Jerry Brown: Raise public worker retirement age
Marisa Lagos, Chronicle Staff Writer
San Francisco Chronicle October 28, 2011 04:00 AM
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Sacramento --
Gov. Jerry Brown unveiled a 12-point proposal on Thursday aimed at shrinking the costs of public employee pension benefits in California, in part by raising the retirement age for most new employees from 55 to 67.
The plan would affect state, city, county and other public workers, including teachers, police and firefighters. Public safety workers would be allowed to retire with full benefits before the age of 67 depending on their ability to perform their jobs.
Brown also called for workers to increase contributions toward their benefits, and wants to institute a "hybrid" pension model that would combine traditional pensions with a 401(k)-style plan. The Democratic governor's plan would require that all public workers pay as much into their retirement savings as the government does, and is forecast to save from $4 billion to $11 billion in public funds over the next three decades.
Brown's administration said the changes, if fully implemented, would cut public funding by half.
"It's time to fix our pension systems so that they are fair and sustainable over a long time horizon," Brown said.
The plan would seek to curb the practice of pension "spiking" - in which an employee receives a raise shortly before retiring or cashes out unpaid vacation to boost his or her pension payout. The plan would require that the retirement formula be based on the last three years of service and exclude, for new employees, the use of unpaid vacation and other perks in the formula.
It would bar anyone convicted of a felony in the course of their public service from collecting retirement benefits, and would prohibit "pension holidays" - when employers and employees stop paying into pension funds for a time because the markets are doing so well.
"My goal is to provide a fair but sustainable income security plan," Brown said. "It is real important in our society that people, when they reach retirement, have sufficient income to maintain a decent state of living."
Californians for Retirement Security Chairman David Low, who also works for the California School Employee Association, said the group was "disappointed that the governor is proposing pension changes that will undermine retirement security for public employees," noting that "public employees already have agreed to hundreds of millions of dollars in pension concessions at the state and local level."
But Yvonne Walker, president of the largest state worker union, Service Employees International Union Local 1000, and Jon Hamm, executive officer of the California Association of Highway Patrolmen, appeared open to discussing the proposal's merits. They have been pushing for the creation of a pension system for private-sector workers as well.
"Gov. Brown's proposal starts the conversation on retirement security that will help shape the future for the millions of people reaching retirement age," Walker and Hamm said in a joint statement. "We support curbing abuses and putting an end to special deals like those in the city of Bell. At the same time, we cannot jeopardize the secure retirements of hard working Californians whose modest pensions are often the difference between living out their years in security and retiring into poverty."
Brown pledged to honor existing contracts with state employees, but said that some portions of the plan - including the requirement for equal contributions from employee and employer, and limiting the ability for retirees to be hired back by government even as they continue to collect a pension - would apply to current workers.
Gov. Jerry Brown unveiled a 12-point proposal on Thursday aimed at shrinking the costs of public employee pension benefits in California, in part by raising the retirement age for most new employees from 55 to 67.
The plan would affect state, city, county and other public workers, including teachers, police and firefighters. Public safety workers would be allowed to retire with full benefits before the age of 67 depending on their ability to perform their jobs.
Brown also called for workers to increase contributions toward their benefits, and wants to institute a "hybrid" pension model that would combine traditional pensions with a 401(k)-style plan. The Democratic governor's plan would require that all public workers pay as much into their retirement savings as the government does, and is forecast to save from $4 billion to $11 billion in public funds over the next three decades.
Brown's administration said the changes, if fully implemented, would cut public funding by half.
"It's time to fix our pension systems so that they are fair and sustainable over a long time horizon," Brown said.
The plan would seek to curb the practice of pension "spiking" - in which an employee receives a raise shortly before retiring or cashes out unpaid vacation to boost his or her pension payout. The plan would require that the retirement formula be based on the last three years of service and exclude, for new employees, the use of unpaid vacation and other perks in the formula.
It would bar anyone convicted of a felony in the course of their public service from collecting retirement benefits, and would prohibit "pension holidays" - when employers and employees stop paying into pension funds for a time because the markets are doing so well.
"My goal is to provide a fair but sustainable income security plan," Brown said. "It is real important in our society that people, when they reach retirement, have sufficient income to maintain a decent state of living."
