Feeble CalPERS reform shows Brown who runs Sacramento

by Chris Reed | July 8, 2014 11:00 am

Taken at face value, the pension reforms[1] touted by Gov. Jerry Brown in 2011 and 2012 were genuinely far-reaching for a California Democrat, even one as allegedly independent as Brown. But from the 2014 perspective, two of the key provisions previously sought by the gov have not only gone nowhere; they’ve been rejected in a way that makes him look like a powerless bystander.

Ed Mendel of calpensions.com explained how one key reform[2] was gutted.

 A bill that started out as Gov. Brown’s proposal to restructure the CalPERS board emerged from the Legislature last week as a more modest change: a requirement that CalPERS board members receive 24 hours of education in pension fund operations.

A 12-point pension reform proposed by Brown in October 2011 called for more “independence and expertise” on the CalPERS board. The governor’s appointees would have doubled to six, matching the number of labor representatives.

“In the past, the lack of independence and financial sophistication on public retirement boards has contributed to unaffordable pension benefit increases,” said No. 11 of the governor’s 12-point plan.

Pension-spiking was target of move

Brown’s goal was plain: to bring more honesty to board decisions about pensions.

The “unaffordable” pension increases were not identified. But the reference may have been to two bills backed by the powerful CalPERS board, which sets annual rates that must be paid by government employers in the giant retirement system.

When a booming stock market gave pension funds a surplus, a CalPERS sponsored bill, SB 400 in 1999, sharply boosted Highway Patrol pensions and authorized the same pension formula for local police, which many obtained through bargaining.

For state workers, SB 400 rolled back a pension cut given new hires earlier in the decade. Low pensions earned under the old plan could be boosted through a “buy back” with increased contributions. Retirees received a 1 to 6 percent pension increase.

A second bill, AB 616 in 2001, authorized three escalating pension formulas for local governments in CalPERS and 20 county systems operating under a 1937 act. The top formula, “3 at 60,” provides 120 percent of pay after 40 years of service at age 60. (See table at bottom)

The CalPERS board, rejecting the advice of its chief actuary, encouraged local governments to boost pensions authorized under AB 616 by offering in 2001[3] to inflate the value of their pension fund investments to help cover the increased cost.

Revising a bill from changing the board’s makeup to requiring education is pretty drastic.

CalSTRS exempted from key pension reform

But it’s still not as much of a symbol of failure as Brown’s other retreat. His 2011 pension manifesto’s key provision was that the state move toward a retirement-benefit funding structure in which public employees and taxpayers roughly shared costs.

The theory was that if employees had to share equally in the huge cost of their pensions, they’d be more amenable to plans to reduce them going forward so as to increase their take-home pay.

But when it came to enforcing this provision — and triggering a fight with the CTA and the CFT — Brown sized up the Sacramento landscape and doesn’t appear to have even tried. The provision in his 2014-15 budget shoring up funding for the California State Teachers’ Retirement System requires that taxpayers foot 90 percent of the bill and teachers just 10 percent.

It’s an “Animal Farm” thing, you see. Some public employees are more equal than others.

Brown’s failure on these fronts is one more reminder that even a popular governor can’t shake up a system in which unions wield such entrenched power. A ballot initiative is the only way to force the sort of changes the governor sought — and that would face monkey-wrenching from the Attorney General’s Office.

This sad state of affairs doesn’t feel like union power-flexing. It feels more like union occupation.

Source URL: https://calwatchdog.com/2014/07/08/not-done-yet-feeble-calpers-reform-shows-whos-boss-in-legislature/

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