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Jerry Brown to propose higher retirement age, lower pension benefits for new state workers

Published: Thursday, Oct. 27, 2011 - 12:00 am | Page 1A
Last Modified: Wednesday, May. 2, 2012 - 10:44 pm

Gov. Jerry Brown will propose a higher retirement age and less-generous pension benefits for newly hired state employees, sources familiar with Brown's pension plan said Wednesday.

The Democratic governor, who plans to release his pension plan today, will also propose prohibiting the purchase of additional retirement service credit, or "airtime."

The plan, as presented privately by the Brown administration to labor leaders Wednesday afternoon, includes increasing the full retirement age to 67 for most new workers not in public safety jobs.

The increased retirement age proposal is more aggressive than expected, and labor interests, which poured millions of dollars into Brown's gubernatorial campaign, are likely to bristle at the prospect.

Brown's plan includes replacing defined-benefit pensions for new employees with a mandatory "hybrid" system combining a smaller, defined benefit, Social Security and a 401(k)-style benefit.

Though Brown's pension plan includes some of the same ideas he discussed with Republican lawmakers in failed budget talks in March, Brown was thought at the time to be considering the "hybrid" system only as an option for employees.

The plan Brown proposes is expected to include a mandatory hybrid plan for new hires. The pension components for public safety employees who do not participate in Social Security would blend a guaranteed pension equal to half the average of their three years of highest earnings plus another 25 percent from a defined contribution plan, said one source who was briefed.

New miscellaneous workers and public safety employees who participate in Social Security would continue in that program and would also receive a smaller guaranteed pension payout and a third component from 401(k)-style defined contributions.

The governor's proposal would also eliminate the option for all employees to purchase retirement service credits that bump up their pensions by adding time to their employment record.

Relatively few employees can afford the benefit, which can run into the tens of thousands of dollars, but it has become a controversial symbol of how government workers can receive benefits that private sector workers don't.

Brown is also expected to propose a ballot measure to reshape the governing board of the California Public Employees' Retirement System, requiring changes to Proposition 162, the 1992 initiative that prevents changing the composition of the fund's board of administration.

According to a Republican memorandum, Brown in March was considering adding two public members to the 13-member CalPERS board.

Brown tried unsuccessfully to use pension changes as a negotiating tool in budget talks with Republican lawmakers earlier this year. He has said for weeks that he would release a pension plan this fall, while declining to discuss it in any detail.

The labor leaders briefed by the administration Wednesday were asked not to speak publicly about the plan until its release. Brown's office did not immediately return a telephone call for comment late Wednesday.

The briefing followed by only hours the first hearing of the Joint Conference Committee on Public Employee Pensions, in Southern California.

Brown said in a letter to the committee's Sen. Gloria Negrete McLeod, D-Chino, and Assemblyman Warren Furutani, D-Gardena, on Wednesday that he would give them his plan for pension changes today.

"Given the paramount importance of pensions to both taxpayers and public employees, it is absolutely critical that we carefully examine our current assumptions and practices," Brown said in the letter. "We have to do our best to make sure that we have a system that is fair and truly sustainable over the long time horizon that our pension and health systems require."

Labor leaders at the hearing Wednesday testified they were willing to collaborate on some changes, but they also said they recently struck labor deals that require higher employee contributions to pension funds and reduced formulas for new workers.

Any plan could face resistance in the Democratic-controlled Legislature.

"There has to be some reform, but it also has to take into account and respect for some of the reforms that have already started happening where savings are being created," said Margarita Maldonado, vice president for bargaining for Service Employees International Union Local 1000, which represents 95,000 state workers.

STATE WORKERS

© Copyright The Sacramento Bee. All rights reserved.


Call David Siders, Bee Capitol Bureau, (916) 321-1215. Follow him on Twitter @davidsiders. The Bee's Kevin Yamamura contributed to this report.



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