On Friday, Aug. 31, the state Legislature sent Gov. Jerry Brown legislation (Assembly Bill 340) modifying public sector pensions. Most of the changes will affect new employees beginning Jan. 1, 2013; however, some of the changes will affect current employees.
“With strong bipartisan support, the state Legislature today passed the biggest rollback of public pensions in California history,” Brown said in a Friday press release. “This sweeping pension reform package will save tens of billions of taxpayer dollars and make the system more sustainable for the long term. I commend the Legislature for taking this action.”
On Friday, California Public Employees Retirement System officials estimated the bill would save between $42 billion and $55 billion over 30 years for its administered pension plans.
Not only state employees, but local governments, such as Riverside County, and special districts that contract with CalPERS for retirement programs will be affected. AB 340 will not affect the pension plans for the state university and college systems.
By 2018, local agencies that contract with CalPERS must have employees share half of the retirement cost with the agency. Locally, this may affect the Idyllwild Fire Protection District and the Fern Valley and Pine Cove water districts.
Other changes, which will affect new employees, include raising the retirement age from 50 to 57 for public safety employees and from 55 to 62 for minimum retirement benefits for other public sector employees, but they won’t be eligible for maximum benefits until age 67.
Also, the maximum retirement rate will be reduced from three percent per year of employment to 2.7 percent for new public safety employees and from 2.5 percent per year to two percent for miscellaneous employees.
Pensions will be limited to $110,100 for employees eligible for Social Security. For those not eligible, such as teachers or public safety employees, the maximum retirement will be $132,120.
Other changes eliminate the opportunity to raise benefits by spiking (inflating the final year’s salary) or buying air time (artificially adding to length of service). Retirements will be based on the three-year final compensation average.
Riverside County Sheriff Stan Sniff has said he supports overall reform of pension legislation. However, he and the California Sheriffs and Police Chief associations oppose raising the retirement age for public safety employees.
Sniff argues that a deputy sheriff in their mid-fifties does not have the physical capability of younger officers. Consequently, he’s concerned about on-the-job injuries climbing or expanded budgets to hire more deputies for street duty.
AB 340 passed the Assembly, 66 ayes, nine noes and five abstentions. Local assemblymen Brian Nestande (R, Palm Desert) voted for the final language, while Brian Jones (R, Santee) opposed the bill.
In the state Senate, the vote was 38-1-1. Local Sen. Bill Emmerson, who has been advocating pension reform for several years, supported this bill reluctantly. In a statement, he said, “... crucial reforms are not included in this plan. It not only fails to address growing retiree health care costs, but it also fails to apply anti-spiking provisions to current employees.
“By limiting certain reforms to new hires, we will not realize major savings for years, if not decades,” he continued, “… If this legislature is serious about addressing our unfunded liabilities, true pension reform cannot go away quietly. We must continue to work towards a solution that is fair for both taxpayers and public employees. While this plan is one small step for change, it’s a giant failure for true reform.”