While not perfect, the state's pension reform proposal has meritOn the final day of the 2012 state legislative session, the Legislature passed AB 340, a pension reform measure that while a long way from solving California's ongoing problem with unfunded pension liabilities, is a significant step forward in a Democratic-controlled Statehouse and Legislature that has long hesitated to address an issue that both unions and its own party members prefer to ignore. The League of California Cities which supported AB 340, applauded both the Assembly and the Senate in passing the measure by large margins.
In a statement, the League board of directors last Thursday said that it views this legislation as a substantial step forward in implementing pension reform largely in keeping with the League's own comprehensive pension reform principles. The League recognized that there are numerous questions of implementation and interpretation that will need to be resolved in the days and months ahead. The League and the cities it represents, including Pleasanton where Vice Mayor Jerry Thorne is a League officer, must now continue to be vigilant in advocating for effective pension reform to ensure the intent of this historic legislation is respected. The League board also congratulated the elected and appointed city leaders of California for their pension reform actions to date, including Pleasanton's, and urged them to continue their leadership on this vital issue at the local level.
If signed by Gov. Jerry Brown, and his signature is expected, the legislation would save an estimated $42 to $55 billion over the next 30 years according to a statement issued by CalPERS, the state's employee retirement system. The proposal applies to all public employers and pension plans on or after Jan. 1, 2013, with the exception of the University of California as well as charter cities and charter counties that do not participate in CalPERS.
AB 340 makes changes to public employee pensions including establishing a cap on the amount of salary that can be used to calculate a retirement benefit, raising the retirement age for both public safety and miscellaneous employees, implementing cost-sharing, using the average of the final three years to calculate final compensation, implementing a 180 day sit-out period for retired persons to return to work in the retirement system in which they receive a pension, defines "pension compensation," a pension forfeiture requirement for public employees convicted of committing a felony in connection with their job, the elimination of airtime, pension holidays and pension spiking. All aspects of the legislation apply to new employees after Jan. 1, 2013. Four provisions, cost sharing, the six month sit-out requirement, and the elimination of airtime and pension holidays, also apply to current members in the system.
Many of the provisions of AB 340 are also contained in the new contract negotiated between the cities of Livermore and Pleasanton and the unionized firefighters in the Livermore-Pleasanton Fire Department. It's good to see the legislature in sync with at least two municipalities that are taking strong action to start putting their fiscal houses in order when it comes to unfunded pension liabilities that are affecting our state and communities.