California state and local governments stand to save between $40 billion and $60 billion over 30 years, according to a hasty fiscal analysis of a pension reform measure set for a vote later this week, according to CalPERS.
The fund's top actuary, Alan Milligan, announced the estimate with plenty of caveats during a special meeting of the fund's Board of Administration. Lawmakers didn't issue the 38 pages of language for Assembly Bill 340 until Tuesday evening. CalPERS staff worked overnight to analyze it in time for this afternoon's special
"We've had limited time in which to review the provisions," Milligan said, "so this estimate will change as we continue to delve in to the language of the bill."
CalPERS continues to refine it's numbers, Milligan said, aiming for a more more accurate accounting in time for Friday's Assembly and Senate floor votes on the bill.
Fund staff concluded the biggest employer savings wouldn't be realized for many years if the bill is enacted, since most of the pension downgrades apply to new state and local government hires, including provisions that reduce benefits and cap wages that can be considered for retirement purposes.
Although the CalPERS analysis didn't break down how much the state would save versus local government savings, municipalities stand to save more. The state has already adopted many of the reforms in the pension bill through collective bargaining, such as using the average of an employee's three highest salary years to calculate pension payments.
Some local governments still use an employee's single-highest year, which makes it easier to manipulate the formula to spike pensions.
"To go from where (the state is) to as far as this legislation goes, that's a shorter
distance and there are less savings," Milligan said.
CalPERS's savings estimate didn't consider savings from higher contributions from current employees, which fund staff interpreted to be a option for local governments and not a requirement. It also didn't estimate the impact of policies that might offset government pension savings, such as higher wages offered to employees to offset lost benefits.