Governor Brown Announces Pension Reform Proposal

 

This past Thursday, Governor Edmund G. Brown Jr. proposed 12 major reforms for state and local pension systems that would end system-wide abuses and reduce taxpayer costs by billions of dollars over the long term.

“It’s time to fix our pension systems so that they are fair and sustainable over a long time horizon,” said Governor Brown.  “My plan raises the retirement age and bans abusive practices like ‘spiking’ and ‘air time’ while mandating that public employees pay an equal share of pension costs.”

The Governor’s 12-point plan addresses key issues affecting pensions in state and local governments.  He initially outlined a pension reform plan during budget negotiations in March 2011.

When fully implemented, these reforms will cut roughly in half the cost to taxpayers for providing pension benefits for state employees.  It will cut the risk to taxpayers for pension debt by more than half.  Similar savings are expected across all systems.

According to the Governor’s press release, the 12-point plan addresses key issues affecting pensions in state and local governments.  The plan includes the following reforms:

  • Equal Sharing of Pension Costs: All Employees and Employers
  • “Hybrid” Risk-Sharing Pension Plan: New Employees
  • Increase Retirement Ages: New Employees
  • Require Three-Year Final Compensation to Stop Spiking: New Employees
  • Calculate Benefits Based on Regular, Recurring Pay to Stop Spiking: New Employees
  • Limit Post-Retirement Employment: All Employees
  • Felons Forfeit Pension Benefits: All Employees
  • Prohibit Retroactive Pension Increases: All Employees
  • Prohibit Pension Holidays: All Employees and Employers
  • Prohibit Purchases of Service Credit: All Employees
  • Increase Pension Board Independence and Expertise
  • Reduce Retiree Health Care Costs: State Employees

Even as Gov. Jerry Brown announced his plan, its prospects of passing intact appeared dim.

His own allies, California's powerful labor interests, objected to major parts of the plan.  In addition, leaders of the Democratic-controlled Legislature – neither of whom attended Brown's announcement – reacted with concern.

Brown said he thinks the Legislature will "rise to the occasion," but even he wasn't sure of the outcome.  Nevertheless, Brown promised pension changes in his campaign, and the proposal could blunt Republican criticism of his labor ties as he prepares next year to ask voters to raise taxes.