Mixed reaction
Reaction was mixed. Democratic legislative leaders, who this week convened a joint committee on pension reform, were noncommittal about the plan's specifics but promised to work with Brown. Business groups praised the plan, while it was immediately criticized by the head of a union coalition representing 1.5 million public employees and retirees.Californians for Retirement Security Chairman David Low, who also works for the California School Employee Association, said the group was "disappointed that the governor is proposing pension changes that will undermine retirement security for public employees," noting that "public employees already have agreed to hundreds of millions of dollars in pension concessions at the state and local level."
But Yvonne Walker, president of the largest state worker union, Service Employees International Union Local 1000, and Jon Hamm, executive officer of the California Association of Highway Patrolmen, appeared open to discussing the proposal's merits. They have been pushing for the creation of a pension system for private-sector workers as well.
"Gov. Brown's proposal starts the conversation on retirement security that will help shape the future for the millions of people reaching retirement age," Walker and Hamm said in a joint statement. "We support curbing abuses and putting an end to special deals like those in the city of Bell. At the same time, we cannot jeopardize the secure retirements of hard working Californians whose modest pensions are often the difference between living out their years in security and retiring into poverty."
Brown pledged to honor existing contracts with state employees, but said that some portions of the plan - including the requirement for equal contributions from employee and employer, and limiting the ability for retirees to be hired back by government even as they continue to collect a pension - would apply to current workers.
Parts need voters' OK
And some portions of the plan would have to go before voters for approval - meaning Brown will need some Republican support in the Legislature to get the proposal on a ballot. Voter approval is necessary in part because many of the provisions of Brown's plan would change pension laws in cities and counties that independently bargain with local employee unions and have passed their own laws governing public worker benefits.
The Republican response was also mixed. While the California Republican Party slammed the governor's plan as "unsatisfactory," Assembly Republican Leader Connie Conway of Tulare said it is "encouraging to see the governor embrace ideas that Republicans have pushed for years."
Conway suggested that it may be more difficult for Brown to persuade fellow Democrats and powerful public employee unions to back his plan - something the governor acknowledged as well. Brown, who was elected with strong union support, earlier this year submitted a nearly identical pension reform proposal during budget negotiations but got nowhere.
"Assembly Republicans hope that he will encourage his fellow Democrats in the Legislature, as well as his union allies, to follow suit," she said.
-- Replaces one-third of retirement benefits for new employees with a 401(k)-style plan.
-- Increases the retirement age for nonpublic safety employees from 55 to 67.
-- Requires pension benefits for new employees to be based on their last three years of pay to avoid "spiking."
-- Mandates that all new public employees' retirement benefits be based on regular salaries so that overtime, vacation and other perks are not used for pension spiking.
-- Limits "double-dipping" - when retired employees collect a pension and continue to work - by limiting post-retirement employment to 120 days per year.
-- Cuts off pension benefits for anyone convicted of committing a felony in the course of their public duties.
-- Prohibits retroactive pay increases for all current and future public employees.
-- Prohibits "pension holidays" - the practice of suspending retirement contributions during boom years.
-- Prohibits the purchase of "airtime" - when employees pay for additional retirement service credit for time they did not work.
The Republican response was also mixed. While the California Republican Party slammed the governor's plan as "unsatisfactory," Assembly Republican Leader Connie Conway of Tulare said it is "encouraging to see the governor embrace ideas that Republicans have pushed for years."
Conway suggested that it may be more difficult for Brown to persuade fellow Democrats and powerful public employee unions to back his plan - something the governor acknowledged as well. Brown, who was elected with strong union support, earlier this year submitted a nearly identical pension reform proposal during budget negotiations but got nowhere.
"Assembly Republicans hope that he will encourage his fellow Democrats in the Legislature, as well as his union allies, to follow suit," she said.
Governor's plan
-- Requires new and current public employees to pay at least half of the annual cost of their pension benefits.-- Replaces one-third of retirement benefits for new employees with a 401(k)-style plan.
-- Increases the retirement age for nonpublic safety employees from 55 to 67.
-- Requires pension benefits for new employees to be based on their last three years of pay to avoid "spiking."
-- Mandates that all new public employees' retirement benefits be based on regular salaries so that overtime, vacation and other perks are not used for pension spiking.
-- Limits "double-dipping" - when retired employees collect a pension and continue to work - by limiting post-retirement employment to 120 days per year.
-- Cuts off pension benefits for anyone convicted of committing a felony in the course of their public duties.
-- Prohibits retroactive pay increases for all current and future public employees.
-- Prohibits "pension holidays" - the practice of suspending retirement contributions during boom years.
-- Prohibits the purchase of "airtime" - when employees pay for additional retirement service credit for time they did not work.
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