Do California’s Unions Support Pension “Reform”? You Bet

Beginning with a special conference committee hearing in Carson City on October 26th, Sacramento is slated to begin a timely and deliberate re-crafting of California's public pension system. Both the governor and the Legislature plan to launch a thorough review of the system — with meaningful hearings and in-depth exploration of fair and workable fixes — which will be a positive step toward ensuring the system's stability and long-term affordability.

The condition of public pensions in California is not a crisis despite the best efforts of pension slashers to portray it as such. Pension costs make up just three percent of the state budget, a percentage that has actually fallen $600 million over the past two years as collective bargaining has increased the share public workers contribute to their pensions and as funds have taken tougher lines on pension spiking.

Similar changes are being negotiated in more than 200 California cities, counties and local districts, where public employees have agreed to increase pension contributions, reduce formulas and lower costs.

California's public sector unions intend to be strong partners with legislators in recrafting the pension system so that it works over the long haul for the state, communities, public workers and their families.

Where we stand: 

  • We support tough action to curb pension spiking for all public pension funds and to pound down the pensions of the small number of public workers — mostly senior officials — who have outsize retirement benefits.

  • We support creating pension reserve accounts for use during bad economic times and setting a fair waiting period before retirees could return to state jobs as part-timers.

  • We support efforts to ensure that more California pension funds are invested within the state, as long as that does not compromise funds' ability to get effective investment returns.

  • We support expansion of voluntary worker and employer contributions into 401(k) type funds as a valuable way to supplement secure, defined benefit pensions.

But we must ensure that retirement for public workers is secure and retirement systems are healthy. That's vital to an effective public workforce and a strong economy. We adamantly oppose erosion of the present system's central pillars:

  • Defined benefit pensions must remain the core of the system. Those opposing the current public pension structure claim that the only acceptable option is a wholesale shift to insecure 401(k)-type pensions now prevalent in the private sector. Anyone with their pension savings locked into a 401(k) knows how precarious such a retirement plan is.

  • Collective bargaining must remain central to the process. Pensions are part and parcel of a larger wage and compensation structure. Public employers and the unions that represent their workers must maintain the authority to negotiate over pensions.

  • Heedless reform can bring unintended consequences, particularly the loss of public investments and income, likely costing taxpayers and the economy more than any savings from reduced pension costs. Some 64 percent of CalPERS payments to pensioners in 2010 came not from taxpayers but from pension fund earnings on investment, which have averaged 7.9 percent annually over the past 20 years. Pensions paid to retirees by CalPERS in 2010 were $12 billion, far more than what the state put into the fund that year, stimulating $26 billion in total economic activity and supporting 93,000 California jobs. The retirement crisis in America stems not from mostly modest public workers' pensions but from the alarming deterioration of private-sector pensions. With a new UC Berkeley study issued this week that shows that half of Californians will retire in or near poverty levels, it is crucial that we work together for retirement security for everyone — in the public and private sector alike.