In today's "no plan is quite good enough to save us" political climate, Gov. Jerry Brown's latest attempt at pension reform has been criticized as "too little, too late."
Brown unveiled his plan this week and immediately drew fire for stepping away from what some felt was a more aggressive 12-point effort he first floated last October. Although the governor appears dedicated to helping cities deal with runaway pension costs and preventing future abuse of the system, critics point out that pension costs continue to climb largely unabated -- pushed by higher salaries and generous benefit formulas as well as under-performing investment portfolios still held by cities hit hard by the current economy.
While Brown's proposed pension reform bill has the potential to help shore up weakened funds, critics said it does not address escalating health care costs for public employees and backs away from his earlier proposal to restructure retirement pay for newly hired employees.
Meanwhile, many local retirement systems across the state remain critically underfunded -- creating a draw on budgetary reserves and forcing civic leaders to make uncomfortable decisions while providing critical services.
With his reform bill the governor is attempting to turn the clock back -- moving to negate an increase in maximum pension benefits approved by the state Legislature when the economic climate was robust more than ten years ago. Brown's plan calls for institution of new formulas local governments can use to require workers to cover more of their retirement costs. He's also calling for a cap on pensions for highly paid workers, a hike in the retirement age for new employees and cessation of retroactive pension hikes.
Far from a done deal, the governor's reform bill could -- and is actually expected -- to encounter opposition from public employees who could sue to protect their existing pension packages. And then there are the unions...
What would you do? Pick up the gavel and sit in the governor's chair and share your plan for addressing the state's pension conundrum. Can it be done? Or are we doomed to fail and go down with the sinking ship?
1. Everyone currently in the system either gets a payout or defered annuity based on their years of experience current salary etc. i.e. if you've got 10 years are 55 and the factor is 1.2%@60 per year of service they would give you the annuity that would pay out 12% of the current salary in 5 years of discount it back to current. and lump sum it into a new 401K style plan 2. Everyone gets a 401K match program from here on out let's be some what generous and say 100% match on the first 6% of salary with vesting @20% per year 3. Retiree health would move to a med/high deductable plan with the single person eating the first $5K (to be adjusted for inflation in the future) of costs and then 90% coverage after with coverage terminated when the person qualifies for medicare.
Why are we even offering new employees a pension? This should be a no-brainer. Give new employees a phone book so they can look up the names of financial advisors, let them contribute to Social Security (even though that entitlement program should be stopped before it wrecks the nation), and be done with it. Pensions for new employees are words that should not be uttered by either Republicans or Democrats.
I agree that working-age participants should have the value of their contributions (not the notional value of the promised beenfits) rolled into 401(k) type plans. A lifeline safety net should be available to all-- but it should be very austere. Retirees should depend on their savings/investments/part time jobs and help from their families (which, as an aside, would have numerous positive social/cultural externalities). We should scrap the notion of SSI as a "trust fund," and admit that "contributions" are really taxes, and pay-outs are not entitlements but rather a means-tested bare-bones safety net. Lets transition to that mode gradually over next 10-15 years and we'll be fine.
this plan brings the following saying to mind.... 'you can put lipstick on a pig.....'