Newly hired California state employees would be moved into either a defined contribution plan or a hybrid plan and collective bargaining would no longer be used to determine retirement benefits under two bills being proposed.
One bill, sponsored by Republican state Sen. Mimi Walters, would impact the $226.5 billion California Public Employees’ Retirement System, Sacramento, and the $146.4 billion California State Teachers’ Retirement System, West Sacramento.
Ms. Walters last week filed a package of 10 bills that would move new employees into a defined contribution system but whether the bill would mandate a defined contribution or a hybrid plan has not yet been decided, said Gina Zari, chief of staff. The package of bills would also eliminate pension plans for part-time locally elected officials, eliminate collective bargaining on retirement benefits with the exception of employee contributions and remove elected officials from CalPERS’ board. It would also create fiscal and actuarial requirements for board membership, she said.
While not addressed in this bill package, current employees’ pension plans may be tackled next, such as changes to the kind of compensation that would be counted toward benefits.
“Given the financial burden the unfunded liability presents, we will have to look to how to make savings or adjustments to current employees (pensions),” Ms. Zari said.
Another bill, sponsored by Republican state Rep. Allan Mansoor, would also eliminate collective bargaining for retirement benefits, including for pensions and post-retirement health care, said Saulo Londono, legislative director for Mr. Monsoor.
He said eliminating collective bargaining for retirement benefits affects the state pension plans’ unfunded liability because “in the future if the governor or Legislature wants to change the pension system, they will be able to do that without negotiating with the unions.”
Mr. Londono said Mr. Monsoor’s bill is expected to be filed next week. He added that Mr. Monsoor’s bill does not include a defined contribution plan but that would be the long-term goal. It is one of the goals of a state Republican pension reform working group, Mr. Londono said.
According to Ms. Walters’ website, the state pension systems’ overall unfunded liability is between $100 billion and $500 billion.
As of June 30, 2009, the most recent calculation, CalPERS’ unfunded liability was $49 billion, Clark McKinley, spokesman, wrote in an e-mailed response to questions. The CalPERS board has not yet taken a position on the bills.
“Our funding ratio is approaching 70%. Eighty percent is considered adequate for public pension funds. If we have a couple of good investment years, we could go much higher,” Mr. McKinley stated.
“CalPERS has voluntary defined contribution plans for members … We believe that we have sufficient resources, experience and a proven track record to bolster our confidence that we can sustain our defined benefits program,” Mr. McKinley stated. “Currently, investment earnings account for 64 cents of every pension dollar; employer (taxpayer-financed) contributions 21 cents; members 15 cents.”
Officials at CalSTRS, and the Service Employees International Union and American Federation of State, County and Municipal Employees, which represent most California state employees, could not be reached by press time.