LOS ANGELES – Governor Edmund G. Brown Jr. Sept. 12 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.”
For full text of the bill, visit leginfo.ca.gov/bilinfo.html.