Pension Deal Commentary

Senator Mimi Walters
California State Senator, 37th Senate District

On the last day of this year’s session, the Legislature approved Assembly Bill 340, which Governor Jerry Brown, Legislative Democrats and our state’s public employee unions all negotiated.  Like many of you, there were a number of legislators, including myself, who were concerned and in some cases livid, with how legislative leaders pushed a complex bill that was not properly reviewed or fiscally analyzed — legislation that was deceptively called by proponents “comprehensive” reform.

Despite my serious reservations and the misgivings of many legislators regarding the backroom process and the lack of substantive and long-term reforms, we ultimately supported the bill because of the immediate need to stop the bleeding.

Since that time I have I have been repeatedly asked, was there anything I liked about the proposal.

My answer continues to be: Yes.  As noted, I am disheartened that the proposal approved by the Legislature lacked substantive reforms and failed to include the minimum reforms Governor Brown, himself, demanded in the December Pension Conference Committee hearing, embodied in his 12-point pension plan; there were some important and necessary changes made.

Specifically, AB 340 will end many of the pension abuses that have outraged all of us.  There will be no more pension holidays (where employers and/or employees stop contributing to the pension fund); we have ended the ability to grant retroactive benefits; we prohibited “airtime” – the ability for a public employee to increase their pensions by purchasing service time for years they did not even work. Also, as a result of the bill, convicted felons will no longer be granted pensions.

In addition, we have increased the retirement age and instituted a pension cap.

While the measure that was passed is a good start, the pension changes addressed in AB 340 are woefully inadequate in addressing our state’s massive unfunded pension liability.  Depending on which study you use, that liability is estimated to be between $250 billion and half a trillion dollars.

Regrettably, the negotiated pension changes approved by the Legislature will do very little to address California’s growing debt problem.  First, the majority of the changes will only impact new employees hired after January 1, 2013.  That means most of the identified savings will only slow the growth rate of our debt problem.  In fact, these saving will not be realized for at least 15 to 20 years.  Further, there was nothing included in AB 340 to address growing retiree health care costs, which are a ticking time bomb and are currently underfunded by $74 billion according to the State Controller.

Finally, the measure did not amend California’s Constitution, which means even these pension changes can be undone by a future Legislature after the November elections.

That is why I am asking you to join me in my continued fight to ensure that AB 340 is not the end of pension reform.  This is only the beginning.  Failure to act will ultimately place the retirement benefits of our public employees in jeopardy.

We must start today, committed to work together to achieve meaningful pension reform.

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