California’s Brown set for fight over pension reform

(Reuters) – California’s Democratic Governor Jerry Brown heard a clarion call for his party to take on state pensions in the overwhelming passage of retirement reforms by the second and third biggest cities in the state, San Diego and San Jose.

The message did not resonate as strongly in the statehouse where fellow Democrats rule, though.

In California, a reliably blue state, the pensions issue is set to trigger a fundamental struggle within the Democratic Party over what needs to be done and how fast – a struggle that could have national implications as some other states have worse pension funding problems.

The result may be that voters have to force any changes they want through the state’s initiative process.

The liberal capital of the Silicon Valley, San Jose, voted on Tuesday to force employees, including police and firefighters, to pay sharply more for retirement or see a sharp drop in benefits.

More conservative San Diego by a similar margin passed a measure to put new employees on a 401(k)-style plan in which the city guarantees how much it will contribute to retirement plans, not how much retirees will get.

Brown, a restless and unpredictable politician with an independent streak, took the vote as a sign the state was ready to jump on his 12-point plan to narrow a pension shortfall estimated to be as high as half a trillion dollars in a state that has struggled in recent years to close budget deficits.

He would put new state employees on a plan that forces them to shoulder some financial market risk, raise the retirement age – to 67 from as little as 55 for many employees – and raise the financial experience of state retirement boards, among other things.

“The pension vote in San Jose, which is a more liberal city than the state as a whole, is a very powerful signal that pension reform is an imperative. It’s really important,” Brown said in a San Francisco Chronicle video interview.

“Right now, I want to lock this budget down. But people should have confidence that pensions and their reform are on the agenda, right at the top.”

At least part of Brown’s plan would need a statewide vote, however, and the governor has only three weeks to convince the legislature to put a measure on the November ballot – the deadline is June 28.

“I think there’s a pretty strong case to be made for the need for the people to speak on this,” said Marty Morgenstern, secretary of the Labor and Workforce Development Agency, which oversees state labor relations. The budget must be passed first, he said, but “I wouldn’t rule out going to the voters through the legislature. … It would have to be real quick.”


Reuters has the full article

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