By Ed Mendel
Monday, September 10, 2012

Without the usual bargaining with unions, a new pension reform raises the amount roughly a third of state workers pay toward their pensions, an increase of 1 to 3 percent of pay over the next two years.

The small bite from worker paychecks, authorized by a broad reform approved by the Legislature and awaiting Gov. Brown’s signature, is for state workers not already paying half the “normal” cost of their pensions, a new standard set by the bill.

There has been little public mention of the increase imposed on current workers and apparently no protests from unions, which tend to view any reduction in pension benefits after the date of hire as a violation of “vested” rights protected by contract law.

Most of the cost-cutting structural changes in AB 340 are for new hires with no vested rights: lower pension formulas that roll back higher pensions granted a decade ago in the SB 400 era, extended retirement ages and a cap on pay that sets pension amounts.

In contrast to the treatment of state workers, the bill uses the bargaining process to increase the pension contributions of current workers in the 1,573 local governments that, like the state, are in the giant California Public Employees Retirement System.

Employers are given five years to bargain employee contributions that are 50 percent of the “normal” cost. Then in 2018 an equal cost share may be imposed (it’s not mandatory) through a bargaining impasse including mediation and fact finding.

Why does the bill, prepared in private by the Brown administration and Democratic legislators and quickly passed with little explanation, respect the bargaining process for local government employees but not for state workers?

Several union officials and their representatives declined to comment. The president of a statewide organization representing public safety employee said the answer may be in the state laws authorizing bargaining.

Local government public employee unions operate under the Meyers-Milias Brown Act of 1968. State employee unions operate under a different law enacted a decade later, the Dills Act of 1977.

“In some conversations it was mentioned that this (an employee contribution increase without bargaining) may be doable for state employees,” said Ron Cottingham, president of the Peace Officers Research Association of California.

CalPERS chart shows state worker contribution increases

Former Gov. Arnold Schwarzenegger had to use a record state budget deadlock, lasting 100 days after the fiscal year began on July 1, 2010, to get the largest state worker union to agree to an employee contribution increase and lower pensions for new hires.

Several smaller state worker unions refused to settle with the Republican governor, waiting until Brown, a Democrat, took office last year. The increased employee contributions helped cut $400 million from the annual state CalPERS contribution.

The nonpartisan Legislative Analyst’s Office said much of the long-term savings from the employee contribution will be offset by pay raises at the end of the new labor contracts.

In this way, the agreements negotiated during bargaining loosely follow the widely held view that a series of court rulings mean that public pensions can’t be cut without providing another benefit of equal value.

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