Serious proposals to reform pensions of public sector workers finally are coming forward — Gov. Jerry Brown offered a plan that takes modest steps and the latest is a promising initiative advocated by a former assembly member.
They come none too soon. A Stanford University study last year showed that state worker pension liabilities are as much as $500 billion higher than the money available to pay for them. Many cities are suffering from the ever-growing bite that pension obligations are taking out of general funds.
The proposed initiative by Roger Niello, a former Republican assemblyman from the Sacramento area, would amend the California constitution and affect all state and local public agencies. Among other things, for current and future employees, Mr. Niello would limit retirement benefits to "no more than 60 percent of the highest annual average base wage." Currently, some retirees can qualify to receive 90 percent of their former salaries.
The reform would calculate pay "over a period of three consecutive years." And "overtime pay, bonus pay, severance pay" and pay for "unused vacation and sick days" would not be included in pension calculations. Combining these two reforms would end the practice in which an employee's pay often is goosed in the final year of service and becomes the basis for an inflated pension.
Marcia Fritz, president of the California Foundation for Fiscal Responsibility, told us that Mr. Niello's proposal is a good start toward pension reform. However, she cautioned, a provision setting the minimum retirement age at 62 could be illegal if applied to existing workers.
With the need for pension reform intensifying, Ms. Fritz said that getting voters to go along requires a couple of things: "It has to be perceived as being fair — to both taxpayers and the public employees. And it has to be seen as saving money both in the long and short terms."
Ms. Fritz warned that even the Niello reform, if gets to a ballot and is approved by voters, still isn't timely enough. "Some cities are on the brink of bankruptcy" in the next few years, she warned, and the Niello reform "won't prevent that from happening."
At least the discussion has moved, rightly, from arguing about whether a problem exists, to identifying its scope and impact, and figuring out how to solve it.