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Pension Debate Faces State Lawmakers

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(Associated Press) — Five months after Gov. Jerry Brown released a 12-point plan to reform public pensions, there has been a lot of talk but little action on the issue at the Capitol. That could change this week when lawmakers return from their summer recess.

Gov Brown was Tuesday’s KVML “Newsmaker of the Day”.

Legislative leaders are considering several ways to address pension abuses and long-term financial health in the systems that pay for government worker retirement benefits. Among them:

– Limiting some abuses that anger the public and increase costs, such as pension spiking, which artificially inflates retirement benefits by boosting pay at the end of an employee’s career.

– Creating a broader package of pension reforms for this year to fix abuses and address longer-term financial concerns, possibly including limits on state contributions or a hybrid system that combines elements of traditional pensions and investment accounts that do not guarantee benefits.

– Tackling a broad pension package next year or in a special session, with a full series of legislative hearings.

The Democratic governor is saying little about his plan or how it might line up with what legislators have in mind. Members of his staff have met in recent weeks with lawmakers, public employee union representatives and pension-reform advocates.

A spokesman for the governor’s office said Friday that Brown is still “fine tuning” the framework developed during budget negotiations with Republican lawmakers this spring. Those talks broke down without a deal, but Brown said in March that he intended to push ahead without Republican backing, even on tough pension changes such as capping benefits and changing how teacher pensions are financed.

“When those negotiations collapsed, the governor made it clear that pension reform would remain a priority,” said spokesman Evan Westrup.

Legislative staffers and union representatives who were familiar with talks on the issue said Brown’s stance will be important, but that some Democratic legislators want to move forward with or without him.

Aides said Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Assembly Speaker John Perez, D- Los Angeles, were scheduled to talk about the agenda during the Legislature’s final month, including pension strategy. Neither would comment Friday.

“The speaker’s office considers pension reform a serious issue, and it’s a priority (Perez) intends to work on with other legislators,” said Robin Swanson, spokeswoman for the speaker’s office.

Public pensions have become a political issue across the nation as the economic downturn has squeezed state and local government budgets. The latest wave of criticism arose last week after another big drop in the stock market that wiped billions of dollars temporarily from pension fund assets.

Some of the arguments focus on whether the plans that guarantee benefits to government retirees are financially sustainable. Brown’s May budget proposal estimated that California owes $181 billion more for retiree pensions and health care than it can pay. Critics say the number is even higher.

Pension officials note their long-term record of hitting or exceeding financial projections and warn against short-term decisions that will affect workers for decades into the future.

Other opponents say unionized public employees have padded their pensions, pointing to big payments and early retirement perks. They highlight six-figure pensions for workers who retire at 55 and loopholes that boost payments every month from retirement until death.

Public employee unions say California’s state workers pay their fair share and increased that share by hundreds of millions of dollars a year in recent labor negotiations. They also argue that most state retirees receive relatively modest pensions, and that teachers are not covered by Social Security.

California’s politics complicate the issue. Brown and Democratic lawmakers, who control both houses of the Legislature, received substantial financial and campaign support from labor groups and want it again if they ask voters to approve increased taxes at the polls in 2012. The unions have said they are open to curbing pension abuses such as spiking, but also pushed to weaken legislation that would limit it.

Republican lawmakers have accused Brown and the Democrats of caving in to labor demands during the budget talks. Some were wary this week about talk of a Democratic-backed pension package.

They have been advocating pension reform all year, but Democrats have killed most GOP-backed pension bills, said Sabrina Lockhart, spokeswoman for Assembly Minority Leader Connie Conway, R-Tulare. Republicans want reforms, she said, but believe they would have to be made as constitutional amendments rather than simple changes to state law to keep them from being watered down later.

“The Legislature is not going to do anything that will address substantial change,” said Dan Pellissier, president of California Pension Reform, a group that plans a ballot initiative next year that would cap government payments for worker retirement benefits.

He said reforms to end double-dipping (returning to work after retirement while still collecting a pension) or pension spiking would be “moral victories” but would not save taxpayers much money. Pellissier is an 18-year state employee who himself will begin receiving a $5,000-a-month pension in 2015.

Reforms such as SB27, an anti-spiking measure by Sen. Joseph Simitian, D-Palo Alto, have been weakened and do not go far enough to protect taxpayers from pension costs, said Marcia Fritz, president of the California Foundation for Fiscal Responsibility. Her group is conducting research, largely financed by a Texas hedge fund manager, into pension alternatives and contends they could save billions of dollars for taxpayers.

“All of them were watered down, and none of them would do what we want,” Fritz said.

The “Newsmaker of the Day” is heard each weekday morning on AM 1450 KVML at 6:47, 7:47 and 8:47am.