June 22, 2007
A foundation led by
former Assemblyman Keith Richman filed an initiative Thursday that would
slash California's state and local government pension costs by offering
a less generous retirement allowance to new employees and raising the
age at which they qualify for full benefits.
"It's not fair that people in the private sector are working well into
their 60s and 70s to pay for extravagant pensions for public employees
who can retire at 50 or 55," said Richman, a former Republican
Assemblyman from Northridge who is now president of the California
Foundation for Fiscal Responsibility.
The initiative, if it qualified for the ballot, would face stiff
opposition from deep-pocketed public employee unions, which in 2005
fought off another attempt to scrap the current pension formula.
"I think it's as serious as a heart attack," said J.J. Jelincic,
president of the California State Employees Association. "It's part of a
national agenda attacking defined benefit plans and the interests of
working folks."
Richman's 2005 proposal would have scrapped the traditional pension plan
for new employees in favor of a 401(k)-style retirement account subject
to the ups and downs of investment funds.
This proposal preserves the traditional plan, which guarantees a certain
payout in retirement years, but cuts the formula that determines
pensions and extends the years an employee would have to work to get
them.
Rank-and-file workers in the state's current system, for instance, now
get 2 percent of their highest pay multiplied by the number of years of
service at the age of 55.
Under the initiative filed Thursday, workers who also qualify for Social
Security would get only 1 percent for each year worked, and they would
qualify for full benefits at the same age they become eligible for
Social Security, 65 to 67.
Those who don't qualify for Social Security would get 1.5 percent for
each year worked.
Peace officers and firefighters would get 2.2 percent for each year
worked at the age of 55. Currently, the state and many local governments
pay peace officers and firefighters 3 percent and allow them to retire
as early as age 50.
Another change would base the pension payout on the highest consecutive
five years of pay, instead of the one year or three years now in use.
That move would tend to reduce retirement allowances, because a
five-year average is normally lower than the highest year of pay or a
three-year average.
The proposal would forbid public agencies from "raiding" pension funds
for other purposes, and require them to make full payments into the
retirement systems even during good years when investment returns are
high. Richman said the initiative would not touch death and disability
benefits. Gov. Arnold Schwarzenegger pulled the plug on the 2005
initiative after public employee unions waged a blistering campaign
saying it would end death and disability benefits for fallen peace
officers and others.
The new initiative would apply to state and local government workers
hired after July 1, 2009.
"It doesn't touch the benefits at all for current and retired workers,"
Richman said. "We think it's important to keep the promises that have
been made to current employees and retirees."
Richman said his plan would save state and local governments $500
billion over the next 30 years. He declined to say where he expects to
raise the money to gather signatures to qualify the initiative for the
ballot. Schwarzenegger spokesman Aaron McLear said the Governor's Office
had not yet looked at Richman's proposal. He added, "We welcome all
ideas to the table. This is obviously part of the public dialogue."
But Dave Low, assistant director of governmental relations for the
California School Employees Association, said that Schwarzenegger is
unlikely to back a proposal that doesn't take into account the work of a
commission he formed to address public pensions, scheduled to come out
with recommendations in January.
"It seems that Richman is way out ahead of the governor on this one,"
said Low, one of the Legislature's appointees to the commission. "Why
not wait?"
Jelincic questioned the rationale for the initiative, saying that the
state's biggest pension system, the California Public Employees'
Retirement System, is not severely underfunded.
If the initiative passed, governments that offered reduced retirement
benefits would have to sweeten the pot for potential workers by raising
pay, he said.
Richman, however, disputed the contention that government workers are
paid less than their private sector counterparts and need better
retirements as an incentive.
"Numerous studies over recent years have demonstrated that public
employee salaries are higher than those in the private sector, and the
benefits are much higher," he said.
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