California likely to scale back pension reform efforts
By Andy Stonehouse
While it has seemed like the second appearance of longtime California Governor Jerry Brown might produce even more drastic changes to the state's retirement systems, analysts say his reform movement may have run out of steam.
Last year, Brown was able to pass the first of a series of modifications to the most populous (and at one time most prosperous) state's vast public pension plans - not quite to the extent that he wished, but close - as well as dangling the prospect of a mandatory, state-run retirement plan created for low-income workers without access to tradional DC options.
But as the San Diego Union Tribune has noted, while Brown suggested that he would build on the momentum to introduce even more radical efforts to save money for the state, the results have been far from the quick fix first suggested to voters.
Under last year's changes, newly hired state workers will have to work an extra year before receiving full retirement benefits, and workers will have to ramp up their contributions to their own pensions and DC plans in coming years - to the point where they'll be required to foot half the bill.
Those reforms, critics say, will be little more than a drop in the bucket when it comes time to begin paying full retirement benefits to the baby boomer wave of California workers, who are just now beginning to reach traditional retirement age.
And the total cost for providing coverage to Golden State retirees might actually be as high as $500 billion, though at present the state's employee, teacher and judge's pension systems are already at least $120 billion short on what they'll owe.
"My best estimate is the reforms that have been implemented might reduce the unfunded liability by about 10 percent," noted former Democratic state assemblyman Joe Nation, now an instructor at Stanford. "So, if you're $400 billion underfunded, it's probably around a $40-billion improvement."
Across the state, voters initially sided with a range of local efforts to limit future benefits for public workers from firefighters to garbage collectors, but lawsuits have bogged down those changes - and observers note that the forward impetus for more changes may have disappeared.
Brown's promises for major reform initially called for the adoption of a hybrid 401(k)-style pension plan for state workers, but even the state Senate leader now admits they will probably not tackle that issue for at least a year.
"Democrats and the unions want to think that they are done," Dan Pellissier, president of Californians for Pension Reform, told the newspaper. "But for anybody who cares about unfunded liabilities and pension costs squeezing out things that we need in our government budgets, pension reform is not done. We're still on an unstable path."
All involved in the issue note that the biggest problem is that inaction on pensions and retirement benefits create even more seemingly insurmountable problems in the not-so-far future.
"It's like somebody racking up a credit card and assuming that somehow they'll win the lottery next year and the thing will go away," Nation told the U-T. "That's obviously not going to happen."
Originally published on BenefitsPro.com