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August 28, 2012 01:00 AM

California governor, Democratic legislators agree on pension changes

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    Bloomberg
    California Gov. Edmund G. Brown Jr.

    California Gov. Edmund G. Brown Jr. on Tuesday said he and Democratic state lawmakers agreed to a new pension reform plan that would cap the pension benefits for future public workers.

    Mr. Brown dropped his original proposal, made 10 months ago, to create a hybrid pension plan for new state employees.

    Under the proposal, new employees participating in the $238.4 billion California Public Employees' Retirement System, Sacramento, would have a $110,000 salary cap on which to base benefits, while most new hires in the $152.1 billion California State Teachers' Retirement System, West Sacramento, would have a $130,000 salary cap. The higher CalSTRS cap is because state teachers do not participate in Social Security.

    “These reforms make fundamental changes that rein in costs and help to ensure that our public retirement system is sustainable for the long term,” Mr. Brown said at a news briefing in Los Angeles. “These reforms require sacrifice from public employees and represent a significant step forward.”

    Senate President Pro Tem Darrell Steinberg, said the plan is expected to be introduced in a bill later Tuesday and will go for a vote before the full Legislature on Friday, the last day of the 2011-'12 legislative session.

    Part of the reform plan also would raise the pension contributions of new state workers.

    None of the changes would affect existing state employees.

    Public employee unions immediately slammed the plan.

    “We are outraged that a Democratic governor and Democratic Legislature are taking a wrecking ball to retirement security for teachers, firefighters, school employees and police officers,“ said David Low, chairman of the Californians for Retirement Security, a coalition representing union workers.

    The legislators' plan is meant to save money and stem criticism of retirement benefit packages that have amounted to hundreds of thousands of dollars for some public employees.

    How much it will save in pension costs is unclear. Mr. Steinberg said savings could end up amounting to tens of billions of dollars over the next 20 to 30 years.

    CalPERS has scheduled special meetings Wednesday morning and Thursday afternoon to discuss the proposal, and has asked its actuaries to estimate cost savings.

    Senate Democrats rejected Mr. Brown's hybrid pension proposal because they believed the cuts to public workers' benefits were too extreme.

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