ... the public worker is not the rich fat cat as portrayed by the Right's wingnuts. Far from it. But because the economy has soured, it's easy to point a finger at those who have a steady job. Ask yourself what caused the recession? I think the causes were/are: (1) The War in Iraq draining our treasury; (2) The Banking collapse caused by Wall Street's greed; and (3) The Housing collapse caused by the ordinary person's greed. IT WAS NOT AND IS NOT THE PUBLIC EMPLOYEE who got us into this mess. Really! ... who could afford an $500,000 mortgage for a 1,000 sq ft home in Compton? C'mon own up to your stupidity! Remember when you point a finger at someone, there are three fingers pointing back at you. Stop the blame game and man (or woman) up!

okaydokay

Oh yeah, Bush gave my x, who is a millionaire, a "tax cut", a return of 300,000. In one year. Really, this millionaire needed this return?
The war, and les and less regulation on Wall Street -republicans worshipping at the feet of the rich, caused this melt down.
The Dems, they are stupid enablers. They are passive narcissists who help others in the wrong ways making them more entitled, ill, and child abusing.
Both righteously suck in their own ways and I can not stand any of them!!!!!
I would never have a child as these people all are horrible and the world is grossly over populated and being ruined. I live in the San Fernando Valley and it is Mexico-the worst of Mexico and I think we are heading to NO middle class, slave labor, and the rich.

Madness.

After his election, finding that things were "worse" than he thought, demanding more taxes, and accusing republicans of being unreasonable, Brown is only now "developing" plans to curtail runaway pensions and benefits?

I'm so glad we elected a pol instead of a businesswoman. Our state is obviously in the best of hands.

As for the people who insist public employees "didn't get us into this mess," take a reality check: public employee pensions and benefits are like the spendthrift wife, the lazy son, the excess servants, the unused bentley, the second vacation home, the 3 cooks--they all come into sharp relief when the money runs out. It has run out and yes, they were-- and are the problem.


HiVeloCT

As a 36-year public employee (15 with State of CA and 21 with LA County), all the proposed reforms seem reasonable and I support them. I also think that the percentages for service be capped at 2%; formulae such as Orange County's 3%@50 are NOT sustainable.

Jon Healey

@Madness -- Actually, Brown started talking about pension reform months before he took office. See this piece from last July -- http://opinion.latimes.com/opinionla/2010/07/pensions-vs-401k-plans-for-state-workers.html -- that cites a number of the same ideas touted here. You can complain that it took Brown too long to develop legislative language for his ideas, but he's been in office for less than six months, most of the time working on other aspects of the budget deal.

affableman

Good for him. We shouldn't roll back the benifits for present employees as that's just welching.

Don't ever get in a poker game with teabaggers because when they lose, they welch.

Got out in time


I'm retired from a local public agency and just spent half an hour recalculating my retirment benefits without the 3 years of air time I bought, the bonuses that were included, the unused leave I sold back, and based on 36 instead of 12 month's highest salary. Had Gov. Brown's proposed pension reforms been in place when I retired my benefits would be 32% lower than they are.

Don't blame me for using every trick available to spike my retirement (which I did). Blame the system for allowing me to get away with it.

Over the years I've seen how it works. The unions don't want to draw too much attention to themselves by demanding ever higher salaries and politicians don't want to bust their current budgets by paying them. So, both agree to sweeten pensions instead. The details are buryed in the fine print out of public view so the unions don't look too greedy and the bill doesn't come due until the current politicians have left office. The unions then back the current politicians for re-election and eveybody's happy.

Fred

The public pensions are clearly being modified - I think all agree that this is a good thing. How come the fat cats on wall street that caused this mess are unaffected?

One ping only

I read today that retired California teachers make more money than working teachers in 28 states. I'm sure that will be the Times headline tomorrow.

Jon Healey

@oneping -- Keep that in perspective. California's cost of living is higher than all but two other states'. See http://www.missourieconomy.org/indicators/cost_of_living/index.stm. When adjusted for cost of living, its salaries rank 44th -- the seventh lowest in the country. See http://teacherportal.com/teacher-salaries-by-state. I haven't seen a similar ranking for retirement benefits adjusted for cost of living, but it's ridiculous to argue that there's something wrong with Cali teachers negotiating for higher retirement benefits than active teachers make in the Dakotas, Kentucky or other states where the difference in cost of living is enormous.

alex

Hello people, everyone can work in the public sectors!! I work in private sector for 10 years and later worked in public for 10 years. Private sector invest in SS while public invest in pensions. Currently I paid $230 in pension and $60 in medicare per months. Before I can retire at 60, I would have contributed $88,000 into my own retirement. How many people receiving SS invested $88,000 into SS? People complain about pensions is the main cause of deficit, but actually it is the spending. We all know public sector is NOT to make money. It gets most of its money from TAXES. It should base it spending on the TAXES it collect from previous.

alex

Hello people, everyone can work in the public sectors!! I work in private sector for 10 years and later worked in public for 10 years. Private sector invest in SS while public invest in pensions. Currently I paid $230 in pension and $60 in medicare per months. Before I can retire at 60, I would have contributed $88,000 into my own retirement. How many people receiving SS invested $88,000 into SS? People complain about pensions is the main cause of deficit, but actually it is the spending. We all know public sector is NOT to make money. It gets most of its money from TAXES. It should base it spending on the TAXES it collect from previous.

