California Pensions: Lack of transparency mires coming reform

150 150 Christopher Nelson

The role and perception of unions in society has evolved since this 1911 union march in New York City

If you have been following the path of pension reform through the final few days of the California Legislature session this week, you might be scratching your head thinking you have walked into bizarro world.

Or perhaps it really is as we were told in 5th grade…Wednesday was Opposite Day.

Democrats have signed the committee proposal for pension reform championed by Gov. Jerry Brown, which promises big savings down the road in 10 or 20 years, with savings from a CALPERS overhaul and restructuring of current and future employee pension plans going into unfunded liability.

Republicans, on the other hand, are balking at signing en masse.

So how does this possibly make sense in a state where Democrats are staunch supporters of labor unions while Republicans have been razing them for years as one of the biggest culprits in bankrupting the state?

The issue is not one of substance, but of transparency and accountability. Although this isn’t a “gut and amend” job in committee, the issue of timing is one Republicans are taking major issue with.

According to Fred Silva, California Forward’s senior fiscal policy advisor and a veteran of state politics, withholding details about the deal until just before it is enacted is par for the course.

“The committee has been in existence all year and has held many hearings over the that time. The process issue is that rather than looking at language following the ‘long march’ [in May], they were handed language on the night the majority party signed the report. Republicans cried foul, as is usually the case when the majority party controls the process,” said Silva.

The substance of the reform itself is being overshadowed by the lack of transparency in the process. Starting Wednesday, the bill will be in print through Friday, at which point it will presumably be passed.

For such a significant revamping of an aspect of state government that has garnered so much attention as a major budgetary deadweight, it stands to reason that the full language of the report would have been floated much sooner in the process.

But such is not the case. As it stands, it will be available for review over the course of a few short days at the tail end of a two year Legislature session.

As it stands, “the conference report makes major substantive changes in the CalPERS for all contract agencies and STRS. Charter cities and Counties that have their own systems, Judicial Retirement Systems and the University Retirement System are not covered. Most of the new pension requirements are prospective and apply to new hires after January I, 2013 when the bill takes effect,” according to Silva.

Retirement age for all new public employees are increased by two years or more while retirement benefit increases granted in 1999 are reduced back to levels prior to the increase. Many of the formulas across all types of employees are revised to be consistent going forward.

And finally, on the issue of spiking, three-year final compensation is required as is a calculation of benefits based on regular, recurring pay.

You can read the full text of the report here. We only wish we could have said that sooner.


Christopher Nelson

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