FOR IMMEDIATE RELEASE:
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Contact:
Governor's Press Office
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Wednesday,
September 12, 2012
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(916) 445-4571
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Governor
Brown Signs Bipartisan Pension Reform Bill to Save Billions by Capping
Benefits, Increasing Retirement Age and Stopping Abuse
LOS ANGELES – Governor Edmund G. Brown
Jr. today signed sweeping bipartisan pension reform legislation that saves
billions of taxpayer dollars by capping benefits, increasing the retirement
age, stopping abusive practices and requiring state employees to pay at
least half of their pension costs.
“This is the biggest rollback to public pension benefits in the history of
California pensions,” said Governor Brown. “We’re lowering benefits to what
they were before I was Governor the first time and reducing costs by up to
$55 billion in PERS and billions more in other local pension systems. Under
the new rules, employers and employees alike are going to contribute their
fair share of the costs, resulting in a more sustainable system.”
The pension reform law, AB 340 (Furutani), requires current state employees
and all new public employees to pay for at least 50 percent of their pensions
and establishes this as the norm for all public workers in California.
Importantly, these new reforms eliminate state-imposed barriers that have
prevented local governments from increasing employee contributions. The new
law also bans abusive practices used to enhance pension payouts.
“I am very proud of my colleagues for their hard work to achieve these
historic, bipartisan reforms,” said Assembly Speaker John A. Pérez. “The
pension reform law outlaws the most objectionable practices, creates new
accountability for pensions and saves state and local government as much as
70 billion dollars in the coming years while keeping faith with
California’s hardworking public servants. These are meaningful reforms that
address one of the biggest long-term challenges facing California, and I
believe this is a major victory for the people of our state.”
“Until recently, pension reform was
defined by ending the system’s abuses. The reforms we have accomplished do
just that but we also ventured significantly further,” said Senate
President pro Tem Darrell Steinberg. “Some say that it is far too much and
others say that it is not enough but this much is undeniable: the result is
a fair and defined middle-class retirement package that goes a great
distance toward protecting taxpayers and the fiscal health of our pension
systems.”
AB 340 also increases the retirement age
for new public workers and caps the salary amount that can go toward
pensions.
“The pension reform plan that Governor
Brown signed today will save taxpayers billions of dollars by making
important changes to the way we calculate pension benefits and eliminating
opportunities for abuse,” said Assemblymember Cameron Smyth. “Having
been involved in pension discussions with the Governor for many months, I
can say that all of us wanted to see this plan go further. We have to
be careful, though, not to make the perfect the enemy of the good. This
plan is a step in the right direction, and lays the groundwork for more
comprehensive reform going forward.”
On Monday, Moody’s Investors Service said
that California’s pension reform legislation boosts the credit outlook for
state and local governments participating in CalPERS. Moody’s currently
rates California an ‘A1’ with a stable outlook.
“Thanks to the Governor's leadership and
signature today we have a Win-Win for California's public and private
sector,” said Dan Dunmoyer, Senior Vice President for Farmers
Insurance and CalPERS board member. “It is a win for the public
sector because the new law will take positive steps to ensure we can
keep our commitment to our new public servants for decades to come
and a win for the private sector as a better funded pension systems
will result in less pressure to raise taxes and reduce support for much
needed education and infrastructure projects.”
Public
Employee Pension Reform Act of 2012
Caps Pensionable Salaries
·
Caps pensionable salaries at the Social Security
contribution and wage base of $110,100 (or 120 percent of that amount for
employees not covered by Social Security).
Establishes Equal Sharing of Pension Costs as the Standard
·
California state employees are leading the way and are
paying for at least 50 percent of normal costs of their pension benefits.
Requires new employees to contribute at least half of normal costs, and
sets a similar target for current employees, subject to bargaining.
·
Eliminates current restrictions that impede local
employers from having their employees help pay for pension liabilities.
·
Permits employers to develop plans that are lower cost
and lower risk if certified by the system’s actuary and approved by the
legislature.
·
Provides additional authority to local employers to
require employees to pay for a greater share of pension costs through
impasse proceedings if they are unsuccessful in achieving the goal of 50-50
cost sharing in 5 years.
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Directs state savings from cost sharing toward
additional payments to reduce the state’s unfunded liability.
Unilaterally Rolls Back Retirement Ages and Formulas
·
Increases retirement ages by two years or more for all
new public employees.
·
Rolls back the unsustainable retirement benefit
increases granted in 1999 and reduces the benefits below the levels in
effect for decades.
·
Eliminates all 3 percent formulas going forward.
·
For local miscellaneous employees: 2.5 percent at 55
changes to 2 percent at 62; with a maximum of 2.5 percent at 67.
·
For local fire and police employees: 3 percent at 50
changes to 2.7 percent at 57.
·
Establishes consistent formulas for all new employees
going forward.
Ends Abuses
·
Requires three-year final compensation to stop spiking
for all new employees.
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Calculates benefits based on regular, recurring pay to
stop spiking for all new employees.
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Limits post-retirement employment for all employees.
·
Felons will forfeit pension benefits.
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Prohibits retroactive pension increases for all
employees.
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Prohibits pension holidays for all employees and
employers.
·
Prohibits purchases of service credit for all employees.
For full text of the bill, visit: http://leginfo.ca.gov/bilinfo.html.
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