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Governor Announces Historic Pension Rollbacks

At a news conference in Los Angeles today, Gov. Jerry Brown announced an agreement that will take public employee retirement security back to the Reagan years.

The plan – hashed out with legislative leaders behind closed doors – imposes a range of rollbacks, all without the benefit of collective bargaining.

  • New lower tier for almost all employees – local, state, teachers, the works. Public safety retirement would top out at 2.7% at 57;
  • A cap on pensionable income — $110,000 for those who pay Social Security; $130,000 for those who don’t.
  • Mandatory cost sharing immediately, for all new employees, and by 2018, for current employees;
  • Three-year final compensation averaging;
  • Limits on pensionable compensation, airtime purchases, pension holidays and retroactivity.

You can read the governor’s media release HERE.

CPF President Lou Paulson had the following reaction:

The pension proposals outlined today represent a retreat from collective bargaining and basic principles of retirement security. The proposal imposes rollbacks to levels not seen in four decades – the biggest pension rollback in California history. They punish everyday working people who have already sacrificed hundreds of millions of dollars in wages and benefits lost to furloughs, layoffs and downsizing.

For firefighters, it is an especially disappointing day. Our members depend on the promise of a reasonable, secure retirement in return for their commitment to a difficult and dangerous profession. These proposals make that future promise less secure for the next generation.

Firefighters in dozens of cities have agreed to two-tiered systems, higher contribution rates and crackdowns on spiking. To unilaterally impose these changes from Sacramento short-circuits a bargaining process that is producing real savings and mocks the governor’s stated commitment to local control.

Beyond its punitive nature, these pension changes could actually wind up imposing greater costs on public agencies, especially in the short term. According to a RAND study, firefighters over the age of 55 have a workplace injury rate that is more than a 60-percent greater than firefighters under the age of 45 years. That translates to higher workers’ comp and disability costs, as well as being bad for the safety of our citizens.

Nobody condones abuse of the pension system – least of all our members. But these proposals go far beyond “reform”. Instead they threaten basic retirement security for generations of front line first responders and their families.

The final proposal is expected to be voted upon by this Friday.

Source:
http://www.cpf.org/go/cpf/news-and-events/news/governor-announces-historic-pension-rollbacks/

Governor Brown Announces Pension Reform Agreement to Save Billions by Capping Benefits, Increasing the Retirement Age and Stopping Abuse
8-28-2012

LOS ANGELES – Governor Edmund G. Brown Jr. today outlined a sweeping pension reform agreement that saves billions of taxpayer dollars by capping benefits, increasing the retirement age, stopping abusive practices and requiring state employees to pay at least half of their pension costs.

“These reforms 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,” said Governor Brown.

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

The pension reform agreement includes substantial benefit rollbacks for public employees. It requires all current state employees and all new public employees to pay for at least 50 percent of their pensions and establishes this as the norm for all public workers in California. Importantly, these new reforms eliminate state-imposed barriers that have prevented local governments from increasing employee contributions.

Further, it bans abusive practices used to enhance pension payouts.

“No more spiking, no more air time, no more pensions earned by convicted felons,” said Governor Brown. “We’re cleaning up a big mess and the agreement reached with Legislative leaders today is historic in its far reaching implications.”

Public Employee Pension Reform Act of 2012

Caps Pensionable Salaries
• Caps pensionable salaries at the Social Security contribution and wage base of $110,100 (or 120 percent of that amount for employees not covered by Social Security).

Establishes Equal Sharing of Pension Costs as the Standard
• California state employees are leading the way and are paying for at least 50 percent of normal costs of their pension benefits. Requires new employees to contribute at least half of normal costs, and sets a similar target for current employees, subject to bargaining.
• Eliminates current restrictions that impede local employers from having their employees help pay for pension liabilities.
• Permits employers to develop plans that are lower cost and lower risk if certified by the system’s actuary and approved by the legislature.
• Provides additional authority to local employers to require employees to pay for a greater share of pension costs through impasse proceedings if they are unsuccessful in achieving the goal of 50-50 cost sharing in 5 years.
• Directs state savings from cost sharing toward additional payments to reduce the state’s unfunded liability.

Unilaterally Rolls Back Retirement Ages and Formulas
• Increases retirement ages by two years or more for all new public employees.
• Rolls back the unsustainable retirement benefit increases granted in 1999 and reduces the benefits below the levels in effect for decades.
• Eliminates all 3 percent formulas going forward.
• For local miscellaneous employees: 2.5 percent at 55 changes to 2 percent at 62; with a maximum of 2.5 percent at 67.
• For local fire and police employees: 3 percent at 50 changes to 2.7 percent at 57.
• Establishes consistent formulas for all new employees going forward.

Ends Abuses
• Requires three-year final compensation to stop spiking for all new employees.
• Calculates benefits based on regular, recurring pay to stop spiking for all new employees.
• Limits post-retirement employment for all employees.
• Felons will forfeit pension benefits.
• Prohibits retroactive pension increases for all employees.
• Prohibits pension holidays for all employees and employers.
• Prohibits purchases of service credit for all employees.

Source
http://gov.ca.gov/news.php?id=17694

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5 Responses »

  1. Of course you quote Lou Paulson, you are all about the firefighters Burke. This does not go far enough and unfunded liability will still be a problem in the fuure. Nice try Mr. Governor!

  2. Humor us Jill. What is far enough in your greedy little mind? Don’t sit here and complain about people who are trying unless you’ve got a better plan.

  3. Greedy little mind? Is that any way to address a taxpayer? It is not Jill’s duty to present a plan, however I expect if it were ther p,an would resolve unfunded pension liabilities. Does Gov MoonBeam’s plan do that?

    Jig? Does the Gov’s plan resolve unfunded pension liabilities withou involving our grand kids or not? Easy question. What do you say?

    The task befor the Guv is to convince us he has such a plan. Not convincing = NO VOTE.

    That’s the deal my friend.

  4. BW, maybe you could take the same class as Jill on understanding pensions? Unfunded liabilities are a major problem only if you plan on paying everything out tomorrow. Otherwise the bill is not due today and the possibilities for resolving them are several. Including recovery in the investment markets which reduces the liability all by itself. I don’t think attempting to unilaterally renig on a deal you made with people 30 or 40 years ago is fair. Do you? Because if your solution is anything other than to address future hires, then you are reaching in to renig on previously agreed to contracts. If that is the case, I hope we never cross paths in a business deal. Your word would mean nothing.

    Unless you are a state legislator, you are not getting a vote on the plan. But nice attempt with the chest beating, I guess.

  5. Going to real interesting to watch the court rulings and the unions turn on the Democrats.

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