There was nary a peep of dissent when a bill that would let cities offer more pension benefits to public workers sailed through a committee hearing Wednesday.
“Local governments need to be able to offer benefits workers value,” said Assemblymember Catherine Stefani, D-San Francisco. “It’s an option, not an obligation.”
We hate to spoil the party, but we’ve seen how responsibly local officials have exercised such “options” before: In their big-heartedness, and/or eagerness to curry favor with employee unions and garner endorsements and campaign contributions, electeds hiked workers’ benefits beyond sustainability. That’s how California’s public pension systems went from being “superfunded” in the early 2000s to sinking into a hole $351 billion deep today.
Stefani’s Assembly Bill 569 would allow cities (and other local governments) to negotiate over “supplemental” retirement plan contributions, “clarifying” some reforms muscled through the Legislature by then-Gov. Jerry Brown more than a decade ago.
Brown’s California Public Employees’ Pension Reform Act (PEPRA) aimed to tame the explosive growth in public pension liabilities that were gobbling up bigger and bigger bites of municipal budgets. It met stiff resistance from labor unions even as critics complained it did little to nothing to curb crushing current costs (because many of its provisions applied to new hires only).
PEPRA reduced benefits for new hires (lower pension formulas and higher minimum retirement ages); tackled spiking (based pensions on the highest average salary over 36 months, rather than the highest single year, and excluded overtime and leave from the calculations); eliminated “airtime” (workers could once buy additional years of service to boost retirement checks); and required workers to kick in more of their own money to retirement funds.
Awkwardly, perhaps, those post-PEPRA workers toil beside pre-PEPRA workers with much sweeter benefits. “Though this may be viewed by some as unfair or other negative adjective,” an analysis of Stefani’s bill for the Assembly Committee on Public Employment and Retirement said, “the history of questionable public employee retirement activities pre-PEPRA resulted in the PEPRA, which is intended to achieve its multiple public policy objectives.”
Targets ‘highly paid employees’
Stefani’s bill would amend PEPRA “relating to supplemental defined benefit plan exceptions by authorizing a public employer to bargain over contributions for supplemental retirement benefits administered by, or on behalf of, an exclusive bargaining representative of one or more of the public employer’s bargaining units.”
By way of vocabulary, supplemental plans are “designed to provide retirement income, typically, but not exclusively, to highly paid employees to address a shortfall caused by limits and restrictions in qualified retirement plans,” the analysis said.
The supplemental plans would have had to exist before PEPRA and the bill would clarify that employers can negotiate contributions to those plans going forward, Shane Gusman of the Teamsters Public Affairs Council told the committee.
(iStockphoto)Stefani said it does not create new mandates and does not undermine PEPRA core protections. “It’s just another option at the bargaining table,” she said.
The bill’s fiscal effects are officially “none.” Costs would fall to local governments that use supplementals, not to the state.
The California Teamsters Public Affairs Council is sponsoring the bill, and it’s supported by the California Federation of Labor Unions, AFL-CIO. There’s no opposition on file.
‘Concerned’
“Even public employees with defined benefit plans are concerned about retirement security,” say comments submitted by the Teamsters.
“This is largely due to changes to pension rules that were enacted over a decade ago. … Public employees hired since those changes spend more out of pocket for lower pension benefits in retirement. While many of the changes were necessary to curb abuses in public retirement systems, some changes may have had little relation to the targeted abuses and, unfortunately, eliminated tools to attract highly qualified job seekers….”
Yikes. If public employees are worried about retirement security, the rest of us are doomed.
The vast majority of California’s public servants will get guaranteed pension payments for life, regardless of how badly their pension investments perform (that’s what a “defined benefit” plan is, and any shortfalls are made up by us taxpayers). Only about 15% of public workers get such plans.
The rest of the private workforce depends on “defined contribution” plans like the 401(k), where the only sure thing is what goes in, not what comes out. And we all know how turbulent those 401(k) waters have been lately!
If this bill makes it through the Sacramento sausage grinder, we beseech local officials to think not only of their workers, but of their constituents who’ll be on the hook for any shortfalls. Pension envy is real.
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