The first step to recovery is often admitting that you have a problem. Lawmakers in California did just that last week when they approved a pension-reform measure.
Pension payments and retiree health benefits are weighing down state and municipal budgets across California and have been a factor in several city bankruptcies this year. Yet despite the fact that many people have been sounding this alarm for years, lawmakers in Sacramento have not acted on the issue until now.
The true fix for the state’s pension and health care mess is incremental movement toward the goal of fiscal responsibility. But any action, even this glacial advancement, is a welcome sign from lawmakers.
Assembly Bill 340, which was authored by Assemblyman Warren Furutani, D-Gardena, will take effect immediately for workers who are hired after Jan. 1. The measure will require workers to pay for 50 percent of their pension costs. It also will limit to $110,000 the total salary used to compute benefits — a measure to prevent so-called pension spiking, in which employees inflate their wages at the end of their careers to receive larger
payouts. And aside from public-safety workers, employees would have to work until the age of 67 to receive full benefits upon retirement.
The California Public Employees’ Retirement System has estimated that this pension-reform measure would save $146 million next year. The savings add up as the years go on, with savings of between $42 billion and $55 billion projected over the next 30 years.
This measure alone will not save the state from financial ruin, but it is the clearest sign yet that state lawmakers understand that serious reforms are needed. That the pension reform stemmed from a Democrat, whose party is heavily backed by public-employee unions, is a shot across the bow for all unions. Not surprisingly, unions opposed the measure.
The Sacramento Bee reported that the 10-point measure stemmed from negotiations over a stricter 12-point plan that Gov. Jerry Brown put forward earlier this year. The governor has made it clear that pension reform is needed for our state’s government.
The greatest impact from AB 340 could be its trickle-down impact upon city and county governments. The bill, which is awaiting final approval from Brown, would push through reform in municipalities that do not have the clout over unions to negotiate needed reforms.
The legislation is too late for bankrupt cities such as Stockton, but perhaps the measure will bring pension spending into better alignment for other cities or counties that need it.
Now that the lawmakers have acknowledged the problem, it is time for them to continue down the road of reforms.
They should be congratulated for the work, but we are stopping short of calling it a job well done. Resting on their laurels will not be acceptable when it comes to legislators reforming pension and health care benefits.
The new guidelines cannot be an endpoint for reform, but rather a starting point to talk with all parties involved about lasting pension changes.