By Jim Christie
SAN FRANCISCO (Reuters) - California Governor Jerry
Brown Thursday unveiled a major overhaul of the pension plan
for the state's public employees, proposing they equally share
the cost of pension contributions and raising the retirement
plan for most new workers to 67 from 55.
Brown said his plan would save taxpayers billions of
dollars over the long term and close loopholes that allow
workers to inflate pensions.
Pension costs have been a growing concern for state leaders
due to forecasts of their burden on California's already
"It's time to fix our pension systems so that they are fair
and sustainable over a long time horizon," Brown, a Democrat,
said in a statement.
Leaders of the Democrat-controlled legislature responded
cautiously to the plan. Public employee unions, whose members
have already been hit with layoffs, furloughs and a hiring
freeze as California has reined in spending, reacted
Under the plan, which now goes to lawmakers, all new and
current employees in state, local, school and other public
agencies would have to equally share with their employers
contributions to retirement plans.
Brown also proposed changing the existing defined benefit
pension plan -- under which retirees receive a guaranteed
amount of money per month for life -- for a "hybrid" plan with
a reduced defined-benefit component paired with a
The combined approach would provide employees 75 percent
of salary based on a full career of 30 years for safety
employees and 35 years for nonsafety employees. The two
components of the plan would provide roughly equal benefits.
For state workers who are not covered by U.S. Social
Security, defined benefits would make up two-thirds of targeted
pension payouts and defined-contribution payments would make up
the remaining one-third.
Brown also proposed restructuring the board of the
California Public Employees' Retirement System, the biggest
U.S. public pension fund.
"In the past, the lack of independence and financial
sophistication on public retirement boards has contributed to
unaffordable pension benefit increases," Brown said.
POLITICS OF PENSION REFORM
Democratic lawmakers gave a muted response to the plan.
"The governor is proposing a provocative set of reforms,
and I intend to approach them with an open mind," said Senate
President pro Tempore Darrell Steinberg. "The abuses that a
small number of people take advantage of absolutely must be
resolved. But we can't forget that the vast majority of public
sector employees are middle class workers and their average
pensions are far from exorbitant."
Assembly Speaker John Perez said his chamber would work
with Brown to "bring stability to our pension system in a
manner that does right by taxpayers and public servants alike."
Union officials offered a fairly blunt assessment.
"The governor has said for weeks now that he would release
a plan labor wouldn't like. Mission accomplished," said Dave
Low, executive director of the 220,000-member California School
Employees Association. "It's a pretty tough pill to swallow."
Even before taking office in January, Brown had vowed to be
a tightfisted governor and said that would involve changes to
shave pension costs.
He had been in talks on pension issues with Republicans in
the legislature's minority as part of broader state budget
negotiations in March. Talks on pension matters, however, were
shelved as more pressing budget matters prevailed.
Republicans were able to insert pensions into budget talks
because polls have been showing voters back changing them.
"This seems to be increasing in urgency," said Mark
DiCamillo, director of The Field Poll, which has conducted
polls on voter sentiment on public pensions.
(Editing by Leslie Adler)
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