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California governor Jerry Brown looks on during a ribbon cutting ceremony on October 19, 2011, in Santa Clara, California. Brown has proposed a new pension plan that is predicted to save $900 million in revenue.
California Governor Jerry Brown may have helped institute collective bargaining during his first gubernatorial stint, but the pension plan he proposed for state employees earlier today has labor leaders and congressional Democrats grumbling.
Among other items, the plan raises the retirement age from 55 to 67, eliminates employees’ option of purchasing retirement service credits, and creates a hybrid system of payouts that relies on a combination of Social Security funds and 401(k) benefits. The plan would be mandatory for new hires. According to the Sacramento Bee, Gov. Brown stresses that his goal is long-term sustainability, but his critics claim the plan jumps the gun and ignores recent compromises made between workers and employers, including higher employee contributions and reworked formulas for new hires.
The administration estimates that this plan could save $900 million a year. UCLA Professor-emeritus Daniel J.B. Mitchell told David Lazarus from the L.A. Times, who sat in for KPCC’s Patt Morrison Wednesday, that this would happen “over a period of time.” Savings partly come from offering a lesser plan to future employees. But the newer employees affected by the proposal may take a while to trickle in to the job market.
“In the current budgetary environment, governments are not doing a lot of hiring, same with private employers, so it could take quite a while before there is a large proportion of the workforce in the public sector that are the newer employees,” he said.
Mitchell said that many details of the plan were not expressed in the press conference and his media release. Though employees may have to wait it out until age 67 before they qualify for full benefits, Mitchell said early retirees get a cut-rate pension, which gradually scales up to the normal retirement age.
President pro tempore of the California State Senate Darrell Steinberg told Lazarus that the proposals are “provocative,” but even the unions have said that there needs to be reforms in the system.
“We’re going to approach this through a very intelligent frame and balance. We are committed to ensuring a long term solvency of California’s pension fund, and at the same time, [...] we do not want to do anything that lessens the number of people who are part of our shrinking middle-class; we want to grow the middle class.”
Steinberg said they will protect the defined-benefit program, work with the governor on the plan’s affordability and approach the issue without political bias to “do the right thing by the working people and by the tax payers as well.”
Yvonne Walker, president of the Service Employees International Union (SEIU) Local 1000, which represents 95,000 state employees, said she’s similarly open-minded to negotiating the specifics laid out by Gov. Brown’s plan.
“We’re open to anything that’s going to ensure a sustainable, secure retirement for the workers we represent. But I also think that the conversation has to be expanded to make sure that we are looking at [how to] secure retirement for all Californians,” she said.
Mimi Walters, Republican California State Senator of the 33rd District, said she has not analyzed the details of the proposal but is pleased with the pension reform packets.
“I do know that he has seen some of our proposals that we have put forward,” she said. “He called me a few days ago, and I had written an op-ed piece dealing with some of the issues [...] and he told me that he liked some of my ideas.”
Does Gov. Brown’s proposal throw the baby out with the bathwater? Do you want to see it passed?
Daniel J.B. Mitchell, professor-emeritus, UCLA Anderson School of Management and the School of Public Affairs
Darrell Steinberg, President pro tempore of the California State Senate, D-6th District
Mimi Walters, California State Senator, R-33rd District
Yvonne Walker, president of SEIU local 1000