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Budget and pension news
 

State budget update.

Keep checking here for updates.

Your 1014 Board of Directors are closely monitoring the budget process in Sacramento.  President Gillotte is directly involved with our politicians on working hard to make sure there is a fair budget in place for all of California. 


June 29, 2011

On-Time State Budget Ends Costly Redevelopment Subsidies
Despite some last-minute wrangling, the California Legislature has approved a state budget that, for the first time in recent memory, will be signed and in effect before the end of the fiscal year.

The $86 billion spending plan slashes an additional $5 billion on top of roughly $12 billion cut from state spending earlier this year. It also holds out the possibility of nearly $4 billion in additional cuts to schools, public safety and other vital services if state revenues fall below projections.

The new budget package also includes a significant reform that will mean billions in new revenues for local fire agencies. ABX1 26 will eliminate local redevelopment agencies, ending a controversial system that has benefitted developers at the expense of vital public services.

The costly and unaccountable local agencies have been diverting nearly $6 billion in property tax revenues away from vital services and into the pockets of local developers. Intended to eliminate blight, redevelopment dollars too often wind up going to specious projects such as golf courses, parking lots, arena deals and, in one case, a "mermaid bar."

"At a time when local fire services are being slashed, it's hard to justify diverting billions in tax revenues to developers -- no matter how valuable the projects may be," said CPF President Lou Paulson. "The Legislature has taken a courageous step and implemented a significant fiscal reform."

The redevelopment reform plan includes a one-time shift of $1.7 billion in property-tax revenue to help finance local public schools. Additional money would also be redirected back to local cities, counties and special districts, including fire districts.

In following years, all redevelopment dollars (save those needed to pay down existing debt) will be reallocated to local agencies, unless new agencies re-form or agree to skim significantly less money for their projects.

The elimination of redevelopment agencies is a victory for Gov. Jerry Brown, who proposed the idea in January as part of his original budget plan. CPF was an early and strong supporter of eliminating redevelopment agencies.


June 27, 2011

Jerry Brown, Democratic leaders announce budget deal
Gov. Jerry Brown and Democratic legislative leaders announced today that they have reached an agreement on a new majority-vote budget plan.

"We've had some tough discussions, but I can tell you that the Democrats in both the Senate and the Assembly have now joined with the administration and myself and we have a very good plan going forward with the budget," Brown said at a press conference in his office this afternoon.

The proposal, outlined in this post, assumes that the state will bring in an additional $4 billion in revenues in the upcoming fiscal year, based in part on higher-than-expected revenue figures in recent months. If those revenues fail to materialize, steeper cuts to programs including K-12 schools, higher education, public safety programs and In-Home Supportive Services would occur later in the year.

"We have severe trigger cuts that will be triggered and go into effect (without the projected revenues)," Brown said. "And those are real."

Brown vetoed the majority-vote budget that lawmakers approved ahead of the Legislature's June 15 budget deadline, calling the package of spending cuts, funding shifts and one-time fixes "not a balanced solution." Legislators have also lost their pay in the wake of Controller John Chiang's decision that the plan approved earlier this month fails to meet the requirements for pay under the voter-approved initiative allowing the budget to be passed with a majority vote.

The governor, who has been working for months to secure Republican votes needed to hold a statewide election on expiring higher tax rates, said without a deal on his original proposal, leaders will have to "look very seriously" at using the initiative process to qualify a measure to secure future revenues.

Assembly Speaker John A. Pérez said Brown and Democrats "have not wavered in our belief that new revenues are essential" to balance the budget over the long term.

"The conversation has been started and we will keep that conversation going as we move to the ballot next year," Pérez said.

Senate Republican leader Bob Dutton criticized the plan unveiled today as a "hope without change" budget.

"This latest budget is based on the hope that $4 billion in new revenues will miraculously materialize, but does absolutely nothing to change government as usual," he said in a statement.

Read more about the plan here.


6/16/2011

Legislature Votes to End Local Redevelopment Subsidies

Sacramento's "mermaid bar" is one of many taxpayer-subsidized misadventures financed by redevelopment agencies.
The California Legislature has approved a landmark reform that will free up billions of dollars for schools, public safety and other critical public services.

On a bipartisan vote, the California Senate and Assembly approved ABX1 26, Governor Brown's proposal to eliminate local redevelopment agencies.

The costly and often-abused redevelopment process diverts more than $5 billion of property tax revenue away from critical services and into the pockets of special projects for developers. Under the governor's plan, this money would be returned to fire districts and schools for use on core services.

