The Legislative Analyst's Office has published its review of Gov. Jerry Brown's pension plan, concluding that it is "a bold, excellent starting point" for changing public pensions, but that it also "leaves many questions unanswered."
In particular, we do not understand key details of how his hybrid benefit and retirement age proposals would work. Moreover, the Governor's plan leaves unaddressed many important pension and retiree health issues, including how to address the huge funding problems facing the state's teachers' retirement fund, the University of California's (UC's) significant pension funding problem, retiree health benefit liabilities, and other issues. In making significant changes to pension and retiree health benefits, we would urge the Legislature also to tackle these very difficult issues concerning the funding of benefits.
The report also cautions that Brown's plan to mandate current employees pay more toward their retirement accounts is a "legal and collective bargaining minefield." Ditto for suggestions by The Little Hoover Commission and others (not Brown) that current employees' accrued benefits could be frozen and then reduced going forward:
Our reading of California's pension case law is that it will be very difficult--perhaps impossible--for the Legislature, local governments, or voters to mandate such changes for many current public workers and retirees. Moreover, employer savings from these changes likely will be offset to some extent by higher salaries or other benefits for affected workers. Given all of these challenges, we advise the Legislature to focus primarily on changes to future workers' benefits. Such changes should produce net taxpayer savings only over the long run but are certain to be legally viable.
Public Pension and Retiree Health Benei ts: An Initial Response To the Governor's Proposal
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