Governor Brown's Public Pension Proposals

"Provisions of Gov. Brown's pensions overhaul plan" (From the Daily Breeze - 10/28/2011)

Gov. Jerry Brown, a Democrat, is unveiling his proposal to overhaul California's public employee pensions Thursday. Here are highlights of the plan, according to a draft report obtained by The Associated Press:

Require all new and current employees to contribute at least 50 percent of their retirement costs, shifting the burden from public employers, some of whom currently make the entire contribution. This portion of the proposal would be phased in. Employers and employees would be barred from suspending contributions.

Excellent proposal. Granted, it would be morally more enlightened to wean public employees of a public pension entirely -- would it not be better to receive a higher salary, and let each employee demonstrate the requisite responsibility to save and invest for their own future? The states and the federal government have turned Social Security and entitlements into a subtle piggy bank which they have pilfered year after year, having fewer forced investors to make up the lost with each passing year.

Form a mandatory "hybrid" risk-sharing pension plan for new employees. New plan would include a reduced, guaranteed defined benefit, a defined contribution portion such as a 401(k)-style plan, and Social Security. The goal would be to replace
75 percent of an employee's salary, based on a 30-year career for public safety employees, or 35 years for non-public safety employees.

The dichotomy between public safety and public works employees is unacceptable. Police and fire contribute a great deal more to our communities in terms of safety, but without water operators, fire fighters could not put out fires. With adequate street personnel, police would have to arbitrate more accidents and traffic violations.

Still, phasing in private-sector options, like a 401(k) is a step in the right direction, remarkable especially coming from a center-left executive.

Raise the age state employees are eligible for full retirement benefits from 60 to 67 to align with Social Security. The administration has not calculated a minimum retirement age, which is currently 55. Raise the retirement age beyond the current
50 years for newly hired public safety employees to an age based on their ability to perform the job and maintain public safety.

Yes, raise the retirement age. This is the largest jump offered by a state. From 60 to 67, in those seven years a state fund can accrue more investment to release to retirees, perhaps even persuade the current old guard of employees to divest themselves of the state system voluntarily and invest their pension funds in a private account. Why not create an incentive for current workers to do just that? Why not reward workers further still if they postpone retirement beyond 67?

For new employees, calculate pension benefits based on the highest average annual compensation for three years, rather than the current one-year system. Benefits would be calculated based on regular, recurring pay and would not include special bonuses, unused vacation time or overtime.

An average will certainly decrease the final calculation, a welcome change to the pension-spiking that has led to rampant legal abuse of the entitlement for workers approaching their final years in employment. It's about time that a governor called employees to accounts over factoring in unused sick and vacation time. Once again, it would be better to raise salaries than back-load retirement wages.

Bar all employees from buying service credits known as air time, to boost retirement service credit for time not actually worked.

Let us recognize our state staff for the work that they have done, nothing more.

Add two independent, public members with financial expertise to the board of the California Public Employee Retirement System board. Replace the State Personnel Board representative on that board with the director of the California Department of Finance. Brown also will recommend that other public retirement boards make similar changes.

How about scrapping the entire bureaucracy? Why not permit municipalities a large say in the accrual and disbursement of pension and medical benefits?
Prohibit retroactive pension increases based on earlier retirement or higher benefit levels for all employees.

Require new state employees to work for 15 years to become eligible for any state-funded health care premiums and 25 years to qualify for the maximum state contribution to those premiums. State-provided retiree health care premium coverage would end at Medicare eligibility age, when the state would fund only Medicare premium coverage and limited "wrap-around" health care benefits.

Governor Brown has demonstrated considerable political courage drawing up significant pension reform for the tarnished state of California, as the report indicates that public unions support the Democratic majorities in both chambers of the state legislature, strong interests not interested in giving in to fiscal solvency for the sake of the state which they serve.

Let us hope that Governor Brown can hone the necessary skills to reach not just across but within the aisle he stands it to curry favor with stalwart politicians who are looking out for the next election, not the next generation of Californians.