(AP) SACRAMENTO, Calif. - With election politics in play, Gov. Jerry
Brown on Tuesday announced systemic reforms to save billions of dollars
in California's underfunded pension systems but dropped key changes he
had sought to avoid a showdown with labor allies.
As a
result, pension reform advocates said the Democratic proposal fails to
address the long-term costs of the state's pension liabilities, largely
by leaving benefits for the state's more than 200,000 employees
unchanged without contract changes negotiated with unions.
The
reform deal does not include putting new government workers in a hybrid
system that includes a 401(k)-style plan, greater independence for the
board that oversees the state's main pension fund, or a reduction in
retiree health care costs, which are skyrocketing.
U.S. public pension plans face $1 trillion shortfall
Still,
Brown hailed the deal as a landmark achievement and said it will make
pension benefits for public employees lower than they were during his
first term in office, in 1975. A legislative committee passed the bill
on a 4-2 party-line vote late Tuesday, setting up a full vote by
lawmakers Friday.
"These reforms make fundamental changes
that rein in costs and help to ensure that our public retirement system
is sustainable for the long term," the governor said in a statement.
"These reforms require sacrifice from public employees and represent a
significant step forward."
Labor leaders also were not
pleased by what they saw as a violation of collecting bargaining rights.
The reforms for new employees include an annual pension cap,
contributions of at least half of their pension costs and a higher
retirement age for full benefits.
"We are fighting back
and we're struggling, and in this case it appears like we're losing,"
said Dave Low, chairman of Californians for Retirement Security, a labor
coalition representing more than 1.5 million public employees and
retirees.
The changes that will save the most money apply
primarily to new workers, rather than existing ones, so the greatest
financial benefit to the state will be decades in the future.
"We've
lived beyond our means. The chickens are coming home to roost," Brown
said during a news conference in Los Angeles, referring to the
difficulty of negotiating pension reforms with the Legislature's
Democratic majority and the public employee labor unions that fund their
campaigns.
Pension reform has been an undercurrent
throughout the entire legislative session this year, in part because the
state's two main pension funds, the largest in the nation, are so badly
underfunded — by at least $150 billion.
California also
faces an estimated $60 billion tab to pay health and dental benefits for
current and retired state employees. That estimate doesn't include
obligations owed to city, county and public school employees.
But
the governor also had a lot at stake: He has promised reforms since
rolling out a 12-point plan last October and is trying to persuade
voters that he is fiscally responsible at a time when he is asking them
to increase the sales and income taxes in November.
Although pension payments account for a fraction of state spending, the cost has been growing in recent years.
Republicans
note that the state's main pension system cost $370 million in 2001,
but the cost went up to $1.7 billion in 2011, nearly the amount the
state spends to fund the 23-campus California State University system.
Brown's
original plan was projected to save $4 billion to $11 billion over 30
years. On Tuesday, the governor said the changes, if enacted by the
Legislature, would save $30 billion, although the time period for that
savings was not clear.
Republican Sen. Mimi Walters said
the savings in the Democratic plan are just a fraction of the state's
overall unfunded public pension liability.
"The voters
need to see that this is not true pension reform, and the reason that I
believe the governor is putting forward this pension reform act, if you
will, is because he knows that he cannot ask voters in the state of
California to increase taxes if he doesn't take on this critical issue,"
Walters, of Lake Forest, said in an interview.
The
reforms include a cap on annual pension payments for new employees at
$110,100 for most workers and $132,120 for employees not covered by
Social Security, such as teachers and some public safety workers. They
also require new employees to contribute at least half of their pension
costs.
Reflecting longer life spans, the reform plan also
raises minimum retirement ages for new employees. A civil service
worker will now have to work until age 67, rather than 55, to receive
full benefits. For public safety workers, that goes from age 50 to 57,
and the maximum benefit formula is reduced.
The plan also
ends some of the most egregious abuses of the pension system, including
a practice known as "spiking" in which employees are given big raises
during their last year of employment as a way to inflate their pensions.
"Those
items may be worth addressing for other reasons, but they have little
to do with rising retirement costs," said David Crane, who served as
economic adviser to former Gov. Arnold Schwarzenegger and is now
president of Govern for California, which advocates for government
changes.
