Brown Endorses Pension Reform

Steven Greenhut: Gov. Jerry Brown has, finally some would say, released a pension-reform proposal. We will analyze this carefully, but it looks like he is simply going after the low-hanging fruit — the abuses rather than the fundamental unaffordable pension formulas. Still, it’s something and his “proposals under development” at least promise to get closer to the root of the problem. Here is the governor’s press release:

SACRAMENTO – Governor Edmund G. Brown Jr. today released the actual bill language of seven separate pension reform measures.

In addition, Brown listed five other specific pension reforms that he is developing. These include a pension benefit cap, limits on post-retirement public employment, hybrid defined contribution/benefit options, an action plan to address CalSTRS unfunded liability, and a measure to change and improve the board governance of CalPERS and CalSTRS.

All 12 of these pension reform measures were presented and discussed in detail with Republican legislators. Talks broke down, however, over other issues.

Brown intends to introduce these pension reforms with or without Republican support. …

PENSION REFORM PROPOSAL

APPLIES TO STATE AND LOCAL GOVERNMENTS

MARCH 2011

1.            Eliminate Purchase of Airtime.  Would eliminate the opportunity, for all current and future employee members of all state and local retirement systems, to purchase additional retirement service credit.    (RN 14777) (Note Walters, SB 522, would eliminate Air Time)

2.            Prohibit Pension Holidays.  All California public agencies would be prohibited from suspending employer and/or employee contributions necessary to fund the normal cost of pension benefits. (RN 14777)

3.            Prohibit Employers from Making Employee Pension Contributions.  All California public agencies would be prohibited from making employee contributions that fund the normal cost of employee retirement benefits in whole or in part.  (RN 14777)

4.            Prohibit Retroactive Pension Increases.  All California public agencies would be prohibited from granting any retroactive pension benefit increases, such as benefit formula improvements that credit prior service.  (RN 14777)

5.            Prohibit Pension Spiking:  Three Year Final Compensation.  Final compensation for new employees would be defined as the highest average annual compensation during a consecutive 36 month period.  (RN 14777)

6.            Prohibit Pension Spiking:  Define Compensation as Only Regular, Non-recurring Pay.  Compensation means normal rate of pay or base pay.  (RN 14777) (Note Simitian, SB 27, would exclude from defined benefit changes in compensation principally for the purpose of enhancing benefits; would place stricter limits on creditable compensation)

7.            Felony Convictions.  Prohibits payment of pension benefits to those who commits a felony related to their employment.  (RN 14777) (*Note Strickland, SB 115, similar prohibition)

PROPOSALS UNDER DEVELOPMENT

Impose Pension Benefit Cap.

Improve Retirement Board Governance

Limit Post-Retirement Public Employment

Hybrid Option

Address CalSTRS Unfunded Liability