Brown Right Once Again on Public Employee Pension Reform

Brown Right Once Again on Public Employee Pension Reform

We are often critical of the way Gov. Jerry Brown governs and the ideas that he proposes. He too often leans on the progressive playbook. But we’ve not been afraid to say that he’s right when he’s right, and today he’s right. The governor is publicly advocating cuts in public employee pension benefits.

Brown’s effort is a follow-up to the pension reform he backed in 2012. That legislation established some modest cuts to new government workers’ benefits. Now, the Sacramento Bee is reporting, Brown is “in court making an expansive case that government agencies should be able to adjust pension benefits for current workers, too.”

According to the Bee, a brief Brown’s office filed in a legal challenge by unions to the 2012 law — the Public Employee Pension Reform Act — says that “he favors broader pension changes that affect current employees.”

The Public Employee Pension Reform Act, known as PEPRA, increases minimum retirement ages, as well as contributions from some employees. It also includes other provisions intended to make the luxurious public employee pensions a little less grand.

But it’s not enough. The fuse on the public-employee pension bomb is still burning. As we’ve said a number of times, California public employees are owed nearly $1 trillion in retirement benefits. Maybe even more staggering is the fact that at least $300 billion of that debt, and maybe as much as $600 billion, has no funding.

Government-worker pensions are also crowding out the delivery of public services as governments struggle to pay for both those services — such as public safety, public works, parks, and libraries — and the pensions they are obligated to fund.

As Brown winds down his second bite at the governorship, he should seriously consider leading a movement to pass a constitutional amendment that would repeal the “California rule,” which essentially says that once government employees have been hired, their benefits can never be changed. PRI fellow Wayne Winegarden calls the rule, which only a few states have adopted, “a bad policy that traps taxpayers in an unaffordable pension system and ensures unequal treatment across different types of long- term contracts.”

Then Brown could move on to the other reforms that Winegarden has proposed, including:

  • Implementing a freeze across all defined benefit programs and offer employees a choice of receiving a payment equal to the present value of their benefits or stay in a reformed defined benefit program that would include, among other adjustments, appropriate policies to accommodate market risk.
  • Establishing for all employees (new and current) a defined contribution plan that meets the standards for a large firm.

Taking the sting out of the state’s public pension crisis would be a far better legacy for Brown than a bullet-train that has no bang.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.