Following the pension reform rejection by IAM earlier this month here in Long Beach, Governor Jerry Brown and the lawmakers had reached a deal yesterday regarding statewide pension reform. The deal, approved by a committee 4-0 along party lines, with two Republicans abstaining due to lack of time to properly analyze the bill, will head to the legislature this week for possible approval on Friday.
These changes will have major effects on Long Beach, the largest city in CalPERS, the State-run pension program. The state’s two main pension funds are the nation’s largest and are underfunded by some $150 billion. And it’s skyrocketing costs have many outraged, growing from $370 million in 2001 to $1.7 billion in 2011.
“These reforms make fundamental changes that rein in costs and help to ensure that our public retirement system is sustainable for the long term,” said Brown in a statement, who also claims the plan will save the state some $30 billion. “These reforms require sacrifice from public employees and represent a significant step forward.”
The plan’s general maneuver in reforming the state’s enormously large pension costs involves systemizing the standards for pensions, which had previously been governed by a collage of different contractual agreements and rules. The bill—AB 340—saves some from requiring higher contributions from existing employees but saves most with pension caps, a longer wait to earn maximum benefits, and a higher retirement ages for workers hired after January 1, 2013. Therefore, the heavy savings via the plan aren’t to be seen for decades.
However, critics from both sides have come down on the plan.
For those who think the plan is too lenient in its alterations are particularly perturbed that the benefits for the state’s some 200,000 employees have been largely unchanged, including a lack of changes in contracts with unions and no reductions in the health care costs of retirees. The Governor’s proposed idea of a hybrid system that mimics a 401(k)-style plan was abandoned, leaving less independence for the oversight board for the state’s pension fund. Furthermore, those municipalities with stand-alone pension funds are not covered, including San Francisco, San Diego, and Los Angeles.
For those who find the plan too restricting—mainly labor leaders—saw it as a violation of collective bargaining rights along with an attack on union wages and benefits.
“We are outraged that a Democratic governor and Democratic legislature are taking a wrecking ball to retirement security for teachers, firefighters, school employees, and police officers,” said Dave Low, chairman of the 1.5 million public employee/retiree group Californians for Retirement Security, in a statement to the press. “We are fighting back and we’re struggling, and in this case it appears like we’re losing.”
David Miller, president of the California Association of Professional Scientists (CAPS), which represents some 3,000 scientists working for the State, informed the Long Beach Post, “As a career state scientist, am very disappointed in the process and substance of this package. CAPS has repeatedly negotiated with Governor Brown and previous Administrations over proposed adjustments in compensation and has negotiated and reached agreements in good faith, as have many other unions. The results have saved taxpayers hundreds of millions. To impose a deal without negotiating may look good in the short term, but one size fits all doesn’t work in a state as big and complex as California.”
Nonetheless, even for some critics—including the editorial board of the Los Angeles Times—it is a step forward in the right direction.
“We have lived beyond our means,” Brown said. “The chickens are coming home to roost and this is just one in a series of countermeasures that will be required over the next decade.”