"As firefighters, we understand what it means to make tough choices that affect a lot of people," said Lou Paulson, president of California Professional Firefighters. "A vote to eliminate redevelopment agencies isn't easy, but it's the right thing for schools, public safety and other critical services."

In addition to the legislation eliminating redevelopment agencies, lawmakers also approved a companion measure - ABX1 27 -- that gives cities and counties the opportunity to preserve their redevelopment agencies, so long as they insure that significant dollars are allocated to school districts, fire districts and other direct service entities.

Lawmakers approved the redevelopment ban despite intense pressure from an army of pro-redevelopment lobbyists, including developers who reap handsome taxpayer subsidies through the property-tax diversions. These subsidies - originally intended to eliminate blight - have become a magnet for controversy and abuse. In Sacramento, millions in redevelopment dollars were spent to subsidize a "mermaid bar".

ABX1 26 would not take effect unless ABX1 27 also becomes effective. The requirements of ABX1 27 would affect those communities that elect to participate in directing revenue to core public services and if they do, ABX1 26 would not apply to them.

The proposals still must win the signature of Governor Brown by June 27th to become law.

 


It’s no secret that firefighters and other public workers are under attack from those who would take away our pensions, our health care and even our right to have a contract. The battle over the state budget has brought even more attacks, as these same anti-worker forces have tried to make public workers the scapegoats for everything wrong with the state.

As firefighters and as brothers and sisters in the labor movement, we’ve never taken these attacks laying down, and we’re not doing so now.  All public sector workers both safety and non-safety have been sticking together to protect our collective pensions and pension funds.

As you are aware we work very hard to ensure our Local’s voice and power is front and center, and as strong as it gets.  We have taken great care to keep Brother Will Pryor on the LACERA Board of Investments and Retirement. Brother Pryor, myself and our Union Treasurer John Smolin have stayed very active and engaged as members of NCPERS, the national voice on public pensions to ensure our members interests are protected.

Additionally, through CPF, Local 1014 is a critical part of a broad statewide labor coalition that is punching back against the pension haters, and getting the truth out about retirement security.

The best way you can speak the truth to the attackers is to stay informed. This week, I assigned Local 1014 Director Andy Doyle to bring Local 1014’s face and voice to the battleground and he is featured along with other public sector workers in the latest edition of CPF Firevision. The short piece showcases middle class public workers, punctures myths about retirement security, and hits back at those who would steal our security.

It’s five minutes well spent, and something you can forward to friends and others who need help understanding why we’re fighting so hard on this.


http://bit.ly/is6SAz
   

As your Executive Board, we’re committed to keeping you informed. We’ve been in this fight for a long time, and we’re committed to staying together and staying strong.


Fraternally Dave Gillotte
President


Former Assemblyman Roger Niello's initiative to rollback public pension benefits "will end up in the scrapheap of politically-motivated failures," said Dave Low, chairman of Californians for Retirement Security, in a statement released by the union coalition Tuesday evening.

As reported by Bee colleague Paresh Dave on Tuesday, Niello has decided he won't pursue collecting signatures to put his public pension rollback initiative on the ballot, although the secretary of state has said that he can begin working to place it before voters.

Niello, a Fair Oaks Republican who has said he's considering a run at statewide office, said with a special election on taxes later this year looking more and more remote, there's no urgency to make sure "pension reform" goes up for a vote.

The union coalition followed the news with a statement from Low that hit The State Worker's e-mail inbox at 9:01 p.m. Tuesday night:

It is appropriate that the flawed Niello initiative to gut retirement security for millions of Californians will end up in the scrapheap of politically-motivated failures instead of on the ballot. It was a poorly drafted attempt to punish middle-class workers and it ignored the fact that workers have agreed to substantial reductions in retirement benefits and have increased their contributions towards pensions from 5 to 10 percent. We continue to believe the way to improve the state's pension system is at the bargaining table, not the ballot box.

Imagine what Low will say if backers of a pension rollback plan actually start collecting signatures or if a measure actually gets on the ballot. (Niello says he might tweak his plan for a vote next year.)


Read more: http://blogs.sacbee.com/the_state_worker/2011/05/union-pension-niello.html#ixzz1NQktFiO6


Public pension cutbacks urged

 

Capitol Weekly
February 25, 2011

http://www.capitolweekly.net/article.php?_c=zincmzhd6g931p&xid=zinc85w2rvdzxe&done=.zincmzhd6gv31p#

California’s public pension system is abused, bloated and based on faulty math, and state lawmakers should take immediate steps to reduce the retirement benefits of current employees, not just new hires, the Little Hoover Commission says.

