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Gov. Jerry Brown unveiled a 12-point public pension reform plan this morning that would ask voters to increase the age at which future state and local government employees could retire with full benefits and place them in riskier retirement plans than current workers.

Speaking to reporters this morning, Brown said he wants all of his proposals to go before voters on the November 2012 ballot.

"It saves a lot of money," Brown said. "This program is a very decisive step forward...We'll have to contend with unfunded liabilities as we move forward."

The plan would also impact current and future workers by mandating employers and employees equally share the cost of pension contributions. Currently, most employers pick up the majority or all of those costs.

Reaction to Brown's plan came swiftly.

Convincing the Democratic-controlled Legislature to place his package on the ballot is a substantial hurdle, Brown acknowledged.

Senate President Pro Tem Darrell Steinberg said Brown's plan is a "provocative" one on which he would keep an open mind.

"The abuses that a small number of people take advantage of absolutely must be resolved," Steinberg said in a statement. "But we can't forget that the vast majority of public sector employees are middle class workers and their average pensions are far from exorbitant....

Assembly Speaker John A. Pérez said his members would "carefully consider" the proposal, but did he not embrace its contents. "I believe the governor is working hard to solve California's long term fiscal challenges, and the Assembly will work with him to bring stability to our pension system in a manner that does right by taxpayers and public servants alike," he said in a statement.

California Republican Party Chairman Tom Del Beccaro called the proposals a "small step in the right direction," in a press statement and criticized Brown for deferring most of the savings for many years, since the provisions with the biggest cost impacts won't be felt for years, since they apply only to future employees.

"California can't wait 500 years for a solution," Del Beccaro said.

California Chamber of Commerce President and CEO Allan Zaremberg had a different take.
"We commend the Governor for a bold and substantive proposal that addresses California's unsustainable state and local pensions and retiree health care costs," Zaremberg said. "The Legislature should embrace this common sense plan."

Brown's plan requires new current and future employees and their employers to split monthly pension contributions 50-50. Currently, employers pick up the majority or the entire tab.

New workers would receive a smaller defined benefit component than current employees receive plus a professionally-managed defined contribution piece and Social Security. The safety workers who don't participate in Social Security would receive a larger guaranteed benefit plus the earnings from defined contributions.

The age for full retirement for new workers would line up with Social Security, which pays full benefits to workers who retire at 67. Public safety hires would be able to retire earlier, "commensurate with the ability of those employees to perform their jobs," the proposal says, but it doesn't name a specific age for that group.

Pension calculations use the highest average annual compensation over a three-year period to figure annual benefits instead of the highest single year. The proposal aims to make it harder to "spike" pension payouts by sharply increasing an employee's pay for one year.

To keep special bonuses, unused vacation time, excessive overtime and other pay perks from figuring into retirement calculations, Brown's plan defines base pay for pension purposes as excluding those extra income sources.

Current and future workers who retire from public service would be limited to working 960 hours or 120 days per year for a public employer.

Pension increases could only be applied prospectively.

When funds are flush with money, employers and employees would have to continue contributions.

Brown's plan also eliminates service credit purchases and changes the composition of retirement fund boards.

New state workers would increase the service time required for the government to pick up their retiree health costs: 15 years to receive a partial benefit and 25 years for the maximum contribution.

Click here to read Brown's 12-point plan.


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