As legislators rush through fixes to address a huge loophole in state pension legislation, a new, and even bigger, problem has been unearthed that undermines the most significant part of the complex bill.
Gov. Jerry Brown and legislative leaders have touted the bill because they've said it will lead to public employees paying significantly more toward the cost of their pensions. However, language in the bill undermines that claim for local government workers.
At issue is how much workers should pay for the going-forward cost of their pensions. Take, for example, police and firefighters covered by the California Public Employees' Retirement System.
Under actuarial calculations from CalPERS, that going-forward cost for pension benefits averages about 28 cents for every dollar of payroll. But that's just an average. It can be much larger in some jurisdictions.
Currently, the employee share for public safety workers is set at 9 cents, with the government (taxpayers) left to pick up the rest, 19 cents. Brown and legislators have been touting that the bill would split the cost 50/50.
Using the average numbers for public safety, that split would apportion 14 cents to the employee and 14 cents to the employer.
As previously reported, however, for local governments, the bill would not mandate the even split. Rather it would only allow local governments to impose that split starting in 2018 if they choose. Thus any change
Now, it turns out, buried in the bill are requirements that limit the public safety worker share to 12 cents on the dollar. Remember, this is for contributions starting six years from now, at a time when the cost could be even greater.
There are similar provisions in the bill for other workers covered by CalPERS. And there are similar provisions for employees covered by 20 county-level pension systems that operate under a different set of rules. The language in the bill for those county systems is much more complicated, but appears to reduce the employee contribution even more in some cases.
Keep in mind that all of these contribution rates are set artificially low, especially for CalPERS, because of the pension systems' overly optimistic assumptions about future earnings, and because of accounting gimmicks that allow them to defer investment losses far into the future.
If the rates were set with more realistic assumptions, the required contributions would be even more. Hence, the effect of the limits in the bill would be even more significant.
These provisions were brought to my attention Friday morning. I have sent an email to the governor's office asking for clarification and have not received a response. Meanwhile, I'm told final debate on the bill has begun. Votes are expected in both houses later Friday.