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California Governor Jerry Brown
Gov. Jerry Brown provided details Thursday on his new pension plan for California state workers, which includes combining benefits with a 401 (k)-style plan.
Brown's plan for this new hybrid system calls for trimming generous public employee pension benefits that have saddled California and local governments with billions of dollars in unfunded liabilities, according to a draft of the plan obtained by The Associated Press Wednesday.
"I've laid out what I think is a minimum that every plan in California ought to meet and the minimum protects the taxpayer while being fair to the employees," Brown said.
Brown's plan deals mostly with new state hires by raising the retirement age from 55 to 67 for civil workers. Public safety officials who can now retire as young as 50 would have to work longer, but the calculation would be based on their ability to perform.
The governor also wants current and new hires to start paying a greater share of pension costs; some contribute nothing toward their benefits. The new plan would require employees and employers to contribute equal amounts to retirement plans.
By shifting to a mandatory "hybrid" system, employees with at least 30 years of service would replace about 75 percent of an employee's salary through retirement funds and Social Security, according to the draft.
"It's time to fix our pension systems so that they are fair and sustainable over a long time horizon," Brown said in a prepared statement to the AP. "My plan raises the retirement age and bans abusive practices like "spiking" and "air time" while mandating that public employees pay an equal share of pension costs."
The administration estimates its proposal would save about $900 million annually.
The Los Angeles Times reports that Brown's new 12-point plan is a necessity, Brown said, as the state can no longer afford to support the current pension system.
Brown's plan would require approval from the Legislature, where union-allied Democrats are likely to balk at some of the significant rollbacks, and where Brown failed to win consensus on pensions with Republicans last spring.
Appearing on KPCC's Patt Morrison Show, State Senate Pro Tem Leader Darrell Steinberg told David Lazarus Thursday that some lawmakers are concerned with Brown’s proposal to raise the retirement age for new state hires from 55 to 67.
“There’s some legitimate questions about the retirement age, especially given the fact that people are living longer, thankfully," he said. "At the same time, though, there are a lot of professions where retiring at 62 or 67 doesn’t make sense because of the physical wear and tear on people.”
"The governor has indicated that labor will not like many of his proposals," Dave Low, chairman of the union coalition Californians for Retirement Security, said in a prepared statement. "He is right."
Several parts of the plan would also require voter approval, including extending many of its provisions to employees at California's public university systems, and Brown's goal to add two independent, public members to the board of the California Public Employee Retirement System, the nation's biggest public pension fund.
The board has come under scrutiny during an influence-peddling investigation by the attorney general's office alleging fraud and kickbacks through middlemen known as placement agents who seek investment business.
The plan also would end so-called pension "spiking" that lets employees boost their payouts by including overtime and other benefits, and end the practice of buying additional service credits to inflate pension checks.