Crane said the proposal doesn't address the current long-term unfunded
liability of the state's pension systems because it leaves benefits for
current employees unchanged. Courts have ruled consistently that
governments cannot make unilateral changes to existing pension benefits.
Jim
Wunderman, president and CEO of the business-backed Bay Area Council,
applauded the deal as a "big first step." However, some public employee
unions were upset by the reforms, which must be acted upon by the
Legislature by Friday.
"This is a one-size-fits-all
approach that really does not work for all the different bargaining
units and situations," said David Miller, president of the California
Association of Professional Scientists, which represents scientists
throughout state government.
He said guaranteed defined benefits are the best way to deliver a secure retirement for public employees.
via CBS News
"There's a momentum that has been building in Los Angeles to change the paradigm of how we address homelessness," said county Supervisor Zev Yaroslavsky. "We are spending tens of millions of dollars a year ... but I think what is clear is that we haven't intelligently invested that money in the past. What we want to do is a more intelligent way to invest in the homeless, not to have temporary solutions."
The shift to target the chronically homeless means more resources will go to people who have lived on the streets for at least a year and suffer from a serious physical, mental or substance abuse problem.
But some emergency housing providers complain that there will be less money to assist families, youths and others who may need only temporary shelter.
"My concern is by focusing all the resources on the few, we are leaving the many out in the cold," said the Rev. Andy Bales, who heads the Union Rescue Mission on L.A.'s skid row.
Officials have been talking for years about a greater focus on the chronically homeless. But the $105 million — which combines public money already set aside to assist the homeless and low-income people with new donations from philanthropic and business groups — marks a major step in bringing it to fruition.
About $88 million will go toward rental subsidies for 587 people over 15 years. In addition to using existing housing, $8.6 million will be used to develop 218 new units. The rest will be used to provide for counseling, treatment and other services designed to keep people off the streets.
The marshaling of money is the most concrete product yet of an ambitious plan launched by business and philanthropic leaders nearly two years ago with the goal of ending long-term and veteran homelessness in the county by 2016.
The Home for Good plan, an initiative of United Way of Greater Los Angeles and the Los Angeles Area Chamber of Commerce, proposed reallocating about $230 million in existing resources each year to pay for permanent supportive housing, which includes counseling and treatment to help keep people off the streets.
They hope additional money and resources will be dedicated to the effort in coming years.
The approach was pioneered locally by the county's much-talked about Project 50 experiment and similar initiatives around the region, which have been praised not only for ending homelessness for many participants but also for saving municipalities money.
A county study found that Project 50, which began in late 2007 with the goal of housing the 50 most vulnerable, long-term homeless people on skid row, more than paid for itself, yielding a net savings of $238,700 over two years by cutting shelter, medical and jail costs.
Proponents of the approach argue that it is all the more important to spend strategically at a time when the state and federal governments are scaling back spending on affordable housing.
Jerry Newman, who co-chairs the Home for Good initiative, said that by prioritizing the most hard-core homeless for housing, "you take out the most costly portion of the issue, which will free up greater resources in the future."
More than 100 community leaders and organizations — including the county Board of Supervisors, several cities and housing authorities — endorsed the Home for Good plan in its first year. In that period, more than 3,000 of the region's long-term homeless and homeless veterans were placed in supportive housing, according to a report released in February.
A collaborative of 24 public and private contributors was formed to make the process more efficient. Members of the business and philanthropic communities, including the Conrad N. Hilton Foundation, committed $5 million to the effort, officials said. That money was then used to leverage $100 million in cash and services from the city and county of Los Angeles and from Pasadena.
In all, 30 nonprofits received awards ranging from $50,000 to $2.37 million to house the 1,018 people.
Maria Cabildo, president of East L.A. Community Corp., said her organization was able with a single application to secure a grant of $2.3 million from the Los Angeles Housing Department to help build homes for 32 chronically homeless veterans in Boyle Heights and more than $6 million in subsidies through the Housing Authority of the City of Los Angeles to help cover their rents in the coming years.
With that support, the organization could break ground as soon as January, shaving at least a year off what can be a complicated and time-consuming process, Cabildo said.
alexandra.zavis@latimes.com
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