alex

If it did not collect enough taxes to cover their expense then they should cut their expense across the board and not just certain department. Look at DWP, it pay it's General Manager $6000 a week!! How much electric /water bill it have to collects just for the General Manger wages & then his retirement? Will DWP go bankrupt without a GM? Does it need to pay a GM $6000 a week? Can a $1000 a week GM do the same job. Every one is focusing pension & retirements as a solution?? But no ONE in the government ever mentions about capping the pay of HIGH salary official? All they want is Taxes this and that to solve the problem. The solution is right before their eyes and yet they will not do it because it affect themselves!! They should make a law that government/city official should be paid no more than $200 per sessions!!

alex

Working citizen salaries is TAXED. When you purchase things beside food is TAXED. Utility is TAXED. Gasoline is taxed. Property is taxed. Internet Sales are taxed. The government will leave no stone unturn for taxes but will look the other way for big corporation! We be happy to get a tax returns but big corporation get millions back from our Uncle Sam!!

yesItsMe

I am amused about all the blather about the cost of Iraq's war and Bush as the cause of the public employee's coming plight.
What is overlooked by people with this complaint is that the pension crisis stands at a couple trillion unfunded liabilities. That liability was built over decades. It would be the same problem with or without Iraq or Bush.

The truth of the matter is Calpers engaged in corrupt business practices and employed Ms Rosy Scenario as their fund manger long before Bush arrived.
The truth of the matter is Fannie Mae and Freddie Mac, government run mortgage agencies, were corrupt and took direction from Congress to dispense mortgage money to politically favored populations and businesses long before Bush arrived. Corruption is the word to describe it.
The truth of the matter is that Wall Street bribed government officials and government officials wrote laws so they could take bribes from more and more of the GDP of the USA. Long before Bush arrived.

The truth of the matter is as government has absorbed more or the economy, more of the economy is corrupted and plundered by public officials. The result? Bubbles that pop with billions or trillions lost. Tax monies wasted on politically connected people pushing bogus products.
Finally I ask those of you who blame Bush. Where are the prosecutions of Wall Street fat cats under the Obama Administration? Why has Obama lavished hundreds of billions on Wall Street fat cats instead?
The answers are all of the above.

Simple Facts

A good start but how about capping ALL pensions at 2% growth, removing the capability for felons to receive a pension and slashing all pension amounts by 30%.

Let's see if we can get this added as a ballot initiative

Madness.

The author of this article deserves high credit for sponsoring a real forum of sorts. We need more of that.

Brown has ignored the helium-filled salaries, benefits and pensions that defy gravity. They are draining our ability to pay for things like roads, hospitals, schools and improvements.

California didn't have state employee unions before Brown authorized them in 1978: and you know what? We did just fine. We built the UC and great schools. Teachers didn't die from lack of state pensions. Neither did retired clerks fro DMV. The roads worked, the schools were fine and if anything they have all gotten worse since 1978.

UC tuition has increased at more than 5 times the rate of inflation. If UC tuition has been indexed to inflationa lone, it would be less than $3,000 now. Instead its about $12,000. It has to be to pay for the lush pensions of the UC professors who now retire at age 50!

Jerry Brown's "symbolic cutting" of 96,000 cell phones to 42,000 saving perhaps 20m, the cutting of agency "swag" like keychains does not count. No more than an insolvent, gambling, drunk's pledge to have the Bentley waxed only once a month counts.

Jerry has been in state and city government since the 70's. He is a very smart man and knows what the problems are: he should have been on them a year ago. While he is to be commended for at least proposing a vote on what the legislature will not fix, he never expected a battle like this.

He tried to avoid disclosing the union deals and salary increases when he was mayor of Oakland, and it took the California Supreme Court to force them out in the open. The LA Times reported that very story.

As Governor, he assumed he could induce some republicans to go along with "business as usual" and force higher taxes onto a ballot. Raise taxes on regular people to support state employee unions that backed him. And the unions deals would never become a focus point: and if they came up, like Arnold's Propositions in 2005, they'd be buried by union ads. But perhaps not this time.

The people "out here" see paid "walking time," to work for prison guards as a problem (actually they see it as an insane waste that typifies the seetheart deals and payoffs that they expect goes on in other areas that have not come to light). And pensions at age 55 with 90% of the highest year's salary (enhanced by vacation days and other spiking devices) and "sick days" that can be cashed in (in the real world they are days when you are sick).

UC professors that love education but retire with pensions at 50 when the UC is howling for more money and admitting more out of state students (hence excluding more Californians) are a problem.

Add the state's impulse to pay something to everyone for whatever might ail them--all at the expense of the diligent people who do not spend their days trying to find ways to get a subsidy from everyone else.

Why should hard working trauma nurses, plumbers, a sales clerk or a small car dealer pay for the pension of a state employee that was never injured on the job to retire at 55?
Can I retire at age 55? Can we all? Who will pay for it then? Why should only some get that benefit now?

Demanding that taxpayers- who are losing their jobs and not getting raises much less pensions-- make up investment shortfalls for state employees is unacceptable. A latter day demand for the peasants to support the nobles.

Are teachers are right to bargain for higher retirement pensions because California's cost of living is higher? No, because pensions are not supposd to be a replacement for salary. And what percent of the retirees stay in California to pay that high cost of living on their pensions? I understand a good many leave to lower cost states. Surely if Prop 13 is repealed the rest will leave too, yes?

Taxes are far too high: income, sales and other taxes have skyrocketed over the past 30 years; our top rate kicks in at a very low income; it will never be enough for those whose mission in life is to use other people's money to re-order society as they deem fair and fit.


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