“The situation is dire,” the study said, adding that public employers should be permitted to make the same sorts of cuts that those in the private sector have done.

The commission’s report, which reflects proposals already floated by some Republican lawmakers and even the governor, is all but certain to intensify the political debate over California’s $25.4 billion budget shortage. 

A piece of that discussion is to cut pension costs to save the state money. Republicans have proposed overhauling and downsizing the system – including one bill to remove public pensions from collective bargaining.

The Little Hoover Commission, set up nearly 50 years ago to probe state government and recommend improvements, has released numerous studies over the years on government operations.

But rarely has the timing of its reports been so crucial: Pension changes recommended in the study, at least in part, are certain to find their way into the larger dispute over resolving the budget deficit.

Democrats control the Legislature but lack the two-thirds votes to approve new taxes.

Gov. Brown, a Democrat, has proposed a mix of tax and cuts – a mix that has riled fellow Democrats who oppose the cuts and Republicans who oppose the taxes.

The pension issues “cannot be solved without addressing the pension liabilities of current employees. The state and local governments need the authority to restructure future, unearned retirement benefits for their employees. The Legislature should pass legislation giving this explicit authority to state and local government agencies,” the report noted.


California Panel Calls for Cuts to Government Workers’ Pensions

Bloomberg- Michael B. Marois and Christopher Palmeri

February 25, 2011

http://www.bloomberg.com/news/2011-02-25/california-panel-urges-freeze-restructuring-of-public-employee-pensions.html

California should scale back pension promises to public workers and reshape the benefits system to make it similar to those used in industry to rein in costs, a state oversight panel recommended.

Government pension costs are no longer sustainable, the independent Little Hoover Commission said yesterday. It called on lawmakers and Democratic Governor Jerry Brown to hold benefits at current levels and recalculate yet-to-be-earned payments under a new hybrid that includes elements of a traditional pension plan and a 401(k) account where beneficiaries bear the investment risk.

The rising cost and underfunding of public employee pensions has sparked a national debate, most recently in Wisconsin where Republican Governor Scott Walker has asked the Legislature to boost contributions from state workers. California’s 10 largest public pension funds were short a combined $240 billion in 2010, the commission found.

“California’s pension plans are dangerously underfunded, the result of overly generous benefit promises, wishful thinking and an unwillingness to plan prudently,” commission President Daniel Hancock said in a letter to lawmakers and Brown yesterday. “Unless aggressive reforms are implemented now, the problem will get far worse, forcing counties and cities to severely reduce services and lay off employees to meet pension obligations.”

Rising Contribution

The state’s contributions to its pensions are expected to rise 10.8 percent to $2.4 billion next year, according to a summary of the governor’s budget plan.

t;“Any change must honor the promises made to all public servants,” said Brad Pacheco, a spokesman for the California Public Employees’ Retirement System, the nation’s largest pension fund with $229 billion in assets. “We recognize that pension costs are a source of fiscal concern.”

Ricardo Duran, a spokesman for the California State Teachers’ Retirement System, known as Calstrs, the second- largest U.S. fund, said that “any recommendation that weakens the financial security of our members” would not be “constructive.”

“This includes recommendations that suggest breaking long- held legal decisions protecting vested pension rights,” he said.

State and local governments need the authority to restructure future, unearned retirement benefits for their employees, the commission said, even though doing so may require courts to reverse previous decisions protecting benefits of current employee.

Salary Calculations

The commission also recommended that salaries for calculating pensions be capped at $90,000 and that lawmakers enact a prohibition on granting new benefits retroactively.

Many of the Hoover proposals, including the limits on so- called spiking of pay in the latter years of employment to boost pensions, caps on salaries and the ban on retroactive increases, had been advocated by the California Foundation for Fiscal Responsibility, a pension-reform group.

“All of that is consistent with what we’re recommending,” said Marcia Fritz, the foundation’s president, in a telephone interview. “I love it.”

Brown has proposed a combination of spending cuts and tax extensions to close a $25.4 billion budget gap over the next year and half. While the governor has said current pension plans should be defended, he said reforms are needed.

Joel Fox, a Republican political consultant in Los Angeles, said the Wisconsin protests gave ammunition to California Republicans pushing Brown for pension changes in exchange for their endorsement of his budget plan.

