Governor Brown Releases Pension Reform Plan

Governor Jerry Brown yesterday released bill language that includes his pension reform measures. A press release issued also highlights the Governor’s five other pension reforms currently in development. Below are the proposals included in the aforementioned bill language:

Eliminate purchase of airtime. As of January 2012, and for all state and local retirement systems, members would no longer be permitted to purchase additional retirement service credit. Note: this proposal is also included in SB 522 by Assembly Member Mimi Walters, which is currently awaiting a hearing date in the Senate Public Employment and Retirement Committee.

Prohibit pension holidays. All public agencies would be prohibited from suspending employer and/or employee contributions necessary to fund the normal cost of pension benefits.

Prohibit employers from making employee pension contributions. All public agencies would be prohibited from making employee contributions that fund the normal cost of employee retirement benefits in whole or in part.

Prohibit retroactive pension increases. On and after July 1, 2011, public agencies would be prohibited from granting any retroactive pension benefit increases, such as benefit formula improvements which credit prior service unless an official public resolution, signed tentative memorandum of understanding (MOU) or ratified MOU made or entered into before July 1, 2011 applies the increase to prior service.

Prohibit pension spiking. Final compensation for new employees hired on or after July 1, 2011 would be defined as the highest average annual compensation during a consecutive three-year period; additionally, compensation would be defined as the normal rate of pay or base pay (cannot include accrued leave, overtime or special compensation). Note: this is similar language to SB 27, by Senator Joseph Simitian, which is currently in the Senate Appropriations Committee. CSAC Opposes SB 27 due to its provision that prohibits retired annuitants from returning to work for a public agency until the passage of 180 days.

Felony convictions. Prohibits the payment of pension benefits to public officers (including elected) who become a member of a public retirement system on or after July 1, 2011 who commit a felony for conduct arising directly out of, or in the performance of, his or her official duties. Note: this is similar language to SB 115, by Senator Tony Strickland, which is awaiting a hearing date in the Senate Public Employment and Retirement Committee.

The following proposals from the Governor are under development, and not included in the bill language outlined above:

• Impose a pension benefit cap
• Improve retirement board governance
• Limit post-retirement public employment
• Address CalSTRS’ unfunded liability
• Create a hybrid option (defined benefit/defined contribution)

CSAC will keep you apprised of the status of these proposals. Please send comments and concerns to Faith Conley at 916.650.8117.

Former Legislator Brings Forward Pension Reform Initiative

Former Republican Assembly Member Roger Niello has submitted a request to the state Attorney General’s Office for a title and summary for a proposed statewide ballot initiative. This action is the first step to qualifying the initiative for the November ballot.

The proposal, among other things, includes the following requirements:

• Sets retirement age at 62 for all public employee classifications.
• Prohibits public agencies from providing retroactive pension increases.
• Limits retirement benefits for public agency employees to 60 percent of the highest consecutive three-year average; final compensation calculation cannot include overtime, bonus pay, severance pay or unused vacation and sick days.
• Requires public employees to contribute an amount equal to the employer’s contributions to fund the retirement plan.
• Requires public employees to be employed five consecutive years by a public agency to receive retirement benefits.

Niello’s proposal would apply to those employees hired after the date voters approve the initiative. The Attorney General now has 15 days to provide the title and summary to the Secretary of State’s Office.

CSAC Adopts Compensation Transparency Principles

At its March 24 meeting, the CSAC Board of Directors adopted a set of compensation transparency and disclosure principles that will become a part of the CSAC Legislative Platform.

In July, when news broke that city officials in Bell, California were receiving unusually high salaries and benefits, focus turned to local governments as state officials and legislators sought to increase transparency for publicly-provided salaries and benefits. While counties have long been required by statute and the constitution to publicly set salaries and to operate in a transparent manner, the state-level response to the Bell salary scandal has placed additional burden on counties. New reporting requirements from the State Controller’s Office (SCO) have been implemented and additional legislation and regulation have already occurred in 2011. 

Accordingly, CSAC developed principles that will guide staff in developing positions and participating in discussions regarding compensation transparency and disclosure.

CSAC Compensation Disclosure and Transparency Principles

Avoid duplication. The SCO database should be the single source of required disclosure of public employee and elected official compensation data. Every county has complied with the requirement and it is likely that the reporting will soon become routine. Any county may choose to additionally make this information available on their website or to link to the SCO database, but additional mandates are unnecessary. 

Keep requirements consistent with the Brown Act and Public Records Act. Timelines for providing information to the public via website, photocopy, or other means should be consistent with existing requirements in the Brown Act or Public Records Act. New standards should not be created. 

Maintain simplicity. Any and all compensation disclosed should be streamlined and specific enough to allow apples to apples comparisons. It is important that any reporting requirement be clear enough to allow agencies of various sizes with various levels of staffing and software capabilities to be able to make consistent reports. 

Apply to all levels of government. All compensation of public officials and employees, at every level of government, is public information. The SCO database should be expanded to include all public employees, including state and judicial branch employees.