Tuesday, August 28, 2012

Democratic lawmakers to release pension fixes - Inside Bay Area

SACRAMENTO -- The Legislature's Democratic leaders will release a bill package Tuesday they say will meet Gov. Jerry Brown's demand for comprehensive public pension reform by capping benefits, raising the retirement age for new hires and ending abuses of the system, Senate leader Darrell Steinberg said.

Democrats have been walking a political tightrope on the issue since Brown rolled out a 12-point pension-reform plan last October: The Democratic governor has urged lawmakers to pass comprehensive changes to a system widely seen as unsustainable, but the public employee unions that fund the campaigns of Democratic lawmakers want far more modest changes.

It's not clear how far the Democrats' plan will go in creating significant savings. California's two main public employee pension funds have a combined $150 billion in unfunded liabilities, and most of the changes will affect newly hired workers. That means the state is not likely to see the benefits of those savings for decades.

Brown, for example, had proposed a hybrid pension plan that combined some elements of the traditional defined-benefit pension with a 401(k)-style plan like that offered in the private sector. Steinberg, the Senate president pro tem, told reporters the Democrats' plan does not include a 401(k)-style plan, but rather caps pension payments by an unspecified amount.

Republicans are concerned the deal was negotiated with leaders of public employee unions who

have a vested interest in preserving the status quo, rather than with the taxpayers' interests in mind. But labor leaders expressed outrage that the deal would trample on collective bargaining rights and worried that benefits would be insufficient.

"You can retire younger into poverty or work until you die. Those are your choices," said Terry Brennand, a lobbyist for the Service Employees International Union's state council.

While details were sparse, Steinberg, a Democrat from Sacramento, called the legislative package robust.

"It will touch virtually every element of pension reform that has been talked about for a year or more," he said. "I think there are going to be some people in organized labor, frankly, that are not going to be thrilled with it."

He expected a conference committee to begin hearings on the bill package Tuesday, with floor votes in the Assembly and Senate on Friday, the final day of the legislative session.

Brown made public pension reform a top priority when he released his proposal last fall, calling for long-range fixes to a system widely regarded as unsustainable.

The governor viewed structural changes as necessary at a time when he is trying to sell voters on a tax hike in November. A Field Poll released last month, however, suggested that pension changes would not sway how a majority of likely voters will vote on Brown's tax increase.

"I think we have a responsibility to pass comprehensive pension reform that demonstrates to the public we are doing everything we can to rein in costs where in the long term any program is not affordable or sustainable," Steinberg said. "I think we will more than meet that test."

Sen. Bob Huff, R-Diamond Bar, expressed skepticism while adding that he could not judge bills that have yet to be given to lawmakers.

While the minority party supported Brown's initial proposal, Republicans were left out of negotiations because their votes are not necessary to pass pension legislation.

"This is basically the union bosses negotiating with their stewards, the Democratic leaders," said Huff, the Senate's minority leader.

Dave Low, chairman of Californians for Retirement Security, a labor coalition of more than 1.5 million public employees and retirees, said the new formulas could be the most regressive in state history.

"Everything in this is a take-away," he said.

He and Brennand said retirement contributions should be subject to collective bargaining. Many labor groups have agreed to increase contributions in recent years. And while an employee could retire earlier with reduced benefits, he or she would have to work until age 67 to qualify for full benefits.

"I don't think you want to see guys out there pitching asphalt on road crews at 67 years old or operating heavy equipment," said Brennand, the SEIU lobbyist.

The governor is expected to get many of the changes he demanded to end practices that allow government works to game the system, including prohibiting employees from using bonuses, unused vacation time, overtime and other perks to help calculate their monthly pension payments.

It's not clear whether he will get other formula and structural changes.

The governor wanted a hybrid system that included a 401(k)-style plan to bring the public retirement system more in line with that offered in most of the private sector.

The Democratic proposal will require current and new public employees to contribute half their retirement costs, Steinberg said. It also would raise the minimum retirement age for many civil service employees from the current 55.

Other changes the governor proposed include changing the composition of the pension board to add two independent, public members and reducing retiree health benefits to future employees. Labor leaders said the governor had to drop those two proposals because of the late hour of the deal.

Copyright 2012 The Associated Press.

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