Pension changes get initial OK in Legislature

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SACRAMENTO, Calif. (AP) – The state Assembly on Friday approved sweeping changes to public employee pensions that were expected to move quickly to Gov. Jerry Brown and be signed into law.

The main pension bill, AB340, won approval on a 49-8 vote in the Assembly. Lawmakers voted even as companion legislation was hustled up to make key fixes in the hastily written bill, which was being taken up during the final day of the legislative session. Some Republican lawmakers complained the process was rushed and preferred to delay a vote until the drafting mistakes were fixed.

The deal will increase the retirement age for new employees, eliminate numerous abuses of the system and require workers who are not contributing half of their retirement costs to pay more.

Brown announced the pension package this week, 10 months after he released a 12-point reform proposal that would have gone much further than the approach approved Friday. Underlying the negotiations was staunch opposition from public employee labor unions who are supporting Brown’s November proposal to temporarily raise sales taxes and taxes on high-income earners.

While some union leaders expressed dismay over the final bill, Democrats appeased their labor allies by removing some of the most important elements of Brown’s original proposal, such as instituting a hybrid pension plan that would have included a 401(k)-style savings vehicle.

Assemblyman Jim Nielsen, R-Gerber, said the bill was an example of “the Legislature at its worst: Last-minute scrambling around on a major, major issue.”

Lawmakers waited until the very end of their session before voting on an issue the governor began promoting 10 months before.

“The governor can sign it and say, `We did pension reform. Hooray! Now support the tax increase.’ I think this only gives more reason to say no to the tax increase, that the Legislature that spends their money proceeds in this kind of manner,” Nielsen said.

As the other house took up the package, Sen. Mimi Walters, an Orange County Republican who has made pension reform one of her leading causes, said she would support the plan. But she emphasized that it should not be considered true reform because it failed to substantially address the state’s massive unfunded pension liability.

She said she hoped the package would be the first step toward making even larger systemic changes.

Actuaries estimate the changes would save up to $55 billion over 30 years. California’s two main public pension funds have liabilities of nearly $165 billion.
Brown said Friday the package was a difficult compromise with many “contentious parties.”

“This is the most far-reaching pension reform in the history of California,” he said.

Some Democratic lawmakers closely aligned with labor also opposed the legislation, saying it could be the first step toward rolling back collective bargaining rights.

“This is a slippery slope,” said Assemblyman Sandre Swanson, D-Alameda, who opposed the bill.

Brown rejected those arguments, noting that some of the provisions that greatly expanded public employee pensions also were done through the legislative process.
Still, the package fell short of Brown’s original proposal. In addition to the lack of a 401(k)-style plan that would make public employees bear some of the investment risk, as private-sector workers do, nothing was done to reduce skyrocketing retiree health care costs.

And the union-dominated board that oversees operations of the California Public Employees’ Retirement System, the nation’s largest public pension fund, will not face reforms or independent oversight of its decisions, as Brown had sought.

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