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California Pension Reform: How Much Would It Save?

Paresh Dave |
April 1, 2011 | 12:52 a.m. PDT

Deputy Editor

How could Republican legislators and Gov. Jerry Brown have debated the best ways to catch the state's pension systems before they fall off the cliff if they didn't know what the possible fiscal effect of each reform would be?

Brown released 12 pension reform ideas on Thursday, two days after ending budget negotiations with Republicans. Most of the proposed changes would eliminate loopholes that public employees have used to increase their benefits. Others would force employees to contribute more to their pension plans. Neither his proposals nor the ideas of Republican legislators have undergone significant public financial review.

On behalf of the California Foundation for Fiscal Responsibility, Sacramento-based Capitol Matrix Consulting has been reviewing various measures that could be taken to keep the state's pension systems from becoming insolvent.

“Even if you take the most optimistic numbers, it's still a disaster,” said consultant Mike Genest.

The foundation's head Marcia Fritz excepts Genest and his colleagues to have a study released by mid-May, complete with the likely amount savings to the state from three different proposals.

“Generally, we know there are little things that can be done to save a lot of money,” she said.

Capitol Matrix advised five Republican legislators earlier this year on ways public employee pensions could be made more manageable for a state with a $26.6 billion budget deficit and hundreds of billions of dollars in unfunded pension liabilities.

In their “limited engagement,” Genest said he told the five Republican senators that there's not a lot of measures that could be proposed to save a lot of money in the short-term outside of raising health care contributions for current employees. That's a proposal that would face immediate legal scrutiny if enacted. So what's the rush to fix the mess without strong analyses of the what the best foot forward might be?

“There's no universal agreement on who's right,” Genest said of conflicting ideas from the right and the left. “Any one of them would reduce the size of the calamity.”

Which reform would have the biggest effect next year, three years from now or even farther down the road remains unclear. Both Brown and Republicans generally want public workers to assume more liability. Last week, Fritz, a Democrat, said Republicans should be willing to vote to place a series of tax extensions on a special election ballot in exchange for a promise from Brown to propose pension reforms later in his term. Brown ended talks with Republicans this week and has now laid bare details of seven of his pension reform plans. Republican leaders want him to place them in front of voters.

Another group of pension reform advocates quickly criticized the governor's proposal for not being far-reaching enough.

"Nice that he's paying attention to pensions, but his ideas aren't sufficient to solve the problem that confronts us," Pellissier told the Sacramento Bee.

Both his group and Fritz's group say them may propose their own ballot measures to significantly tweak the pensions of current employees.

Republicans sought to have Brown agree to a deal in a matter of days in exchange for their support of his budget package. Brown's proposals and those of the two special interest groups are likely to be vetted over the course of several months. Finally, the passage of time could attach some numbers for voters to make sense of.

Fritz said capping pension accumulation at a salary of $80,000 to $90,000 has broad appeal. Many of Brown's other ideas, such as preventing convicted felons from collecting pensions, are likely to draw wide support.

“Whatever is politically feasible right now should be done,” Genest said. “We need to shut the door before the problem grows worse.”

To reach reporter Paresh Dave, click here.

Find him on Twitter: @peard33.



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