“He may be forced to go there by Wisconsin,” Fox said.

The Little Hoover Commission, created in 1962, was modeled after a federal commission chaired by former President Herbert Hoover that was charged with recommending changes to the federal government.


Cap Those Bonus Retirement Payouts

Sacramento Bee- Audio, Ginger Rutland
February 25, 2011

http://www.sacbee.com/2011/02/18/3415260/cap-those-bonus-retirement-payouts.html


Commission recommends rolling back pensions for current state, local workers

Sacramento Bee- Jon Ortiz
February 25, 2011

http://www.sacbee.com/2011/02/25/3429573/commission-recommends-rolling.html#

California's state and local governments should roll back pensions for existing employees, dump guaranteed retirement payouts and put more of the burden for pension benefits on workers, a bipartisan watchdog commission said Thursday.

Any attempt to reduce pensions for current workers would prompt a legal battle royal. Still, the 12-member Little Hoover Commission concluded that government pension funds are in such dire financial straits that they'll never right themselves without cutting into benefits for those working now. The proposal wouldn't affect benefits drawn by current retirees.

"This is one of the toughest issues that we've taken on," said Chairman Daniel Hancock shortly before the commission unanimously approved the 100-page report and its recommendations.

Sacramento politicians had anticipated the moment. While Democrat Gov. Jerry Brown has proposed a mix of taxes and cuts to close the state's estimated $26.6 billion deficit, his budget doesn't explicitly address pension changes, which would anger unions and would not save money immediately.

Republicans have criticized that as a glaring oversight. Senate Republican leader Bob Dutton of Rancho Cucamonga has said his caucus would offer some pension-reform ideas once the commission released its report.

"I'm probably going to lean pretty heavily on taking their recommendations," he said.

Public employee unions counter that guaranteed pensions make up for government's generally lower wages. They say the Little Hoover report and politicians like Dutton overstate the pension problem to pursue an anti-union agenda and undercut collective bargaining.

Six unions representing about 170,000 state workers have already agreed to contracts that offer lowered retirement benefits for new hires and increase what employees pay toward their pensions.

"Our members – who are taxpayers, too – bargained in good faith and reached an agreement including key pension changes and concessions," said Brady Oppenheim, spokeswoman for the California Association of Psychiatric Technicians. "If there is a call for further concessions, it should come through the collective-bargaining process and be taken to the bargaining table."

The report caps a year's research and a series of hearings that included testimony from actuaries, union officials, pension reform activists, retirement board members, labor union leaders, public employees and others.

It notes that the state's 10 largest public pension systems, including the California Public Employees' Retirement System, the California State Teachers' Retirement System and the University of California pension fund reported in 2010 a collective $240 billion spread between their obligations and assets.

"In another five years, when pension contributions from government are expected to jump 40 to 80 percent and remain at those levels for decades in order to keep retirement plans solvent, there will be no debate about the magnitude of the problem," the report says.

Pension fund investment returns are supposed to cover the bulk of payments to retirees, but most haven't yet rebounded from Wall Street's meltdown in 2008.

CalPERS says investment earnings account for 64 cents of every dollar it takes in, while employers kick in 21 cents and employees pay 15 cents.

The commission recommends the employer/employee share be split equally.

Since reducing pensions for the next generation of employees won't cut costs in the near term, the commission recommended the Legislature pass a measure that lets state and local governments freeze the pensions of current workers and move them into a less costly hybrid system.

For example, a 20-year government employee planning to retire in 10 years at age 63 with 2.5 percent of salary for each year of service would keep the money built up under that formula.

But once the pension is frozen, the employee would move into a three-legged program that keeps a much smaller guaranteed pension, a professionally managed 401(k)-style savings account and Social Security benefits.

Some public employee retirement plans already include all three. Plans for current state workers and retirees vary – some receive Social Security and can invest in personal retirement accounts.

The conventional wisdom is that public pension benefits are untouchable, constitutionally protected property that government has a contractual obligation to provide.

A state law that says otherwise would set off a legal firestorm, said Sacramento-based labor attorney Tim Yeung, since the sanctity of public pensions has never been tested in the courts. Private companies can freeze pensions and lower their promises, he said, "but whether government can do it has never really been tested."

Still, the Little Hoover report buoyed pension change advocates such as Marcia Fritz, president of the California Foundation for Fiscal Responsibility in Citrus Heights.

