California State Commission Urges Freeze On Pensions

SACRAMENTO (KCBS/AP) — A California watchdog agency on Thursday called on the governor and Legislature to freeze pension benefits for current state and local government workers and overhaul the existing system, as the debate over retirement benefits for public employees has exploded nationwide.

KCBS’ Doug Sovern Reports:

As the Little Hoover Commission unanimously approved its report, it also recommended the state move from a defined benefits plan to a hybrid model that would include something similar to the 401(k) plans offered to most private-sector employees.

The commission, which includes lawmakers and political appointees, agreed that California’s 85 public pension systems need more flexibility and oversight because retirement costs have been growing as tax revenues have plunged. Pension costs for retired public workers now account for about 7 percent of the state’s general fund expenditures, according to the nonpartisan Legislative Analyst’s Office, which also recommended the state convert to a hybrid plan.

Commissioners acknowledged that such a change likely would face legal challenges but said the state has no choice given that pension plans are dangerously underfunded because of overly generous benefits granted in years past. If the governor and lawmakers do not address the problem, it will force cities and counties to severely reduce services and lay off employees.

California had at least $115 billion in unfunded pension obligations as of June 30, 2009, according to the latest figures available from the California Public Employees Retirement System. Unfunded state retiree health care costs were nearly $52 billion, according to the state controller’s office.

“While recognizing the legal challenges, this is a path that the state has no choice but to pursue,” wrote Daniel Hancock, chairman of the Little Hoover Commission. “Public agencies must have the flexibility and authority to freeze accrued pension benefits for current workers, and make changes to pension formulas going forward to protect state and local public employees and the public good.”

The commission suggested the state address public employee pension costs before they become unsustainable.

Bruce Blanning, executive director of the Professional Engineers in California Government, which represents 13,000 state engineers and professionals, said the courts already have determined it is illegal to reduce future pension benefits already promised to current workers.

“All surveys show that public servants are paid less than their private-sector counterparts,” Blanning said in a statement. “The Legislature and governor should direct their focus to legitimate savings rather than illegally violating long-standing commitments to those who serve the public.”

Evan Westrup, a spokesman for Gov. Jerry Brown, declined to comment on the report, saying the Democratic administration was still reviewing it. While Brown has echoed many of the ideas included in the report, he has proposed working out the changes through negotiations with labor unions to avoid questions about the legality of such changes.

Brown supports a two-tiered system in which newer employees receive lesser benefits than current employees. He also favors increasing contributions from government workers at all levels and stopping pension spiking, a practice that inflates pensions by giving raises in employees’ final years of service.

The report recommended all those changes. In addition, it suggested capping the annual salary that could be used to calculate pension benefits at a maximum of $90,000, banning retroactive pension increases, and prohibiting employer contribution “holidays,” when employers do not pay into the retirement funds.

Sen. Mimi Walters, R-Laguna Hills, said that she was encouraged by the bipartisan commission’s findings. She noted that the commission’s recommendations to increase the minimum retirement age, prevent pension spiking and improve transparency were part of a package of legislation she introduced last week.

“The more bipartisan institutions that come forward and acknowledge how severe our pension crisis is, the more attention our Legislature will be force to pay to the issue,” Walters said in a statement. “We desperately need pension reform, and we need it now.”

But Roxanne Sanchez, president of Local 1021 of the Service Employees International Union, warned that taking away the right to negotiate retirement benefits would be viewed as an attack on the collective bargaining process.

“There are proposals in the commission’s report that are fundamentally unfair to workers,” Sanchez said.

(© 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

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  • jupe guintu

    “California had at least $115 billion in unfunded pension obligations as of June 30, 2009,”

    ” the courts already have determined it is illegal to reduce future pension benefits already promised to current workers.”

    this will be interesting

  • ptown

    how long do the unionized state workers expect to have better retirement, job security, and pensions than those of us who have to pay for them? Fire them all and rehire them as contract workers…or keep them on but take away thier guaranteed jobs status. Start with the teachers and then move your way down to firefighters,DMV workers etc…BTW why dont firefighters work 8 hour shifts like policemen? I know its fun hanging out with your buddies in your club house but these are tough times…work an 8 hour shift and forget the overtime! getting paid six figures to do something that in alot of communities is done for free is wrong.

    • Jess Reynolds

      Than why don’t you sign up to be a firefighter if you think it’s all fun and games?

  • JBlevins

    It’s time to end the Fire & Police Entitlement Pay. $115 Billion is a lot of Tax Payer Money.
    Stop the Fire & Police Welfare Pension Scam.

  • rastrelliger

    I can hear the wall street moguls laughing at us from here. They ruined the markets pensions invested in so heavily, reaped the rewards, and get to watch us fight amongst ourselves, blaming state workers who don’t get paid any more (and often less) than non union folks. Big business (wall street) hates unions – they’re a voice for the people, the working class. Of course they want to break unions. Get a clue folks. If we fight amongst ourselves while big business ruins the country, we deserve to live under their thumbs.

    • Jess Reynolds

      ahh a person whom actually is paying attention! It’s true state workers don’t make as much as most union workers and yet most state workers still have to pay union dues even though they aren’t a part of it. What is that all about? Also the pensions and retirement isn’t as good as people think it is. Just ask any state worker trying to retire right now. Most have to spend 50k in buying backs years in order to get the better retirement option.

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