SACRAMENTO, Calif. -- Gov. Jerry Brown on Wednesday was expected to sign into law sweeping pension changes that will save California taxpayers billions of dollars in the future.
State lawmakers last month sent the Democratic governor a series of changes to California's public pension system that will largely affect state and local government workers hired after Jan. 1, 2013. Brown described the changes in a meeting Tuesday with the Bay Area News Group's editorial boards as the best deal he could get while navigating between "one side that doesn't know (the Democrats) how to say no and the other side that doesn't know how to say yes (the Republicans)."
The main pension bill, AB340, will increase the retirement age for new employees, cap the annual payout at $132,120, eliminate numerous abuses of the system and require workers who are not contributing half of their retirement costs to pay more. Brown, who was scheduled to sign it into law at his Los Angeles office, said he supports the legislation even though it falls short of the 12-point reform proposal he offered last October.
Many Republican lawmakers supported the changes but said much more needs to be done to fix a system with massive liabilities for current retirees and workers.
The bill does not include a hybrid system that includes a 401(k)-style plan so public employees would bear some of the investment risk, as private-sector workers do. Nothing was done to reduce skyrocketing health care costs promised to current workers when they retire. And there will be no independent members with financial expertise on the board of the state's main pension fund.
While some GOP lawmakers called the bill woefully inadequate, union leaders were angered by what they saw as a violation of collective bargaining rights. The reforms for new employees include raising the higher retirement age for full benefits.
"We have already adopted many of the measures proposed by the governor through the collective bargaining process, including measures to ban spiking and increase each member's contribution from 5 percent to 8 percent to make sure that CalPERS remains strong," Yvonne R. Walker, president of the Service Employees International Union Local 1000, the largest state workers' union, said in a statement Monday.
The changes affect the state and most local governments, many of which participate in the state's pension programs. The state's two main pension funds - the California Public Employees' Retirement System and the California State Teachers' Retirement System - are at least $165 billion underfunded.
CalPERS estimates the fund will save between $42 billion and $55 billion over 30 years while CalSTRS pegged its savings at $22.7 billion over 30 years.
While new employees starting Jan. 1, 2013, would automatically have to contribute 50 percent of their pension costs, local government labor unions will have a five-year window to negotiate that through collective bargaining.
If no deal is reached by Jan, 1, 2018, a city or school district could force employees to pay their half, up to 8 percent of pay for civil workers and 11 or 12 percent for public safety workers.
Most state workers already contribute half of their pension costs. Democrats included language that would raise contribution rates for about 75,000 state workers, including park rangers, game wardens and firefighters, to bring them up to the 50 percent level over the next two years.
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