The State Worker

Chronicling civil-service life for California state workers

July 1, 2011
Senate Republicans introduce sweeping pension initiative

Four state Senate Republicans have introduced a long-shot resolution aimed at putting a ballot measure before voters that would make sweeping changes to public pensions in California.

Senate Constitutional Amendment 13, would alter everything from how much current and future employees pay toward their retirement accounts to banning retroactive pension increases.

Republican Sens. Tom Berryhill of Oakdale, Anthony Cannella of Ceres, Bill Emmerson of Hemet and Tom Harman of Huntington Beach introduced the resolution on Tuesday.

Its provisions would apply to all state and local pension systems in the California on and after July 1, 2012, and to employees hired on or after that same date. (A few would affect current employees, too.)

The bill faces some high political and legal barriers. The resolution needs support from two-thirds of both Democrat-controlled chambers of the Legislature.

In the unlikely event that all that happens, the political campaign leading up to the vote would be an advertising atomic war. If voters passed the measure, a string of union-backed lawsuits likely would follow. That would suspend the amendment's implementation while a court battle would drag on, probably for years.

Some of the measure's provisions were on the list of pension changes that Brown said he'd horse trade to get GOP support for his budget plan. After Republicans refused to compromise on taxes to balance the budget, the governor said this week that pension reform was "tabled."

But let's assume for the moment that the resolution gets on the ballot in its current form, and California voters get a crack at it. What would they be voting on? Here are some of the provisions:

Temporarily increases contributions for current employees in defined benefit pension plans:

The measure would increase, beginning 30 days after its effective date, employee contribution rates for members of defined benefit plans by at least an additional 5% of current salary until the pension fund of the plan is 90% funded, as determined by an independent plan actuary.

Hikes health insurance payments:

This measure would require public employees to pay an increased amount, that is proportional to employee base pay, as specified, for employee health care benefits. The measure would also require a public employee hired on and after July 1, 2012, to contribute to the cost of postretirement health care benefits, in proportion to the employee's base pay and years of service, as specified, if the public employer provides those benefits. The bill would prohibit employees hired on and after July 1, 2012, from being eligible for full postretirement health care benefits until the employee has 25 years of service.

No more buying "air time":

This measure would prohibit a public retirement system from allowing the purchase of additional retirement service credit.

No more retroactive pension increases:

Any change to the formula used to calculate the pension benefits of a member of a public retirement system, as defined, that results in an increase in the member's pension benefits shall apply only to service performed on and after the operative date of the change, and would prohibit the retroactive application of that change.

No more locked-in retirement benefits for new hires:

Public employees hired on and after July 1, 2012, to expressly provide that the public employer retains the right to prospectively change retirement benefits, as specified.

Hybrid plans for new hires:

The measure would permit a public employer to offer those employees a defined benefit plan only as part of a uniform hybrid retirement plan, as specified, and only if the Legislature has established the hybrid retirement plan and the defined pension benefits
that may be provided, as specified.

Those new hires and their employers would split the hybrid costs 50/50. The plans would use the average of the employees' last 5 years of service to calculate defined benefits.

The measure would require the employer and employee to share equally the hybrid plan costs. Any benefits under a defined benefit plan would be based on a member's annual base pay averaged over the consecutive 5-year period immediately preceding his or her retirement or last separation from state service if earlier.

Other provisions include: Employer/employee contribution rates based on recommendations from "independent" actuaries; a virtual end to so-called "pension holidays" that allow employers to skip paying into the funds; an end to employers paying 100 percent of contributions (frequently a feature of local plans).

Editor's note, July 5, 2011, 9:38 a.m.: An earlier version of this post incorrectly stated that Gov. Jerry Brown would have to sign the pension reform constitutional amendment resolution to get it on a statewide ballot. He does not.
Senate Constitutional Amendment 13

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About The State Worker

Jon Ortiz The Author

Jon Ortiz launched The State Worker blog and a companion column in 2008 to cover state government from the perspective of California government employees. Every day he filters the news through a single question: "What does this mean for state workers?" Join Ortiz for updates and debate on state pay, benefits, pensions, contracts and jobs. Contact him at (916) 321-1043 and at jortiz@sacbee.com.

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