In summary
California firefighters say their retirement age puts them at risk of injury and illness. They’re asking to lower that date, a move that former Gov. Jerry Brown warns would add risk to pension plans.
California public employee unions think their members are falling behind financially in retirement, and for the first time in recent memory they’re making a serious case to increase their pensions.
They proposed legislation this spring that would allow newly hired police and firefighters to retire two years earlier — at age 55 — and with a more generous pension formula, arguing that the nature of their work exposes them to hazards and takes a toll on their health.
The bill, carried by Democratic Assemblymember Tina McKinnor of Inglewood, also would lift a cap on how much California pensioners can earn in retirement, increasing it by almost $100,000 to match the federal limit of $280,000 a year. That change alone would cost government agencies and workers more than $300 million a year in new payroll expenses, according to a legislative analysis of the plan.
Their proposal would chip away at the 2012 law then-Gov. Jerry Brown championed to shore up California’s public pension funds after they suffered severe losses in the Great Recession and lumbered to recover under the weight of benefits lawmakers expanded in better days. Under Brown’s law, public employees hired after Jan. 1, 2013 accrue pension benefits under a less generous formula and have to work longer to earn a full retirement.
Brown, in retirement, noticed the new bill and warned that the changes would hurt taxpayers in a future financial crisis.
“It’s a big complicated system, and what’s being proposed here is to make it less secure. As a member of the pension system, I object to that,” he said in an interview with CalMatters.
Today, the big pension funds are still clawing out from their recession losses. Both the California Public Employees’ Retirement System and the California State Teachers’ Retirement System — which combined administer the pensions of some 3 million people — are considered underfunded because their assets are worth about 75% of what they owe to their members. That’s a shortfall worth tens of billions of dollars.
They’re closing the gap in part by charging government agencies, including cities and school districts, more money to pay down past losses, which employers say leaves less room for them to hire new police officers, parks workers and other civil servants.
Union leaders backing the bill to boost benefits say they’re focused on a different crisis: Ensuring that California agencies can recruit and retain police and firefighters, and that those workers can retire comfortably after careers spent in harm’s way.
“I do not want to roll back all of the gains Gov. Brown made, but we have got to make adjustments and modifications to (Brown’s pension law) because my members are dying over it,” said Brian Rice, the president of California Professional Firefighters, a union that represents some 35,000 firefighters.
Rice acknowledged there’s “never going to be a perfect time” to ask lawmakers for a benefit that has the potential to drive up expenses for government agencies, but he said he was persuaded after seeing how Brown’s law played out and the number of firefighters who die of cancer every year.
“I feel strongly that 57 is too high,” he said, referring to the retirement age for California firefighters hired after Brown’s law took effect. “It extends the exposure too long, and it exposes the members after our health starts to decline. We are very vulnerable after 50.”
Pension heyday to freefall
His advocacy for Assembly Bill 1383 reflects the decades-long debate over how much California government workers should be able to earn in retirement. The pendulum swung in favor of public employees in 2000 when Gov. Gray Davis signed a law that allowed them to retire at a younger age and increased benefits retroactively.
Police and firefighters under that law could retire at 50 with a formula that gave them 3% of their final wages for every year of service, meaning California Highway Patrol officers with 30 years on the job would get a pension worth 90% of their final year earnings.
Back then, CalPERS and CalSTRS expected to earn investment returns of 8.25% a year, and some cities and schools skipped the contributions they make toward their employees’ pensions because the funds were so flush from the Dot-com bubble.
It didn’t last.
CalPERS lost $67 billion in 2008 and 2009 as the recession took hold. Brown took office in 2011 at a moment when voters were alarmed by the freefall in the pension funds, and he set to work on changes that would “balance” the fund by lowering benefits for new employees and requiring them to contribute more toward their pensions.
It also instituted the cap on pensionable income for newly hired employees, a number that increases somewhat every year and today stands at $186,000. People hired before 2013 are not subject to that cap, and about 1,250 CalPERS pensions exceed current IRS limits.
Outside of Brown’s law, the pension funds adapted by lowering the expected investment target to 7% at CalSTRS and 6.8% at CalPERS, a change that effectively requires government agencies and employees to pay more for retirement plans because it acknowledges that the funds will earn less over time.
“This is a modest reform and you should not undermine it in any way,” Brown told CalMatters. “If there’s a problem attracting firefighters then perhaps the academies or the local jurisdictions can increase the pay.”
Unanimous vote to boost pensions
Rice said the unions backing the bill to lower the retirement age for public safety workers learned from past mistakes and took care not to jeopardize the system.
For instance, the bill would not require agencies to give police and firefighters the more generous pension formula of 3% per year of service, but it would allow unions to negotiate for that rate. And, the bill would not increase benefits retroactively for current employees.
“We’re taking 2012 prior standards to today’s realities and maybe the things we did in (Brown’s pension law) needed to be done, but that doesn’t mean you shouldn’t look for appropriate modifications,” he said.
The bill sailed through the Assembly committee that oversees public employment issues in April, where dozens of police and firefighters showed up to press for the lower retirement age.
“In Los Angeles, we just had one of the biggest fires we’ve ever had in the history of Southern California,” Assemblymember McKinnor, the bill sponsor, said at the hearing. “And to see the lines of all these guys showing up and men and women, this is how they showed up for us when we had this disaster, like, never ending.”
The Republicans on the committee backed the proposal, too. Both of them, Assemblymembers Juan Alanis and Tom Lackey, are former law enforcement officers who cited their personal experiences in supporting the lower retirement age.
Alanis, a former Stanislaus County sheriff’s deputy, said he has a son in law enforcement who’d be able to retire at a later age than him because he began working under the conditions of Brown’s pension law.
“I feel for him and all those that came up and those that fall under (Brown’s pension law) who with this bill will at least possibly get the chance to get two years of their lives back. I probably would have made it a lower age, but I think 55 is pretty fair, at least a good start,” he said.
But the bill will not pass this year. It was tabled by the Assembly Appropriations Committee and can return for consideration after January. Rice plans to continue advocating for it.
Former Gov. Brown followed the bill and noted the bipartisan vote for it. He pointed out that Republicans voted for the 2000 expansion of benefits that contributed to the pension funds’ shaky footing in the recession.
“Every year there’s an effort to achieve more benefits for the organizations, and some organizations like firefighters have a much more compelling case than others, but nevertheless the government has to live within limits,” he said.
He continued, “The great danger of pensions is that risk comes later when the current lawmakers and advocates are no longer around, so the current leadership has to act as stewards for future beneficiaries, and that is very difficult because the future is not here, but the present is now.”
