A new public pension reform bill (AB 340) would save state and local governments between $40 billion and $60 billion over 30 years, according to a preliminary analysis released by CalPERS, the Sacramento Bee reports.
CalPERS concluded that the biggest employer savings would not be realized for several years after the bill is implemented.
Alan Milligan, a CalPERS actuary, presented the analysis during a special Board of Administration meeting on Wednesday (Ortiz, Sacramento Bee, 8/30).
Details of Bill
On Tuesday, Gov. Jerry Brown (D) and Democratic lawmakers unveiled the bill.
The bill would:
- Require all current and future public workers at every level of government to pay at least 50% of their pension costs;
- Increase the retirement age by at least two years for future public workers; and
- Cap the amount of future public workers' salaries that can go toward their pensions at $110,000 for those participating in Social Security and $130,000 for those not participating in the program.
The bill would apply to most public workers. However, it would not affect employees of the University of California system or of charter cities with independent pension systems.
Altogether, the bill includes 10 of the 12 points included in Brown's original pension reform plan.
The bill does not include the centerpiece of Brown's original plan, which was a requirement that new workers have a significant portion of their retirement money placed in 401(k)-style accounts. The requirement would have shifted more financial risk from the state to workers (California Healthline, 8/29).
Details of Preliminary Analysis
Milligan said that CalPERS "had limited time in which to review the provisions" of AB 340. He said, "[T]his estimate will change as we continue to delve into the language of the bill."
According to Milligan, CalPERS analysts seek to develop a final analysis in time for Assembly and Senate floor votes on the bill on Friday.
The preliminary analysis did not consider savings from higher contributions from current workers because CalPERS interpreted that provision to be optional for local governments, according to the Bee.
Analysts also did not estimate the effect of provisions that could offset savings, such as higher wages that could be offered to workers to offset lost pension benefits (Sacramento Bee, 8/30).
On Wednesday, KPCC's "KPCC News" reported on impending floor votes on AB 340 in the Assembly and Senate (Small, "KPCC News," KPCC, 8/29).