California's state Conference Committee on Public Pensions voted Tuesday to approve extensive reforms to public pension benefits. The changes in Assembly Bill 340 would apply to both state and local government — with some exceptions.
The full state Assembly and Senate will vote on the measure on Friday. Because the measure comes to the floor from a special committee, no member can amend it, making it a straight up or down vote. A simple majority of lawmakers can enact pension reform.
Gov. Jerry Brown unveiled the plan Tuesday at a press conference in Los Angeles. Brown said he had to “move heaven and earth” to get this deal.
“These pension reforms offer a radical change in the way pensions have been paid and calculated over the last several decades,” Brown said.
The plan forces all current and future public employees who work for state and local government to pay half of the costs of their pensions. Current employees would have up to five years to negotiate a way to achieve that contribution level. If there’s an impasse, then government officials could impose the increased contribution.
Only charter cities — and counties with independent pension plans including Los Angeles and San Diego counties — would be exempt. The law won’t apply to University of California employees either.
Union representatives called the plan “punitive” and “unnecessary.”
David Low with the California School Employees Association said public employees have made huge financial sacrifices in recent years to reign in costs, such as increased contribution rates.
“And now we face a unilateral change in pensions without negotiations. No give and take, no discussion, no participation. This bypasses collective bargaining, and it results in the biggest rollback of pensions in the history of California,” Low said.
Unions also object to changes in the formulas used to determine a public worker’s pension. Starting next January, new hires in both the state and local government will have to work at least two years longer to collect full retirement benefits — and those benefits will represent a much smaller percentage of their final pay.
The plan also caps the amount of a new employee’s salary that can be used to calculate the retirement payout. The new cap would be $110,000 for workers who collect Social Security and $130,000 for employees who don’t. About 5 percent of the current workforce makes more than $110,000.
Gov. Brown said the changes to pensions are needed to save the state tens of billions of dollars over the next 30 years.
“We’ve lived beyond our means, the chickens are coming home to roost. And this is just one of a series of countermeasures that will be required,” Brown said.
Analysts at CalPERS, the giant pension fund that manages most state and local employee pensions, will crunch their own numbers on the fiscal impact of the reforms in time for the Assembly and Senate floor votes on Friday.