Last week, California’s legislature approved numerous changes to California’s public pension laws. As reported on Gov. Jerry Brown’s website, the Public Employee Pension Reform Act of 2012 enacts the following reforms:
• Caps Pensionable Salaries at $110,100, or 120 percent of that amount for employees not covered by Social Security.
• Establishes Equal Sharing of Pension Costs as the Standard by requiring new employees to pay at least 50% of the cost of their pension benefits (a similar target has been set for current employees, subject to bargaining). Local government employers are also given greater flexibility in requiring higher contributions.
• Unilaterally Rolls Back Retirement Ages and Formulas. Retirement ages are increased by two years or more for all new public employees, and benefits are rolled back below the levels in effect for decades.
• Ends Abuses by requiring, for all new employees, three-year final compensation and calculation of benefits based on regular, recurring pay to prevent “spiking”; limiting post-retirement employment for all employees; eliminating pension benefits for felons; prohibiting retroactive pension increases for all employees; prohibiting pension holidays for all employees and employers; and prohibiting purchases of service credit for all employees.
CalPERS reports that “A preliminary cost analysis by our actuarial staff estimates that the reforms will save California taxpayers $42 billion to $55 billion over 30 years for CalPERS plans alone. CalSTRS, the California State Teachers’ Retirement System, estimates savings of nearly $23 billion over 30 years.”
Not every one is happy, of course. Many feel the legislation did not go far enough to reduce existing benefits, and others felt that the legislation was more “cuts” than real reform (see this article from P & I for additional details).
Lawsuits or backsliding to follow.