Her group, which gained national attention with a database that lists state and local government retirees with six-figure pensions, wants to put a measure on the 2012 ballot to freeze pensions for all civil service employees and lower the benefit prospectively.

"This is amazing," Fritz said after reading the report. "It just validates everything we've been saying for years."


Commission: Freeze pensions for Calif. Workers

Marin Independent Journal
February 25, 2011

http://www.marinij.com/tablehome/ci_17475495

A California watchdog agency on Thursday called on the governor and Legislature to freeze pension benefits for current state and local government workers and overhaul the existing system, as the debate over retirement benefits for public employees has exploded nationwide.

As the Little Hoover Commission unanimously approved its report, it also recommended the state move from a defined benefits plan to a hybrid model that would include something similar to the 401(k) plans offered to most private-sector employees.

The commission, which includes lawmakers and political appointees, agreed that California's 85 public pension systems need more flexibility and oversight because retirement costs have been growing as tax revenues have plunged. Pension costs for retired public workers now account for about 7 percent of the state's general fund expenditures, according to the nonpartisan Legislative Analyst's Office, which also recommended the state convert to a hybrid plan.

Commissioners acknowledged that such a change likely would face legal challenges but said the state has no choice given that pension plans are dangerously underfunded because of overly generous benefits granted in years past. If the governor and lawmakers do not address the problem, it will force cities and counties to severely reduce services and lay off employees.

California had at least $115 billion in unfunded pension obligations as of June 30, 2009, accordingto the latest figures available from the California Public Employees Retirement System. Unfunded state retiree health care costs were nearly $52 billion, according to the state controller's office.

"While recognizing the legal challenges, this is a path that the state has no choice but to pursue," wrote Daniel Hancock, chairman of the Little Hoover Commission. "Public agencies must have the flexibility and authority to freeze accrued pension benefits for current workers, and make changes to pension formulas going forward to protect state and local public employees and the public good."

The commission suggested the state address public employee pension costs before they become unsustainable.

Bruce Blanning, executive director of the Professional Engineers in California Government, which represents 13,000 state engineers and professionals, said the courts already have determined it is illegal to reduce future pension benefits already promised to current workers.

"All surveys show that public servants are paid less than their private-sector counterparts," Blanning said in a statement. "The Legislature and governor should direct their focus to legitimate savings rather than illegally violating long-standing commitments to those who serve the public."

Evan Westrup, a spokesman for Gov. Jerry Brown, declined to comment on the report, saying the Democratic administration was still reviewing it. While Brown has echoed many of the ideas included in the report, he has proposed working out the changes through negotiations with labor unions to avoid questions about the legality of such changes.

Brown supports a two-tiered system in which newer employees receive lesser benefits than current employees. He also favors increasing contributions from government workers at all levels and stopping pension spiking, a practice that inflates pensions by giving raises in employees' final years of service.

The report recommended all those changes. In addition, it suggested capping the annual salary that could be used to calculate pension benefits at a maximum of $90,000, banning retroactive pension increases, and prohibiting employer contribution "holidays," when employers do not pay into the retirement funds.

Sen. Mimi Walters, R-Laguna Hills, said that she was encouraged by the bipartisan commission's findings. She noted that the commission's recommendations to increase the minimum retirement age, prevent pension spiking and improve transparency were part of a package of legislation she introduced last week.

"The more bipartisan institutions that come forward and acknowledge how severe our pension crisis is, the more attention our Legislature will be force to pay to the issue," Walters said in a statement. "We desperately need pension reform, and we need it now."

But Roxanne Sanchez, president of Local 1021 of the Service Employees International Union, warned that taking away the right to negotiate retirement benefits would be viewed as an attack on the collective bargaining process.

"There are proposals in the commission's report that are fundamentally unfair to workers," Sanchez said.


State commission says state should freeze current pension plan, start anew

San Francisco Chronicle- Marisa Lagos
February 25, 2011

http://www.sfgate.com/cgi-bin/blogs/nov05election/detail?entry_id=83773&tsp=1

A government commission is recommending that state leaders make sweeping changes to pension benefits for current state workers, including freezing the current plan and creating a more sustainable alternative.

The report by the Little Hoover Commission also recommends capping the maximum salary used to calculate benefits at $80,000 to $90,000, setting eligibility ages that do not encourage early retirements, and requiring that employees and employers share the costs of funding pension benefits.

