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

March 31, 2011 |  4:28 pm

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.

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-- Jon Healey

Credit: AP Photo / Rich Pedroncelli

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