Kevork Djansezian/Getty Images
California Gov. Jerry Brown will sign the state's new pension reform law Wednesday in Los Angeles. (Photo by Kevork Djansezian/Getty Images)
Governor Jerry Brown will sign a bill Wednesday that cuts benefits for most public workers in California and could save state and local governments up to $80 billion over the next 30 years.
Almost all the changes apply to future hires. But one big change — an increase in how much employees contribute to their pensions — applies to hundreds of thousands of Southern Californians who currently work in the public sector.
Under the new rules, employees must pay at least half the cost of their pensions. Unions have five years to phase-in the increase as contracts are renewed, but it’s the end result that worries most workers.
“It’s going to bring my net down, and it’s going to hurt me because right now I don’t have to pay anything,” says Patsy Gonzales, who works as a secretary for the housing division of the City of Pico Rivera.
Gonzales says she earns $3,500 a month before taxes. Under the new law, she’ll eventually have to contribute about $245 of that to her pension.
“That’s going to be a big chunk out of my check,” she says. “I’m going to have to learn to live differently.”
Gonzales has a couple years until her union contract expires and she begins contributing to her pension, but other unions, like the Orange County Deputy Sheriffs Association, are negotiating right now.
“The timing couldn’t have been any better or any worse” says OC Sheriffs union president Tom Dominguez.
The 1,800-member union was the first in the county to have its members contribute towards pension costs—currently five percent of their paychecks. But to get to the mandated 50-50 split with employers, they’ll have to increase contributions to as much as 13 percent of their pay.
New hires make just over $61,000 a year, and sergeants make between $77,000 and $108,000 annually. At a 13% contribution rate, deputy sheriffs would contribute $7,000 of their pay to cover pension costs and top tier employees would contribute up to $14,000.
Dominguez predicts the county won’t have trouble recruiting young officers, but the smaller take home pay will make it harder to hold onto experienced sheriffs.
“You can hire somebody who is 21 years old and they’re just happy to have a police officer, or law enforcement or deputy sheriff job—because it’s a calling,” Dominguez says. “But once they get hired, they start to see the landscape, they become a little bit more mature. They get married, they have kids, they have families and more responsibilities and then it becomes an issue of, ‘Hey I need to do what’s best for myself and for my family.’”
Most Orange County employees already contribute more than half the cost of their pensions. Jennifer Muir with the Orange County Employees Association says her members contribute as much as 19 percent of their pay.
But county managers, executives and elected officials don’t pay a cent. That includes the board of supervisors.
Orange County Supervisor John Moorlach says managers’ contribution to pay for pensions is “being negotiated.” He adds “Maybe down the line we’re looking at them having to pick up a part of the normal cost.”
Moorlach’s been a vocal critic of what he calls exorbitant public employee pensions. He unsuccessfully sued the Deputy Sheriffs in 2008 to overturn a retroactive pension increase. But he says larger deductions from employees’ paychecks could demoralize county workers.
“When you say to an employee, ‘Congratulations you did a great job this year, we’re not going to give you a raise this year. In fact, we’re going to take more out of your pay because you have to contribute to the pension plan,’ that becomes the root cause for dis-motivation.”
Moorlach points out the new law won’t reduce the multi-billion dollar pension debt that governments racked up in the past couple of decades competing for quality employees.
Los Angeles County opted out of that pension race decades ago. Assistant CEO Ryan Alsop says some pension reforms were needed around California, but not in L.A. County.
“At the end of the day we would have really liked to have been exempt and left alone,” Alsop says.
L.A. County’s 100,000-plus employees already pay more than half of their pension costs—with few exceptions. The county has repeatedly lowered pension payouts and raised retirement ages. Alsop says officials are still analyzing the new rules to make sure they don’t preempt the county’s decisions.
“What we’ve already done is cost efficient, it saved us money and we didn’t want any of that undone.”
But the big surprise, Alsop says, is the new cap on how much of workers’ salaries can count towards their pension. Under the new law, pension payments will be based on a maximum of $110,000 for workers who collect social security, $130,000 for those who don’t. That change applies only to future hires.
That wasn’t part of the Governor’s original 12-point reform plan. Alsop worries it could hurt L.A. County’s ability to hire top-level physicians for the nation’s second-largest medical system. They have to compete with the private sector, he says, and with a small but mighty group of bodies that are exempt from the statewide pension rules: the University of California and the charter cities of Los Angeles, San Diego, San Francisco and San Jose.