It can be liberating for a politician to see the finish line and not have to worry about the next election.
Gov. Jerry Brown – about to start the final year of his second four-year term – is using that freedom to confront the issue of pensions and, in the process, take on public employee unions, among California’s best-financed and most powerful political players. That’s good for taxpayers and for the financial stability of the state and local governments.
As The Bee’s Adam Ashton reported last week, Brown’s office took the bold step of replacing Attorney General Xavier Becerra in a crucial court case on pensions. It is, in part, unfinished business.
In 2012, Brown butted heads with the unions when he pushed through a pension reform package that required new employees to pay more into their retirement, reduced pension formulas, raised retirement ages and banned pension spiking.
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Those changes were a long overdue, if only partial, correction to the irresponsible Senate Bill 400 giveaway by Gov. Gray Davis in 1999. That measure led to an explosion in pension costs for the state and local governments. It’s particularly tough on cities and counties, which must pay especially generous pensions to public safety employees.
Because most of the changes brought about by Brown’s 2012 effort apply only to new employees hired on or after Jan. 1 2013, significant savings won’t kick in for 20 years or more.
But unions have sued to challenge aspects of the 2012 law that affect workers hired before 2013.
Specifically, the union representing state firefighters in the case, Cal Fire Local 2881 vs. California Public Employees Retirement System, wants to again allow workers to buy “air time” – extra years of service used in computing their pensions. Other unions are objecting to anti-spiking provisions that limited the kinds of pay that can be used in calculating pensions.
The unions say those changes run afoul of the “California rule” – the longstanding legal precedent that has prevented the state and local governments from reducing pension benefits for current workers without additional compensation.
In the new legal filing, however, Brown argues that “air time” credits are an “unworkable and fiscally irresponsible scheme.” More broadly, the governor asserts that the state must be able to modify pensions because taxpayers expect limited funds to be used wisely.
Lower courts appeared to side with Brown’s position. Now the matter is before the California Supreme Court.
There are high stakes for employees’ personal finances, but also for the state’s pension funds. According to the latest figures, the California Public Employees’ Retirement System and California State Teachers’ Retirement System have a little more than two-thirds of the assets to pay all the benefits they owe.
Pension obligations are a burden on state and local agencies, eating up tax dollars that could go to current employees and public services. Already, local governments are girding for higher payments to CalPERS because it lowered its expected investment returns. Sacramento, for example, is projecting its additional bill to rise from $3 million in 2018-19 to $29 million in 2022-23.
As Brown nears the end of his tenure, he is rightly winning praise for showing leadership on the world stage on climate change. His advocacy closer to home on pensions is just as important.
Not many Democrats would take such a stand. Those who are running for office depend heavily on labor support. But if Brown succeeds, his successors and California taxpayers will owe him a measure of gratitude.