Gov. Brown Asks For More Time On Pension Reform

SACRAMENTO (AP) — The governor said Tuesday he could not reach a deal with Democratic leaders on sweeping public pension reform and suggested talks continue during a monthlong recess that begins at the end of the week.

Gov. Jerry Brown issued a comprehensive proposal last fall that focused on raising the retirement age to match Social Security and moving new workers to a hybrid system in which defined benefits are combined with a 401(k)-style plan widely used in the private sector. Democratic leaders did not send him their plan until last Sunday and have not made it public.

Lawmakers said they want to allow workers to retire before age 67 at reduced pension rates and they refused the governor’s call for a defined contribution plan that places some of the risk on employees. Currently, taxpayers are on the hook for billions of dollars in pension and health care benefits promised to public workers when they retire.

“The governor could not agree to some of the changes in the pension counterproposal,” Brown’s spokesman Gil Duran said in a statement. “These complex issues cannot be resolved in two days and he has asked the Legislature to continue to work with him over the recess to resolve the substantial differences.”

Assembly Speaker John Perez said Democrats would keep working on passing a proposal before the legislative session wraps up at the end of August. Although Republicans support Brown’s plan, the Democratic governor needs support from members of his own party to pass legislation.

“The Assembly has been working diligently to finalize a pension proposal that not only satisfies the 12 points of the governor’s plan, but also goes further in finding needed reforms” that create savings and other benefits, Perez said in a statement.

Pension reform supporters have been hoping to build momentum for statewide changes after voters in San Diego and San Jose overwhelmingly passed sweeping changes in those cities last month.

Brown’s announcement Tuesday suggests the majority party still has work to do to satisfy his demands for a comprehensive package to help contain rising pension costs. Critics say the costs are unsustainable and are starting to compete with public education and other programs for limited state and local funds.

“They continue to mess around and not get the people’s business done,” said Joel Fox, president of the Small Business Action Committee, which is campaigning against Brown’s tax initiative on the November ballot.

Fox said if lawmakers were serious about reform, they would have sought to put changes on the fall ballot before the June 28 deadline for that move.

The state said pension contributions accounted for 2.4 percent of state spending in 2006. It’s expected to reach 3.9 percent of this year’s $91.3 billion budget.

The California Public Employees’ Retirement System, the nation’s largest public pension fund, has an unfunded liability of around $85 billion. The California State Teachers’ Retirement System has about $64.5 billion in unfunded liabilities.

Labor leaders said it’s important for Brown and lawmakers to get details right.

“Both the legislative and governor’s proposals are deeply flawed and deserve public scrutiny that the next few weeks will allow,” said Dave Low, chairman of Californians for Retirement Security, a coalition of unions.

The governor wants to increase the retirement age from 55 to 67 for new, non-public safety employees, and have local and state government workers pay more toward their pensions and retiree health care. Newly hired public safety employees would have to work beyond the current minimum retirement age of 50 depending on their ability to perform the job.

Brown’s proposal would put new workers in a hybrid plan in which guaranteed benefits are combined with a 401(k)-style plan.

Brown’s finance department has estimated that his changes would reduce the state’s contributions by $4 billion to $11 billion over the next 30 years if the plan is implemented. Other aspects of government — from courts and schools to cities and counties — would see their own savings, too.

Assemblyman Warran Furutani, co-chairman of the Legislature’s pension committee, said Democrats have embraced most of the governor’s proposals but have offered alternatives on how to raise the retirement age and want changes to the hybrid system.

Democrats are willing to cap the amount an employee can receive from the pension fund but want another type of defined benefit program known as a cash balance plan tied to a lower guaranteed interest rate to supplement pensions. They are willing to raise the retirement age for an employee to collect full benefits, but don’t want to prevent people from taking early retirement if they are willing to accept a smaller pension, he said.

“It’s going to be a sliding scale with a minimum of hurt for the people that retire early,” Furutani said. “If you stayed until 67, you’ll be able to get a sweetened amount that’s extra.”

He said Democrats have added some of their own changes as well. For example, they want to allow local government to negotiate employee contributions through collective bargaining. Brown wants to mandate employees pay half of their pension costs.

Furutani said lawmakers agree with the governor’s proposals to end pension spiking.

The governor wants to state and local governments to calculate benefits based on the highest average compensation for three years, rather than one year. And he wants to ban counting unused vacation time, overtime and other bonuses in calculating base benefits.

The governor also wants to require new state employees to work for 15 years to become eligible for retiree health benefits, and 25 years for maximum health care premium coverage.

Copyright 2012 The Associated Press.


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