CalPERS: Brown’s Pension Plan Would Not Aid Budget, Workers

Gov. Jerry Brown's (D) pension reform plan would not help new workers or significantly reduce state spending, according to a report by CalPERS, the Los Angeles Times' "PolitiCal" reports (Mishak, "PolitiCal," Los Angeles Times, 2/15).

Background

Earlier this month, Brown released a detailed pension reform plan that would end traditional pensions for state and local government workers hired after June 2013. The plan includes statutory language on health benefits available to retired state workers.

The proposal would implement "hybrid" plans that combine typical payouts with a 401(k)-style component for workers hired July 1, 2013, or later.

The plan also calls for:

• Basing pension benefits on a 36-month average of a worker's wages;
• Adding an independent health benefit expert and a representative from a contracting agency to the CalPERS board -- both appointed by Brown; and
• Requiring 25 years of service for new hires to receive 100% of the state's retiree health benefits.

Two-thirds of the Legislature would need to approve the plan for inclusion on the Nov. 6 ballot because it amends the state constitution.

If voters approve the plan, pension changes would take effect Jan. 1, 2013 (California Healthline, 2/6).

Report Details

The CalPERS report was requested by the state Legislature ("PolitiCal," Los Angeles Times, 2/15).

CalPERS found that the plan would reduce benefits for new workers and transfer risk from employers to workers.

The report also found that the proposal could cost some employers more than what they now pay for defined benefit plans.

CalPERS did not consider the administrative costs of managing a hybrid plan or closing existing defined benefits (Ortiz, "The State Worker," Sacramento Bee, 2/15).

Editorial Coverage

A Stockton Record editorial states that "it's up to Brown" to overhaul pensions in the state because pension reform activists "suspended their efforts to put their proposal on the November ballot, citing a lack of the millions needed to push the effort."

However, it notes, Brown's proposal "lacks considerable detail, for example how a hybrid pension system" for workers would function (Stockton Record, 2/16).