Nearly a year ago, Governor Brown announced a 12-point pension reform plan. It was a very small step in the right direction towards solving a very big problem. Unfortunately, though, because of bitter opposition from the public labor union bosses not a single Sacramento Democrat supported the governor. For that reason, I joined Assembly and Senate Republicans in authoring and submitting to the Legislature the governor's own proposal. But even that was too much for union leadership. The Governor/Republican measure did not receive any support from the Democrats and died.
But talk of pension reform did not die. Most observers in Sacramento felt that, if the Legislature did nothing on pensions, the governor's tax plan had no chance of passage. Absent serious pension reform, went the thinking, the public rightly would recognize that Sacramento is not serious about solving California's fiscal crisis. Make no mistake, it was that concern for salvaging the increasingly unpopular tax increase that explains the pension "deal" that recently emerged from behind closed Capitol doors. In short, now that we have reached the last week of session and with the clock about to run out on the Democrats' last chance to show seriousness on pensions, they have decided to push forward with a brand new pension plan.
Is that plan any good?
The San Francisco Chronicle reported that a "Democrat-led conference committee" has been meeting since October, working with the governor, and has drafted a proposal that was unveiled a few days ago. Incredibly, the two Republicans on that conference committee, Assemblyman Jim Silva (R-Huntington Beach) and Senator Mimi Walters (R-Laguna Niguel) were not privy to the negotiations information until it was made public by the media, but that is just how the majority party does business. And despite the fact that the governor was involved in those negotiations, the pension deal is significantly weaker than the one he - and the Republicans - proposed months ago.
First the good news: The new plan caps public employee pensions at $106,000 for those entitled to Social Security and at $130,000 for workers not so entitled. This is some progress. Because the state has seen a staggering increase in the number of retirees making more than $100,000 per year, I had authored Assembly Bill 1633 in my own effort to advance pension reform and which placed a cap of $100,000 on all public employee pensions. Several months ago, when this bill was voted on in an Assembly Committee, the subject matter of the bill was referred to a group of Democrat legislators in charge of pension reform. I interpreted this to mean, as it usually does, that this was a devious way to dismiss my plan without actually voting against it. Consequently, I was pleasantly surprised that the pension plan the Democrats produced this week directly uses my suggested approach, though, not surprisingly, was more generous to the unions than my bill.
There is more good news: The plan rolls back the very generous 3% at 50 retirement option. A sliding scale at lower percentages and higher retirement ages mostly replaces it, and that, too, is at least some progress.
But there is also much bad news. First, the Democrats rejected the governor's proposed hybrid system. Their plan continues the ultimately unsustainable Defined Benefit model instead of replacing it in whole or in part with a Defined Contribution plan. Second, the total savings for the plan is estimated by the governor to be only about $30 billion over the next 30 years. To put that in perspective, the size of the problem is reliably estimated to be as high as $500 billion. Third, the plan exempts certain counties and government agencies - probably to buy political peace.
The biggest flaw, though, is that the Democrats intend to write this proposal into law, instead of submitting it to the voters. That means, of course, that they can then very easily write a new law next year - after the vote on the governor's tax plan - undoing the pension scheme in whole or in part. I have seen this bait and switch several times already in my brief two years in the Legislature. Beware of it again on pension reform.
The pension proposal is a very small step in the right direction. Despite the fact that the Democrats can (and, in my opinion, almost certainly will) weaken or eliminate it altogether later, it is supportable as the modest positive reform that it is. But do not be fooled that the Democrats are now showing fiscal restraint and thus deserve more from you in the way of taxes. This little bit of pension reform that we might not even get to keep after the new Legislature convenes next year is not worth trading for the governor's proposed massive tax increase. Sacramento does not deserve more of your hard earned money.