But GOP, Dems disagree on plan
Mediha Fejzagic DiMartino, Staff Writer
Created: 03/06/2011 10:26:04 PM PST
With California facing $115 billion in unfunded pension liabilities, Inland Valley legislators want something done about it, but they disagree on steps to sustainability.
Last week’s report by the Little Hoover Commission, a bipartisan watchdog group, recommended giving state and local governments the authority to restructure future, unearned retirement benefits for their employees – a right enjoyed by employers in the private sector.
The commission called for “freezing earned pension benefits and re-setting pension formulas at a more realistic level going forward for current employees (that) would allow governments to reduce their overall liabilities.”
The commission’s findings have garnered support from local GOP lawmakers.
“The changes suggested empower local agencies to do the right thing,” said Assemblyman Tim Donnelly, R-Claremont. “Everybody needs to be a part of the solution. I’m in favor of taking every and any suggestion as to how to deal with it. We have to make sacrifices now and salvage what was good. Not every single government worker deserves a pension.”
Assemblyman Curt Hagman, R-Chino Hills, said the commission’s plan is a starting point.
“To date, most pension reforms are being proposed by Republicans,” Hagman said. “We have not seen if Democrats are serious about reform. The governor may try to use pension reform in the upcoming election, but pension changes won’t solve the immediate problem of government overspending.”
Democrats, who control both legislative houses and generally support public employee unions, said the commission’s proposal faces such legal hurdles that it probably is not worth pursuing.
“The report acknowledges that a plan for reducing benefits for current public employees may not be possible under our current laws and would likely lead to prolong and possibly futile legal battles,” said Sen. Gloria Negrete McLeod, D-Montclair, the chairwoman of the state Senate Committee on Public Employment and Retirement, which reviewed the report on Wednesday. “As we seriously look at addressing problems in our pension systems, I do not see the recommendation as helpful.”
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. “The Legislature and governor should direct their focus to legitimate savings rather than illegally violating long-standing commitments to those who serve the public.”
The commission’s report fails to fully acknowledge the value of the reductions and rollbacks that state employees have already agreed to, Negrete McLeod said.
“Some of our local agency employees are now in the process of negotiating, and employees have shown a willingness to be part of the solution,” she said. “While I am willing to consider all ideas as we attempt to fix our state’s problems, some proposals have more feasibility than others.”
Recently enacted pension reforms have brought the benefits back to the payout levels of the 1970s, which are projected to save the state about $200 million annually, according to the information provided by Negrete McLeod’s office.
Long-term savings on pension obligations are projected to be $13 billion by 2040.
But the commission’s report warned that “increasing contributions and introducing a second tier of benefits for new employees will not be enough to reduce unfunded liabilities to manageable levels, particularly for county and city pension plans.”
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.
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.
The commission suggested the state should switch from its current defined-benefit plan to a hybrid model that would include something similar to the 401(k) plans offered to most private-sector employees.
Unlike Blanning, Donnelly disagreed that public employees’ pension should compensate for their “low salaries.”
“Nowadays, government workers earn more than their private-sector counterparts,” Donnelly said. “Any further (pension) obligation should be the 401(k) plan and that’s it. The private sector should be used as a model.”
Besides implementing 401(k) plans to restore public confidence in the public pension system, “the state must impose a cap in the $80,000 to $90,000 range on the salary used to determine pension benefits,” according to the commission’s report. “If the governor and lawmakers do not address the problem, it will force cities and counties to severely reduce services and layoff employees.”
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