CalPERS CEO Issues Statement on Governor’s Pension Reform Proposal
SACRAMENTO, CA – Anne Stausboll, Chief Executive Officer of the California Public Employees’ Retirement System (CalPERS), today issued the following statement in response to Governor Edmund G. Brown, Jr.’s 12-point pension plan:
“CalPERS is closely involved in the pension policy dialogue that will affect our employers and members in the State, schools and local government. We encourage discussion between all parties to ensure that public employee retirement plans are sustainable, secure and cost-effective.
CalPERS pensions have provided retirement security for California’s hard-working State and local public employees for nearly 80 years. Retirees with a dependable income contribute to stimulating our economy. In 2010, CalPERS $12 billion in monthly pension checks resulted in more than $26 billion in economic activity throughout the State, including $14 billion in business revenue and more than 93,000 jobs.
In today’s fragile economy, many employers are facing budgetary challenges and have already made changes to their pension systems. We have observed more than 175 cities, counties and local governments negotiate changes to lower near-term and future costs by increasing employee contributions, modifying benefits for new hires, or both. Changes in the State plan that have already occurred will result in significant savings of about $13 billion over the next 30 years. Some of the Governor’s proposals may require constitutional changes, while others may require collective bargaining.
At CalPERS, we believe that defined benefit plans are an important cornerstone to adequate and secure retirement. Pension change dialogue should focus on the critical policy issue of how to provide adequate and secure retirement income for public workers in a cost-effective way, while honoring vested rights for existing employees. We are committed to serving as an honest broker of information and an expert in pension administration as all parties work together on pension solutions. As the pension policy discussion progresses through the Legislative process, CalPERS can assist with information on costs and potential savings over time to facilitate lawmakers in a fully informed discussion.
CalPERS provides retirement benefits to 1.6 million State, public school, and local public agency employees, retirees, and their families, and health benefits to more than 1.3 million members.
CalPERS Pension Quick Facts (as of June 30, 2011)
Average monthly service retirement allowance for all retirees: $2,331
Average monthly service retirement allowance Fiscal year 2010-11 retirees: $3,065
Average years of service for all retirees: 20.3
Average years of service for Fiscal Year 2010-11 retirees: 21.2
Average monthly service retirement for school miscellaneous members: $1,250
Average years of service for school retirees: 16.9
Average monthly service retirement for State members: $2,597
Average years of service for State retirees: 23.2
74 percent of all service retirees receive $3,000 a month or less.
86 percent of CalPERS retirees, survivors, and beneficiaries live in California.
$12 billion in pension payments in 2010 resulted in $26 billion of economic activity in California and 93,651 jobs.
$22 billion of CalPERS assets are invested in California.
The Sacramento Bee recently reported that a group, looking to abolish collective bargaining rights for all of California’s public sector employees, filed three ballot initiatives this week. The group is called the California Center for Public Policy and arrears to be led by a UC Santa Barbara economic lecturer named Lanny Ebenstein. Mr. Ebenstein’s group has started fundraising to begin a signature campaign to get the initiatives before the voters.
The three initiatives are focused on both public sector employees and retirees. The first measure would ban recognition of all public sector labor unions to prevent government from collectively bargaining with them. The second measure would impose a higher tax burden on pensions paid through CalPERS or CalSTERS for retirees who earn an annual pension of over $100,000.00 per year. The Third measure would raise the retirement age of state employees to 65 and, and public safety workers to age 58.
The most troubling aspect of the news was the initial reaction from representatives of public employee groups. Steve Maviglio, of a group called Californian’s for Retirement Security, responded by saying “these will end up in the same trash bin as the proposal to require Christmas music in public schools. These proposals are wildly out of synch with California; fortunately there is a $15 million dollar gap between dumb ideas and the ballot box.”
Let’s hope Mr. Maviglio’s comments are not shared by a majority of public sector employee organizations throughout the State. Californians and members of public sector employee organizations should take these measures very seriously. Many voters, especially those who work in the private sector would view positively some, if not all of the element s of the measures. Union recalcitrants, inflexibility and lack of creativity is exactly the posture that lead to the abolition of collective bargaining in other states, including Wisconsin. The public sector employee union can no longer used tried and true methods like strikes, picketing, or PR smear campaigns to meet their objectives. The world out there is much more complicated now and requires an entirely different and smarter approach. The public sector employee unions need to position themselves as partners with a solution and regain the trust and respect of the citizens of California. Mr. Ebenstein is quoted in the Sac BEE article by saying, “[g]overnment does not exist to provide compensation and pensions for government workers. Government exists to provide good public services at a reasonable cost.” A vast, vast majority of California voters would agree with this statement. Unions need to incorporate this message in their strategy and convince the public that the good public service Ebenstein references depends upon hiring and keeping skilled and motivated government workers. Remember, the California private sector employees out number public employees over 25 to 1 at the ballot box. California’s public sector employee organizations would be wise to take seriously the three initiatives filed by Mr. Ebenstien and similar ones that have already been filed or will be filed in the coming months.
If you would like more information from us, regarding how you can craft a message of cooperation and partnership, please contact Jennifer at the Firm.