"The situation is dire, and the menu of proposed changes that include increasing contributions and introducing a second tier of benefits for new employees will not be enough to reduce unfunded liabilities to manageable levels, particularly for county and city pension plans," the report states. "The only way to manage the growing size of California governments' growing liabilities is to address the cost of future, unearned benefits to current employees, which at current levels is unsustainable."

The independent commission is made up of five citizen members appointed by the Governor, four citizen members appointed by the Legislature, two Senators and two Assembly members. But some Democrats immediately slammed the report's findings as stacked.

Democratic consultant Steve Maviglio had this to say in a tweet: "Shocker. Little Hoover Commission stacked with @schwarzenegger appointees wants to cut economic security of civil servants."

Republican Allan Mansoor, R-Costa Mesa (Orange County), had a different take. He, of course, introduced a bill last week that would end collective bargaining for pension benefits.

"I'm in complete agreement with the findings of the Little Hoover Commission, and am glad to see them address the situation," he said. "It doesn't surprise me because these have been problems for many years that we've been try to address. This is one more clear example of why we need to remove collective bargaining when it comes to pensions, because the public employee unions are not going to agree to the reform that is needed, and quite frankly the taxpayers are expecting us to address the situation, and if we don't we're not going to solve our budget problems."

Officials from the governor's office were more circumspect in their response:

"Our office is reviewing the Little Hoover Commission's findings. The Governor agrees that California faces serious challenges, which is why he rolled out a comprehensive framework to reform pensions during his campaign," spokesman Evan Westrup said in a written statement.

But Gov. Jerry Brown, in comments to the Legislature on Thursday, at least hinted at some area he might be open to changing:

"I believe people should be working longer," said the 72-year-old governor. "I think institutional memory is a good thing. I don't have a problem extending how long people have to work."


Roll back pensions for current workers, state watchdog says

Orange County Register
February 25, 2011

http://taxdollars.ocregister.com/2011/02/24/roll-back-pensions-for-current-workers-state-watchdog-says/76463/

The governor and Legislature should establish the legal authority for state and local governments to freeze pension

benefits for current workers, the Little Hoover Commission concluded Thursday in a report sure to ignite fireworks.

“State and local governments cannot solve this problem without addressing the mounting pension obligations of current employees,” said Daniel W. Hancock, chairman of the commission, in a prepared statement.

The good-government watchdog’s report on public pensions was long in the making. Like the Legislative Analyst, it recommends a “hybrid” pension model that combines a lower guaranteed-payout formula with an employer-matched (and risk-managed) “defined-contribution plan,” like a 401K.

Unlike the Legislative Analyst, it recommends stripping down the pensions of current employees, not just future employees.

“The Commission acknowledges the significant challenges to modifying pension benefits for current workers,” it said, with considerable understatement. “Nonetheless, the Governor and Legislature should set uniform standards for the 85 defined-benefit pension plans in California, including:

Payments to current retirees would not be affected, it said.

State employee associations are ripping the report to shreds.

“The Little Hoover Commission has truly missed the mark in its efforts to study potential reforms to California’s  85 public employee retirement systems,” says a retort by Californians for Health Care and Retirement Security, a coalition of public employee union types. “Rather than presenting a reasoned and constructive analysis, the Commission attempts to wipe away more than 50 years of legal and financial precedent by joining the chorus of doomsayers who seek to undermine retirement security for millions of Californians.”

When average pension payments for public employees are in the range of $24,000 per year it is unconscionable to call for cuts and rollbacks of those payments, it said.

“For a supposedly non-partisan commission this report enters the policy discussion on the side of the Governor of Wisconsin, seeking to cut the benefits of teachers, firefighters and other public employees who are already working to find ways to ease the financial pressures on our governments,” said Dave Low, chairman of Californians for Health Care and Retirement Security.  “While there are real challenges facing our state and local governments the rhetoric of this report seems designed to inflame fear rather than to generate reasoned solutions.”

“Across California public employees are doing their part to help meet the pension challenges caused by the market collapse,” Low said “Public employees did not cause the economic crisis, but like all other Americans they have paid a dear price for the excesses and abuses of Wall Street.”

We’ll be giving the report a more thorough read. We look forward to some enlightening discussion from our readers. BEHAVE, people.


Pension reform suggestions by Little Hoover. Not bad, either

Orange County Register
February 25, 2011

http://orangepunch.ocregister.com/2011/02/24/pension-reform-suggestions-by-little-hoover-not-bad-either/41719/

The Little Hoover Commission urged the governor and the Legislature to establish legal authority for the state and local governments to freeze pension benefits for current workers.

