Carmel, CA CalPERS Update : Governor Brown Scores Goal On Cutting Pensions For State Workers

Although it wasn't all that he had hoped for, Governor Jerry Brown was able to convince the state legislature to write legislation which is expected to be passed tomorrow that will reform the state worker's pension  plan.  The law will boost the retirement age and cap benefits for state workers, based on a maximum salary of $110K.  At aged 63, many of those covered by the plan now are able to retire with 2.4% of their highest annual salary multiplied by the number of years of employment.  The new plan raises the full retirement age from 63 to 67, and the minimum retirement age from 50 to 52.  Police officers and firefighters will suffer the most.  They can now retire at age 50 with 3% of their highest salary per year earned, the minimum age is being pushed back to 57 and the percentage dropped to 2.7%.  New workers will have to contribute half of their pension costs and a similar target is set for local employees, although those are subject to collective bargaining agreements.  Unions that represent public workers said the plan was unnecessarily harsh, signaling that negotiations won't be easy.  "We're cleaning up a big mess," Governor Brown told a reporter.  The Pew Center on the States recently analyzed the main pension plans and said they were only 78% funded through June of 2010 and the plan faced a $112 billion funding gap.  It's probably gotten worse since then.  Brown had favored a plan combining the current one with a 401(k) style account which would have shifted some of the risk of stock market losses to the worker, but he couldn't get widespread support for this.  The proposed legislation did not address spiraling costs for retired healthcare workers, something Governor Brown would have liked to address.  Assemblyman Warren Furutani, Democrat, authored the new bill dubbed the Public Employee Pension Reform Act of 2012, which Brown said could save state and local governments $18 billion over the next three decades.  The law will not apply to some cities like San Diego, San Jose and Los Angeles which have pension systems which are not managed by the state.  It's good to see some progress being made.  I've written many times before on my blog about massive shortages on CalPERS future obligations.  Something has to be done to cut the gap so retirees get the benefits they are promised.