pensions

By Ed Mendel
Thursday, January 31, 2013

As local governments scrambled to meet a Jan. 1 reform deadline for giving lower pensions to some new hires, a top target was a big increase bargained by police and firefighters during the last decade.

A CalPERS-sponsored bill, SB 400 in 1999, gave the California Highway Patrol a 50 percent pension increase. Then in labor negotiations, local governments were urged to match the new benchmark as a way to remain competitive in the job market.

The landmark bill also gave all state workers a large retroactive pension increase. And retirees received a 1 to 6 percent increase in their pensions. All this could be done, said a CalPERS brochure given to legislators, without costing taxpayers “a dime.”

When critics say pension costs are “unsustainable,“ they often cite the SB 400 increase along with below-forecast investment earnings. Frequently mentioned: Police and firefighters retiring at age 50 with 90 percent of final pay after serving 30 years.

The California Public Employees Retirement System no longer claims that “superior” investment returns cover all SB 400 costs. But CalPERS does not view benefits as a key driver of pension costs, pointing instead to rising pay and market cycles.

Gov. Brown’s pension reform, which took effect Jan. 1, resulted in new and narrow calculations of how higher pensions increase annual costs paid by local government employers.

The bill, AB 340, ended bargaining for higher pensions and imposed a single statewide formula for new hires, lower in most cases than the pension formulas used before the SB 400 increase.

But the employer’s formula for new hires before Jan. 1 is used if the employee, through a previous employer, is already a member of CalPERS, the California State Teachers Retirement system or one of the 20 county systems operating under a 1937 act.

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