California Governor Announces Pension Overhaul

(October 27, 2011) — California Gov. Jerry Brown is seeking massive pension cuts, which the administration estimates would save about $900 million annually.

Some of the changes the governor has proposed include raising the retirement age to 67 for new employees who are not public safety workers and requiring state and local employees to pay more toward their retirement and health care, according to a draft of the plan obtained by the the Associated Press. 

“It’s time to fix our pension systems so that they are fair and sustainable over a long time horizon,” Brown said in a prepared statement to the AP. “My plan raises the retirement age and bans abusive practices…while mandating that public employees pay an equal share of pension costs.” The news service reported that the governor is expected to end so-called pension “spiking,” which allows employees to boost their payouts by including overtime and other benefits, while also ending the practice of buying service credits.

Earlier this month, Brown signed legislation that strengthened the chief financial officer position at the $217.1 billion Sacramento-based California Public Employees’ Retirement System (CalPERS). The legislation will become law on January 1, 2012, the statement from the fund revealed. “These new laws allow CalPERS to continue to apply newer and higher standards of accountability, integrity, and openness to ensure public trust in our institution,” Anne Stausboll, CalPERS CEO, said in a statement. Furthermore, the legislation will encourage the formation of timelines for when board members and some staff members at both CalPERS and CalSTRS can move to certain other jobs, Stausboll explained.

In addition, as outlined in the release, the pension legislation “prohibits CalPERS and CalSTRS Board Members and executive employees from representing another entity before the pension funds to influence specified actions for a period of four years after leaving service.” Furthermore, the legislation prohibits those individuals from aiding, advising, consulting with, or assisting a business entity for two years after leaving service, in obtaining the award of, or in negotiating, a contract or contract amendment with CalPERS or CalSTRS. Among the new restrictions board members and staff at CalPERS and the California State Teachers’ Retirement System (CalSTRS) are subject to is also a 10-year moratorium on the acceptance of jobs as placement agents.

Click here to read the California governor’s “Twelve Point Pension Reform Plan.”