SACRAMENTO, Calif. (AP) — The bulk of the projected savings in the public pension reform deal announced by Calif. Gov. Jerry Brown won’t be felt for decades because most of the proposed changes will affect government workers who have yet to be hired.
While Brown touted his deal as a way to shore up California’s retirement systems, the legislative package he announced Tuesday also illustrates the difficulty in addressing runaway pension costs. That’s because retirement benefits for current government employees are protected by decades of court decisions.
The governor announced a compromise with Democratic lawmakers after months of negotiations. On Wednesday, the chief actuary of the state’s main pension fund — the California Public Employees’ Retirement System — estimated the pension plan will save the system $40 billion to $60 billion over 30 years. The fund currently has an estimated $100 billion in unfunded liabilities, according to spokesman Brad Pacheco.
Unlike private-sector retirement plans, which employers can change, court decisions over 60 years have made clear that future pension benefits are guaranteed to current public employees. Last year, for example, the state Supreme Court ruled that implied contracts covering retirees’ health care are valid.
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That case was brought by Orange County and other local governments trying to reduce their retiree health costs, and remains in federal litigation.
“People have vested rights. You can’t take away something that somebody has already earned,” said Jeff Lewis, an Oakland-based attorney who represents public employees and retirees. “People work in exchange for not just their paychecks but also the promise of future benefits under a specific plan.”
A 2011 pension report by the Little Hoover Commission, an independent state oversight agency, had urged lawmakers to challenge legal decisions by changing current employee benefits.
“Public agencies must have the flexibility and authority to freeze accrued pension benefits for current workers, and make changes to pension formulas going forward to protect state and local public employees and the public good,” the commission wrote.
Democratic lawmakers said the reform package announced this week struck somewhere in the middle, pleasing neither unions nor pension-reform advocates.
“If the goal is to please the ideologues, then this package won’t receive their acclaim. If the goal is to please organized labor, then this package won’t receive their acclaim,” said Senate President Pro Tem Darrell Steinberg, D-Sacramento. “But if the goal is to establish an affordable public pension system without abandoning secure middle-class retirement benefits, then this package passes the test.”
The pension reforms would apply to most state and local government workers, many who are covered by CalPERS or the California State Teachers’ Retirement System.
One of the few changes to affect current workers is a provision that would have them contribute at least half the cost of their retirement benefits.