Brown for Governor Campaign
LOS ANGELES- Pointing to growing pension fund liabilities across the state, Jerry Brown today called for a series of reforms to stabilize California’s public employee retirement system and protect taxpayers, retirees and current employees.
“State government has to honor commitments that have been made, but we have a responsibility to taxpayers and to retirees themselves to make certain that we can withstand sudden meltdowns in the markets without overburdening an already strained state budget,” Brown said. “We have to be realistic about what the state can afford, and put an end to abuses of the system that cost millions.”
Brown outlined eight proposals to shore up California’s pension system, reducing the cost to taxpayers and the state budget in the future.
Brown highlighted the practice known as pension spiking – driving up pay in the final year before retirement to increase pension payouts – as “dishonest in the extreme” and called for calculating benefits based on the last three years of work, not just the last year, a system that was in place when Brown was governor.
“In some cases, managers and employees have secured pensions beyond their original base salary,” said Brown. “It is wrong, the people doing it know it’s wrong, and we have to put an end to it.”
To further reduce profiteering and fraud, Brown called for an end to the use of placement agents, who have cost the pensions system hundreds of millions, and led to charges of bribery against former CalPERS board members.
In 1981, his final year as governor, Brown called for the creation of a two-tier pension system. “It was the right thing to do and if implemented, would have saved the state millions,” said Brown. “It is still the right thing to do today.”
Pointing out that “we can’t apply cuts retroactively,” Brown also proposed an end to the retroactive application of new benefit agreements.
Brown identified excessively rosy projections as a problem in benefit calculations as well, and called for tighter oversight of the retirement system. Under Brown’s plan, pension board members would be required to undergo specialized training. The Director of Finance would oversee the board’s revenue projections to ensure numbers that more closely match state projections.
Brown would end the practice of “pension holidays,” when local governments stop making scheduled contributions because of unexpected market gains.
“Unpredictability is destructive,” Brown said. “We need consistency, and local governments need to know what pension costs will be from one year to the next.”
Finally, Brown asked public employees and their unions to accept the reality of larger employee contributions.
“Several unions have agreed to larger employee contributions for their members,” Brown said. “Taxpayers are living with cuts and making sacrifices to deal with the reality of California’s budget crisis, state workers are going to have to do the same.”
“Pension reform can be hard to talk about,” Brown added. “In the long run, reform now means fewer demands for layoffs and less draconian measures in the future. It’s in the best interest of all Californians to fix this system now.”