Gov. Jerry Brown has proposed a package of reforms to the pension systems for state workers. He tackles the obvious and most egregious abuses in the current system but falls far short of offering anything that would have a significant impact on unsustainable current benefits and the structural changes needed to meet the growing gap between retirement promises and the ability to pay for them.
Gov. Brown on Thursday outlined a seven-point pension proposal, which includes:
• Eliminating the purchasing of airtime, a practice whereby employees can purchase additional "service credits" to boost their pensions;
• Ending pension holidays, where agencies suspend employee contributions to pensions;
• Prohibiting public agencies from paying for employees' normal retirement costs;
• Making retroactive pension increases illegal for public agencies;
• Limiting the practice of final-year pension spiking by calculating retirement benefits on a 36 consecutive month average of highest earnings;
• Redefining compensation as only regular pay and instituting "stricter limits on creditable compensation," also to prevent pension spiking;
• Cancelling pension benefits for those convicted of an employment-related felony.
The governor also indicated his office was considering additional proposals, including imposing a pension cap; improvements to retirement board governance; limits on "post-retirement public employment;" a hybrid pension model; and a plan to address the teachers' system's unfunded pension liability. Of course, there was no mention of the prudent proposal to move from defined-benefit to defined-contribution plans.
Brown's proposal came on the heels of disclosure Thursday by the California State Teachers Retirement System that its unfunded pension liability had swelled to $56 billion, up $15.5 billion.
Stronger reforms are being advocated elsewhere. The Legislative Analyst's Office in February urged the government to reduce pensions for future employees.
It is good that Gov. Brown has pensions on his radar but his proposal misses the mark for meaningful reform on the unfunded pension liability of up to $500 billion that's facing the state.