August 30th, 2012, 4:56 pm
Posted by Teri Sforza, Register staff writer

By Brian Joseph and Teri Sforza

The pension reform bill that the California legislature is expected to approve Friday may save a lot of money for your grandchildren.

For you, not so much.

While a preliminary analysis by the California Public Employees’ Retirement System estimates that the plan could save as much as $60 billion over the next few decades, many experts – including CalPERS own chief actuary, Alan Milligan – say it does little to address the state’s current unfunded pension liabilities, which have been pegged at $240 billion to $500 billion by various analysts.

The bill doesn’t fix the current problem because while it rolls back benefits for new workers, it does nothing to change the generous promises made to the hundreds of thousands of current and retired public employees already in the system. Democrat Assemblyman Warren Furutani of Long Beach testified Tuesday that the proposal will spell the end of $100,000 pensions, but it won’t. At least not for many years.

Retirees already earning big pensions will continue to receive them, and current workers eligible for big paydays in the future will not see their benefits cut. Those promises are considered etched in legal stone, unalterable and unbreakable, although some would-be reformers think state leaders could press the issue in court, if they wanted to. By all accounts, Gov. Jerry Brown and the Democrats who control the Legislature aren’t interested.

“No one should believe that this is going to have an appreciable impact on the public pension problem in California,” said Joe Nation, a former state assemblyman who is now studying the state’s pension problems at Stanford University.

“The real danger here is in people being fooled into thinking it does that,” said Dan Pellissier, who works on ballot measures to revamp the system. “It’s a minor step forward. The first mile of a marathon. Yes, it’s nice you’ve strapped on your shoes and made it through the warm-up – but there’s a long race ahead of us.”


Pension reform has been one of the Legislature’s top priorities this year, in large part because analysts and political observers believe the governor’s tax measure on the November ballot is doomed without it. But while legislative Democrats had promised action for months, the plan wasn’t publicly revealed until Tuesday. Lawmakers have until just midnight Friday to approve the proposal before they are required under the state constitution to adjourn for the year.

Legislative Democrats are under enormous pressure to pass the proposal, officially known as Assembly Bill 340, even though they and their staffs are still learning what precisely it does. The legislation is so complex that it took legislative aides hours just to confirm that Orange County and its employee retirement system are covered by the bill.

The proposal has received tentative praise from Republicans, major proponents of pension reform, who found many of their ideas incorporated into the final bill. For example, the plan calls for a cap on pensionable benefits for future employees, which was also proposed by Assemblyman Don Wagner of Irvine. The assemblyman warns, however, that the proposed cap – at $110,100 for employees covered by Social Security or $132,120 for those not covered – is too high to make a real impact.

Indeed, less than four percent of state and California State University employees made $110,100 or more in 2011, according to a rough analysis of state controller figures by the Orange County Register.

The proposal also faces vocal opposition from labor unions, who have called it an outrage and “a retreat from collective bargaining and basic principles of retirement security,” in the words of Lou Paulson, president of California Professional Firefighters.

Some believe the unions’ opposition is fake, to boost the perception that the reform is serious, but they certainly sound angry. “This proposal hurts hundreds of thousands of low- and middle-class workers who negotiated in good faith and now will be hit with more cuts and takeaways, getting nothing in return,” said Dave Low, chair of Californians for Retirement Security, a coalition of public employee unions, in a prepared statement.


The main impact the proposals would have on current workers: Asking them to pay more of their own money toward their retirements.

State workers will be required to do so; local governments have until 2018 to ease their workers into it.

This is not as grand an achievement as it appears, and reformers urge great caution here.

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