That’s a good start. But it gets better.

The commission said going forward current workers should accrue benefits under more sustainable plans, which wouldn’t affect payments to current retirees.

“State and local governments cannot solve this problem without addressing the mounting pension obligations of current employees,” said Chairman Daniel W. Hancock.

“Public Pensions for Retirement Security” recommends a “hybrid” model combining “a lower defined-benefit pension formula with an employer-matched and risk-managed defined-contribution plan.”

The Commission also suggested the state consider extending Social Security old-age benefits to all uncovered state and local public employees, following a model adopted for federal employees 25 years ago.

None of this will be easy, but the commission says uniform standards for the 85 defined-benefit pension plans in California should include: 

  • A cap in the $80,000 – $90,000 range of the maximum salary that could beused to calculate pension benefits.
  • Eligibility ages for pension benefits that do not encourage early retirement.
  • A requirement that employees and employers share the normal costs offunding their pension plans.
  • Clear definitions of final compensation to prevent “spiking.”
  • A prohibition against contribution “holidays” when employers do not pay intothe funds.
  • A ban on retroactive pension increases.
  • Steps to improve accountability and transparency.

These things are so reasonable we wonder why it’s taken so long to say them out loud. On second thought, many of them have been said out loud for quite some time.

Thanks makes us wonder why it’s taken so long to adopt them. Two guesses.


We understand the outrage over large pensions

Orange County Register
February 25, 2011

http://www.ocregister.com/news/representatives-289763-county-santa.html

Representatives of Orange County’s labor unions rallied Thursday in solidarity with their counterparts in Wisconsin, where the Republican governor wants to take away some collective bargaining rights from public employees.

Chanting “What do we want? Justice. When do we want it? Now!” and holding signs saying “Stop Attack on Middle Class,” about 200 people gathered for a boisterous candlelight vigil in Sasscer Park, near Santa Ana’s Civic Center.

Labor union officials said they understood why people who aren’t in labor unions might feel resentful of the relatively generous pensions won by unionized and government workers but said such feelings are misdirected.

“We’re an easy target,” said Doug Mangione of International Brotherhood of Electrical Workers Local 441. “I think people do see us as ‘Hey, they have something that I don’t have.’ ”

Mangione said his wife works for a nonprofit and hasn’t had a raise in four or five years. He said he told his wife “You should go to your employer and say, ‘Why don’t I have these things?’ ” like a defined-benefit pension.

Bob Tucker, who worked as a janitor in Huntington Beach schools for 25 years, said if he retired today, his pension would be $1,641 a month.

“I understand the outrage at the very large pensions and some of the double-dipping … but the average worker is like me. Who can live on that?” he said. Tucker is now a labor representative with the California School Employees Association.

Kimberly Claytor, president of Newport-Mesa Federation of Teachers and a former teacher at Estancia High School, said all workers, both union and non-union, “have some value to give and we all should have the right to negotiate for our labor.”

“If the unions are busted, we won’t have that united voice,” she said. “We want to lift working conditions for everyone, and if we don’t have collective bargaining, we don’t have what it takes to lift working conditions for everyone.”

Susan Meyer of the CSEA said union workers have typically given up a portion of pay increases in exchange for greater contributions to pension funds by employers.


Panel's recommendations to fix deficit called anti-union

Sacramento Bee- Jon Ortiz
February 25, 2011

http://www.sacbee.com/2011/02/24/3429971/panels-recommendations-to-fix.html#

California's state and local governments should roll back pensions for current employees, dump guaranteed retirement payouts and put more of the burden for pension benefits on workers, a bipartisan watchdog commission said Thursday.

Any attempt to reduce pensions for current workers would start a legal battle royal. Still, the 12-member Little Hoover Commission concluded that government pension funds are in such dire financial straits that they'll never right themselves without cutting into benefits for those working now.

The proposal wouldn't affect benefits drawn by current retirees.

"This is one of the toughest issues that we've taken on," said Chairman Daniel Hancock shortly before the commission unanimously approved the 100-page report and its recommendations.

Sacramento politicians had anticipated the moment. Democratic Gov. Jerry Brown has proposed a mix of taxes and cuts to close the state's estimated $26.6 billion deficit, but his budget doesn't explicitly address pension changes, which would anger unions and would not save money immediately.

Republicans have criticized that as a glaring oversight. Senate Republican leader Bob Dutton of Rancho Cucamonga said last week his caucus would offer some pension-reform ideas once the commission released its report.

