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Funding Pensions A Complex Problem In California

ARI SHAPIRO, HOST:

Sorting out California's budget mess has been Jerry Brown's number one challenge since the day he took office as governor. Brown unveiled a plan yesterday that would cut pension benefits and lower the amount taxpayers have to pay. Almost every state is wrestling with a pension problem, and in California it's especially complex, as John Myers of member station KQED reports.

JOHN MYERS, BYLINE: Jerry Brown's plan to revamp public employee pensions in California has 12 separate proposals. Yes, it's a 12-step plan, and as with all good 12-step plans, Brown's begins with what he says is honesty about the problem.

GOVERNOR JERRY BROWN: We're on a sustainable path, so I tried to make something that's balanced and I think is fair.

MYERS: Brown's proposal covers both state and local employees. Future workers would have to stay on the job longer, in some cases up to age 67. Their retirement benefits would switch from a traditional pension known as a defined benefit, to a hybrid system that includes a 401(k)-style plan. And Governor Brown is calling for more modest expectations from retirees.

BROWN: What we say is the goal ought to be 75 percent of your salary. That's what you should get in retirement.

MYERS: Brown expects the real work on pension reform to be done in consultation with the state legislature, and the final plan placed on the ballot in November 2012. The early reaction from organized labor is less than enthusiastic. Willie Pelote is with the American Federation of State, County, and Municipal Employees. He says Brown's hybrid 401(k) pension plan would short-change retirees.

WILLIE PELOTE: The formula that would be set would be so low that no one would be able to save the retirement that is required for them and their families to have some type of resemblance of a quality of life at that age.

MYERS: Pelote and other labor leaders were strong backers of Jerry Brown in his 2010 campaign for governor, and he says that relationship isn't broken, but he says Brown needs to be reminded of the concessions made by public employees before he became governor. Getting a grasp on just how bad of a pension problem California has isn't easy. For starters, few agree on how to calculate the long-term shortfall, which could range anywhere from 100 billion to 500 billion dollars. And unlike many states, California has layers of pension systems, each offering different benefits, says Ron Snell, with the National Conference of State Legislatures.

RON SNELL: There are independent county systems and city systems. It's a particularly complicated and difficult issue in California.

MYERS: Governor Brown's plan seeks to standardize much of that, and may be met with resistance on the local level. Much of the cost of local pensions is for police and firefighters who say they've earned it. Rich Brandt, a firefighter in the city of Long Beach, testified at a state legislative hearing this week.

RICH BRANDT: You know, I'm not going to apologize as a safety officer. I'm not going to apologize for a firefighter for the pensions that we have.

MYERS: Still, union workers say they are willing to talk. And that's solely thanks to Jerry Brown, says Joe Nation, a former state legislator who studies pensions at Stanford University.

JOE NATION: He's exactly the right person to be able to take this on. If you had a Republican governor, a Republican governor would never be able to, you know, get anywhere with the proposal because of the politics.

MYERS: Jerry Brown, who is 73, joked with reporters Thursday that he may never take his state pension. Of course, if he can navigate the tough waters ahead on the issue, many may argue he'd have earned it. For NPR News, I'm John Myers, in Sacramento. Transcript provided by NPR, Copyright NPR.

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