Our View: Brown's pension bill lacks fortitude
Gov. Jerry Brown showed a lot of moxie last year when he vetoed the state budget the Legislature's Democratic majority put on his desk, declaring that it "continues big deficits for years to come and adds billions of dollars of new debt."
Too bad the governor didn't muster similar fortitude by vetoing Assembly Bill 340, the grossly inadequate pension reform measure the Legislature hurriedly approved last week before hightailing it out of Sacramento for the remainder of the year.
Brown signed AB340 on Wednesday, proclaiming it "the biggest rollback in public pensions" in California history, apparently untroubled that the Legislature disregarded the governor's own pension reform proposals, which called for more cost-cutting.
That's not to say that AB340, authored by Long Beach Democratic Assemblyman Warren Furutani, chairman of the Assembly's Public Employees, Retirement and Social Security Committee, is entirely without merit.
The legislation raises the retirement age for new state employees. It caps the amount of salary that can be used to calculate a pension benefit. It excludes overtime, unused leave and other employee benefits from calculations of a retirement benefit. And it requires public employees to shoulder half the cost of paying into their pension account, rather than leaving the entire burden to taxpayers.
The California Public Employees Retirement System reckons that the pension reforms the governor signed will save the state as much as $55 billion during the next 30 years. The California Teachers' Retirement System estimates that AB340 will save nearly roughly $23 billion over the same three-decade span.
Unfortunately, those projected savings are a mere down payment on the state's estimate half-trillion dollars in unfunded pension obligations. Taking the pension funds' savings estimates at face value, there's still about $400 billion in unfunded liabilities for which California taxpayers remain on the hook.
The pension reform deliberations in Sacramento that began in earnest last year with Gov. Brown's 12-point plan and culminated Wednesday with his signature on AB340 represent a missed opportunity.
Indeed, the new law left out a proposal for a 401(k)-type plan for public employees to replace part of standard defined-benefit pension plan they currently receive. Public employees would have assumed some of the proposed plan's investment risk, much like private sector employees.
AB340 also included no provision to reduce the $62 billion tab the state faces over the next 30 years to foot the health care benefits for future state government retirees.
The Legislature left Sacramento announcing the state's pension crisis almost solved with passage of AB340. The governor has foregone an opportunity to help disabuse his fellow Democrats of that notion with a veto that could have sent a loud, clear message that almost is not remotely good enough.