Gov. Jerry Brown unveiled the outlines of a public employee pension reform bill Tuesday that's a step back in some notable ways from the 12-point plan he laid out last October. The measure, which top Democrats will try to rush through the Legislature this week, would do nothing about rapidly rising retiree healthcare costs, and it abandons Brown's proposal to restructure retirement pay for new employees. Yet it would still make badly needed changes to shore up pension funds, help cities struggling with outsize costs and curb abuses in the system. It's not the whole solution, but it would provide many of the right parts.
Public employee pension costs are projected to climb to alarming levels, driven in part by larger workforces, higher salaries, more generous benefit formulas and underperforming investments. Although some local retirement systems remain in good shape, others are grossly underfunded, forcing local officials to devote an ever-larger percentage of their budgets to meeting their obligations. Meanwhile, federal law and the state Constitution prevent state and local governments from reneging on the benefits promised to current employees.
Brown's original proposal called for new workers to receive a "hybrid" retirement benefit that combined a much smaller pension with a 401(k) plan and Social Security benefits. But he gave up that plan, which would have shifted some of the financial risk from the state onto its workers, in the face of high short-term costs.