Gov. Jerry Brown and legislative Democrats said Tuesday they remain at odds over a package to cut public pension benefits, a rift that will delay passage beyond the summer recess that begins next week.
The Democratic governor issued a 12-point plan in October designed to rein in future costs for state and local governments, mostly by promising less to employees not yet in the workforce. The proposal has been seen as one way to sell his November tax initiative by convincing voters that government has sufficiently tightened its belt.
Brown press secretary Gil Duran said in a statement Tuesday that Brown "could not agree to some of the changes in the pension counterproposal shared by the Legislature on Sunday."
Senate President Pro Tem Darrell Steinberg, D-Sacramento, downplayed the problem and said lawmakers are in "common agreement" on most of Brown's proposals, particularly those aimed at curbing practices that workers can use to spike pensions. The changes would go beyond state employees and affect workers in local government.
However, Steinberg said they remain at odds over a handful of issues: a "hybrid" concept that transfers some retirement risk to employees; the ways in which the state would increase the retirement age; and how to increase contribution requirements for existing employees.
Steinberg said Democrats have drafted a plan that caps the pension share for new public workers at roughly $110,000, giving them a less lucrative retirement benefit for income above that amount. Public-safety workers would be eligible for a higher cap at around $130,000.
Brown proposed in October that all new state workers, not just those making above a certain amount, have hybrid accounts that rely on shares of a guaranteed pension benefit, 401(k)-style investment account and, for those that qualify, Social Security. He did suggest capping the pension benefit for high-income earners. Steinberg said that Brown had not yet put that hybrid plan into bill language.
"We're talking about how to draw a reasonable line here," Steinberg said. "What we like about a cap is that it does tend to protect people at the lower end and more in the middle."
Steinberg said the legislative plan would hike the earliest retirement age from 50 to 52 for workers who are not in public safety, while it would delay full benefits until age 67. Public safety workers would have lower qualifying ages.
"We will do more of a gradation," Steinberg said. "Ultimately, 67 will be the retirement age for the highest level of benefits for 'miscellaneous' employees," referring to non-safety workers.
Lawmakers agree with Brown on several concepts. Those include calculating pension benefits based on the highest average income over a three-year period, rather than on the final year, which state leaders believe can be gamed. Other restrictions would curtail the addition of unused sick time or bonuses in pension calculations.
Another change would stop the purchase of "air time," which allows workers to bolster pensions with service credit for up to five years not worked. Critics say that provides a guaranteed rate of return currently 7.5 percent while taxpayers bear the risk if investments fall short.
Dave Low, who heads a labor coalition on retirement issues, said he opposes both proposals from Brown and lawmakers. He said most ideas, save for those curbing the worst abuses, should be negotiated as part of union contracts, not placed into law outside the bargaining process.
He also said he believes it would be illegal to eliminate air time for current workers, and that employees lose with that benefit if the market outperforms or they die early.
"We're opposed to unilaterally rolling back pension benefits without negotiations," Low said. "Increasing the age, decreasing formulas, changing the employee share all of that without bargaining is opposed by unions."
Aaron McLear, a GOP consultant and spokesman for the coalition opposing Brown's tax initiative, criticized Democrats for delaying a vote on pension changes.
"Everything they've been doing the last couple weeks has been geared toward the tax hike in November, and this does not help them with that," McLear said. "Taxpayers are not going to want to send more money to Sacramento when Democrats can't come together on modest, minimal pension reform."