Brown To Propose Reform for Pensions, Retiree Health Care

On Thursday, Gov. Jerry Brown (D) plans to propose steps to overhaul California's public pension system in part by increasing how much workers pay toward their retirement and health care costs, the AP/Washington Post reports.

The plan aims to reduce spending by about $900 million annually (AP/Washington Post, 10/26).

Background

Earlier this year, public pension reform was a main point of debate as lawmakers negotiated a state spending plan. GOP leaders unsuccessfully pushed for pension reform, and Brown proposed his own pension changes that did not gain support in the Legislature (California Healthline, 8/15).

According to a Stanford Institute for Economic Policy Research report issued last year, CalPERS has $75 billion in unfunded future pension liabilities, and the state is responsible for nearly $52 billion in unfunded health care costs for retirees (AP/Washington Post, 10/26).

Details of Brown's Plan

Labor union leaders shared details about Brown's plan after receiving an outline of the proposal from him late Wednesday (York/Mishak, Los Angeles Times, 10/27).

Brown's 12-step pension proposal would require new public employees to work for the state for at least 15 years before becoming eligible for state-funded retiree health benefits.

When retirees become eligible for Medicare, the state would pay only for premiums.

The plan also calls for:

• Raising the retirement age from 55 to 67 for workers who are not in public safety positions;
• Ending the practice known as pension spiking, in which workers can use overtime and other benefits to boost their payouts (AP/Washington Post, 10/26);
• Instituting a so-called hybrid system that would disburse benefits through a guaranteed benefit and a 401(k)-style benefit;
• Banning the purchase of additional retirement service credits, known as "airtime," to add time to employment records (Siders, Sacramento Bee, 10/27);
• Prohibiting retired workers who serve on public boards and commissions from earning retirement benefits;
• Requiring workers to pay for at least half the annual cost of funding their pension benefits (AP/Washington Post, 10/26); and
• Restructuring the CalPERS governing board (Sacramento Bee, 10/27).

Brown's plan would require approval from both the Legislature and voters (Los Angeles Times, 10/27).

Democrats are likely to disapprove of some of the proposed reforms, according to the AP/Post.

Labor Union Response

Labor unions have expressed opposition to elements of the governor's plan.

Dave Low, chair of the Californians for Retirement Security group, said much of Brown's plan evades collective bargaining.

He added that unions already have "negotiated major retirement concessions" that have saved state and local agencies hundreds of millions of dollars (AP/Washington Post, 10/26).