Group again files proposed measure to reduce public pensions in California

Published online on Saturday, Nov. 07, 2009

A public pension group has refiled proposed ballot measures that would create a mandatory second-tier pension system for new public employees hired by the state, counties, cities and other non-federal government agencies in California.

The California Foundation for Fiscal Responsibility put forward a similar measure in 2007, but it didn't have the financial support to gather enough signatures to qualify for a statewide vote.

Foundation President Marcia Fritz figures it will take $2 million to gather the 1 million signatures needed to get the initiative before voters in the November 2010 election. She said no well-financed backer has stepped forward.

In a telephone interview Friday, Fritz outlined a strategy that includes an aggressive Web-based signature-gathering campaign and a push to get 2010 gubernatorial candidates such as Meg Whitman to take up the cause.

"We hope that the candidates will step up and help us raise money," Fritz said. "It would give us exposure and give them an issue to talk about."

Fritz, who runs an accounting firm in Citrus Heights, estimates the savings from the foundation's benefit rollback for new hires would save California $1 billion in pension costs one year after taking effect on June 30, 2011.

Some features of the plan:

• Changes the retirement formula for new peace officers and firefighters from the current 3 percent times years of service at age 50 to 2.3 percent at age 58.

• Cuts the formula for other newly hired public safety employees, such as park rangers and game wardens, from the current 2.5 percent at age 55 to 1.8 percent at age 60.

• Ties the full retirement age for all other employees to the federal standard. Those workers paying into Social Security would get a defined pension based on no more than 1.25 percent of pay. Those who don't contribute to Social Security would get no more than 1.65 percent.

• Caps annual pension benefits at 75 percent of an employee's annual base wage.

• Requires retirement benefits be based on a three-year average of base pay, excluding things like overtime, uniform pay, bonuses, longevity pay, and accrued but unused vacation pay.

• Requires that any public employee retirement enhancements go to a public vote. The foundation has filed two versions with the attorney general, one requiring a simple majority vote of the people to approve future pension enhancements and the other a two-thirds vote. Fritz said her group is seeking feedback before deciding which one to push for a public vote.

• Requires public employers and employees to contribute enough money to pension and retiree health plans to cover future benefits. The "pay as you go" system would end unfunded liabilities, now at $48 billion for CalPERS retiree health benefits alone, Fritz said. The state could then issue bonds to cover existing debt.

Timing is certainly part of the foundation's consideration. A recent Field Poll showed that a solid majority of California voters think state and local governments should make pension benefits for new hires less lucrative than the current system. However, only a third thought pensions for current employees are too generous.

Dave Low, chairman of Californians for Health Care and Retirement Security, a broad-based coalition of public employee interest groups, said the issue isn't a high priority with voters and predicted the initiative would suffer the same fate as the 2007 effort.

But if it does make the ballot, Low said, it would trigger a "nuclear option" response from state employee unions, because retirement benefits for new hires would be cut between nearly one-third to one-half.

"We'll do everything we can to fight this," Low said, "to keep employees from retiring into poverty."

The foundation put a spotlight on public employee pensions earlier this year when it published two searchable databases with the names of roughly 9,000 Californians who receive more than $100,000 per year from CalPERS and CalSTRS. The two funds together provide pensions for about 716,500 retirees.