"I'm probably going to lean pretty heavily on taking their recommendations," he said.

Public employee unions counter that guaranteed pensions make up for government's generally lower wages. They say the Little Hoover report and politicians like Dutton overstate the pension problem to pursue an anti-union agenda and undercut collective bargaining.

Six unions representing about 170,000 state workers have agreed to contracts that offer lower retirement benefits for new hires and increase what employees pay toward their pensions.

"Our members — who are taxpayers, too — bargained in good faith and reached an agreement including key pension changes and concessions," said Brady Oppenheim, spokeswoman for the California Association of Psychiatric Technicians.

"If there is a call for further concessions, it should come through the collective-bargaining process and be taken to the bargaining table."

The report caps a year's research and a series of hearings that included testimony from actuaries, union officials, pension reform activists, retirement board members, labor union leaders and public employees.

It notes that the state's 10 largest public pension systems, including the California Public Employees' Retirement System, the California State Teachers' Retirement System and the University of California pension fund, reported in 2010 a collective $240 billion spread between their obligations and assets.

"In another five years, when pension contributions from government are expected to jump 40 (percent) to 80 percent and remain at those levels for dec- ades in order to keep retirement plans solvent, there will be no debate about the magnitude of the problem," the report says.

Pension fund investment returns are supposed to cover the bulk of payments to retirees, but most haven't rebounded from Wall Street's meltdown in 2008.

CalPERS says investment earnings account for 64 cents of every dollar it takes in, employers kick in 21 cents and employees pay 15 cents.

The commission suggests the employer/employee share be split equally.

Reducing pensions for the next generation of employees won't cut costs in the near term, so the commission recommended the Legislature pass a measure that lets state and local governments freeze the pensions of current workers and move them into a less costly hybrid system.


Pension Reform- California Style

Sac Bee- Editorial Cartoon
February 25, 2011

http://www.sacbee.com/2011/02/25/3429773_a3429774/skelton-reality-behind-pension.html


San Francisco County

Jeff Adachi Outlines Provisions of His New Pension Reform Initiative

KQED
February 25, 2011

http://blogs.kqed.org/newsfix/2011/02/24/interview-with-jeff-adachi-on-pension-reform/

Yesterday KQED's Joshua Johnson talked to Jeff Adachi, whose name might as well be Sauron to city workers, about what is fast becoming the hottest button issue of the decade: Pension reform.

Last year, Adachi, who is San Francisco's Public Defender, was the driving force behind Proposition B, an extremely contentious ballot measure that sought to require city workers to pay a greater share of their pension and health benefits. The proposition lost at the polls 58-42 percent.

Now, Adachi's back, threatening to put "Son of B" (or "Son of a B!" to San Francisco unions) on the ballot this November.

In the interview, Adachi outlined some of the provisions of his new initiative:

  •  City employees would have to pay 50% of their pension costs
  • Employees would have to pay into a health care trust fund, perhap 2 to 5% of their salaries
  • Receiving an pension "artificial spike" through a promotion just before retirement would be prohibited
  • A cap would be put in for new employees' pensions, perhaps $85,000

Commission: Freeze pensions for state workers

ABC Channel 10
February 25, 2011

http://www.news10.net/news/local/story.aspx?storyid=124768&catid=2

A California watchdog agency is calling on the governor and Legislature to freeze pension benefits for current state workers and overhaul the existing system, as the debate over retirement benefits for public employees has exploded nationwide.

The Little Hoover Commission on Thursday unanimously approved its report.

It also recommends the state move from a defined benefits plan to a "hybrid" model that would include something similar to the 401(k) plans offered to most private-sector employees.

The commission said the state needs to set uniform standards for the 85 defined pension plans including:

  •  Put a cap in the $80,000 - $90,000 range on salary used to calculate pension benefits
  • Eligibility ages for pension benefits that do not encourage early retirement
  • A ban on retroactive pension increases
  • Steps to improve accountability and transparency
  • A requirement that employees and employers share the normal costs of funding their pension plans

The commission, which includes lawmakers and political appointees, agreed that California's pension system needs more flexibility and oversight.

Retirement costs have been growing as state tax revenue has plunged. Pension costs now account for about 7 percent of general fund expenditures.

The commission suggested the state address pension costs before they become unsustainable.


Molly Weedn
Dewey Square Group
921 11th Street, 10th Floor
Sacramento, CA 05814
415-209-4217

 

 
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