05.05.2017
Committee Votes Down Senate Bill to Ban COLAs and Increase Contribution Rates

As reported by the Sacramento Bee, last week the California Senate’s Public Employment and Retirement Committee voted down by a three-two margin Senate Bill 32, which had been aimed at reducing public pensions’ unfunded liabilities. Republican Senator John Moorlach from Costa Mesa brought the bill; many union representatives testified against it.

SB 32 was modeled after last year’s climate change bill, also called SB 32, which aimed to reduce greenhouse gas emissions to 40 percent below 1990 levels by 2030. Senator Moorlach’s bill demanded that CalPERS and CalSTRS reduce their unfunded liability to 1980 levels by 2030. To attain that goal, pensioners’ cost-of-living increases would be frozen, local governments would be required to increase their contribution rates by 10 percent, public employers would have to offer hybrid plans combining traditional pensions and defined contribution plans, and pensions for members joining the system after January 1, 2018 would be calculated based on their highest average compensation over 60 consecutive months or five consecutive school years, rather than the current 12 or 36 consecutive months.

Comment

Although many people assert the Public Employees’ Pension Reform Act of 2013 (PEPRA) did not go far enough to reduce unfunded liabilities, Senator Moorlach’s bill may have gone too far. It is impossible to satisfy everyone. However, one can hope to achieve a middle ground which both secures future pension funds and fairly compensates public employees and retirees.

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