It's Time To Pass Meaningful Pension Reform
In Case You Missed It: It’s time to pass meaningful pension reform
By Sen. Bill Emmerson
Californians have made it clear that they support key reforms to our unsustainable public employee pension system. According to a recent poll by the nonpartisan Public Policy Institute of California, 83 percent of Californians agree that our state’s pension problems must be addressed. With the average debt of both state and county pensions at $30,500 for each California household, it’s no wonder that an overwhelming majority of Californians are demanding reform.
As stated in The Sun’s editorial, “Before pushing taxes, governor must act,” Californians want their governor, as well as legislators, to get “serious about restructuring the state’s expenditures and revenues.” I agree and reforming our costly pension system is an important first step toward balancing our state’s finances.
That’s why legislative Republicans recently introduced several bills to enact the governor’s 12-point pension plan. Our legislative package outlined the governor’s plan verbatim, with no strings attached. While not solving the entire pension problem, the governor’s proposal makes great strides toward addressing our unfunded pension liabilities.
Reforming our state’s public employee pension system has long been a priority for Republicans. Last June Sens. Tom Berryhill, Anthony Cannella, Tom Harman and I introduced Senate Constitutional Amendment 13 – a reform measure that controls pension costs and ends abusive practices. During our failed budget negotiations with Gov. Jerry Brown last year, it was clear to us that he supported virtually every tenet of our proposal. That’s why it was no surprise that the governor’s pension plan, which was put forth last fall, virtually mirrored SCA 13. Unfortunately, legislative Democrats have failed to set either measure for policy hearing.
Both the governor’s proposal and SCA 13 seek to address not only the “easy” fixes such as pension spiking and double dipping, but also addresses the underlying structural issues that contribute to the pension problems faced by state and local government.
Specifically, both plans offer new public employees a hybrid between defined-benefit plans most public employees have and the defined-contribution plans most private-sector companies offer. New employees would be required to contribute more toward their retirement, but would have the additional opportunity to take advantage of a 401(k)-style plan they could manage themselves.
With regard to abuse, both proposals eliminate spiking – a practice that artificially inflates salary at the end of an employee’s career to maximize retirement benefits – by averaging an employee’s final compensation over multiple years. Furthermore, pension benefits would be calculated based only on an employee’s salary – not counting overtime, car allowances and other perks. Double-dipping would also end so an employee cannot receive a pension while simultaneously earning a salary from a government entity.
As stated in The Sun’s editorial, pension reform is a straightforward issue. Today nearly 4 percent of California’s budget goes toward pension and health care costs for retirees. Without any reform, experts predict that it could grow to 17 percent in the near future. This means there will be less funding for critical state services, such as education and public safety. Despite this fact, legislative Democrats have yet to take action on pension reform.
Moreover, contrary to conventional wisdom, the PPIC survey found that the majority of public employees are in favor of reforming their own pension system. For instance, 64 percent support a 401(k)-style defined contribution plan, 62 percent are in favor of increasing the amount they pay into their own pensions, and two-thirds want to end the practice of pension spiking. If a majority of public employees support pension reform, then there is no reason for Democrats to delay action.
In Gov. Brown’s State of the State address, he asked the Legislature to act on pension reform this year saying, “please take up the issue and do something real.” We did and we’re ready to vote on both the governor’s pension plan and SCA 13. We urge our Democrat colleagues to join us and pass meaningful reform to our public employee pension system.
It’s time to act. We can no longer afford to wait.