SACRAMENTO (AP) — A California watchdog agency on Thursday called on the governor and Legislature to freeze pension benefits for current state and local government workers and overhaul the existing system, as the debate over retirement benefits for public employees has exploded nationwide.

As the Little Hoover Commission unanimously approved its report, it also recommended the state move from a defined benefits plan to a hybrid model that would include something similar to the 401(k) plans offered to most private-sector employees.

The commission, which includes lawmakers and political appointees, agreed that California’s 85 public pension systems need more flexibility and oversight because retirement costs have been growing as tax revenues have plunged. Pension costs for retired public workers now account for about 7 percent of the state’s general fund expenditures, according to the nonpartisan Legislative Analyst’s Office, which also recommended the state convert to a hybrid plan.

Commissioners acknowledged that such a change likely would face legal challenges but said the state has no choice given that pension plans are dangerously underfunded because of overly generous benefits granted in years past. If the governor and lawmakers do not address the problem, it will force cities and counties to severely reduce services and lay off employees.

California had at least $115 billion in unfunded pension obligations as of June 30, 2009, according to the latest figures available from the California Public Employees Retirement System. Unfunded state retiree health care costs were nearly $52 billion, according to the state controller’s office.

“While recognizing the legal challenges, this is a path that the state has no choice but to pursue,” wrote Daniel Hancock, chairman of the Little Hoover Commission. “Public agencies must have the flexibility and authority to freeze accrued pension benefits for current workers, and make changes to pension formulas going forward to protect state and local public employees and the public good.”

The commission suggested the state address public employee pension costs before they become unsustainable.

Bruce Blanning, executive director of the Professional Engineers in California Government, which represents 13,000 state engineers and professionals, said the courts already have determined it is illegal to reduce future pension benefits already promised to current workers.

“All surveys show that public servants are paid less than their private-sector counterparts,” Blanning said in a statement. “The Legislature and governor should direct their focus to legitimate savings rather than illegally violating long-standing commitments to those who serve the public.”

Evan Westrup, a spokesman for Gov. Jerry Brown, declined to comment on the report, saying the Democratic administration was still reviewing it. While Brown has echoed many of the ideas included in the report, he has proposed working out the changes through negotiations with labor unions to avoid questions about the legality of such changes.

Brown supports a two-tiered system in which newer employees receive lesser benefits than current employees. He also favors increasing contributions from government workers at all levels and stopping pension spiking, a practice that inflates pensions by giving raises in employees’ final years of service.

The report recommended all those changes. In addition, it suggested capping the annual salary that could be used to calculate pension benefits at a maximum of $90,000 and banning retroactive pension increases.

(© Copyright 2010 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

Comments (5)
  1. Jason says:

    It’s about time. The system is almost as bad as those creeps in Bell stealnig money for their own benefit. The idea that an state employee can retire at age 50 with full retirement benefits, then go on to work elsewhere for anothr 15+ years is nuts! We have to slave and work past 65-70 to even get a loust social security check!!

  2. Dave Martin says:

    Jason, where in the world did you get your information? From Fox “news”? The only retirement system that rich in the State is some of the law enforcement systems. The rest of us will put in 35 years, and retire at age 65 with 70% MAX. That might seem like a lot, but realize that in our pay negotiations, that “rich” pension is factored in to our pay. i.e. our annual salary is LOWER than the private sector because we have a richer retirement. So the state saves money for 35 years while I put in PUBLIC SERVICE. Then they catch up if I live long enough to retire. So if the current proposal is to lower the retirement benefits but NOT raise pay, where is the money going to come from to invest in a 401? I guess the right-wingnuts will only be happy when every public servent is unable to buy a home and unable to afford health insurance on their paltry salary.

  3. Rob says:

    There always seems to be a witch hunt for government woes. A few years back it what welfare and foreign aid. Most don’t realize that public employees contribute to their retirement and their employer also contributes. PERS has fought many a battle so the “state” could not borrow PERS money, and use it wastefully. Also, unlike social security, PERS is not used like gov’t welfare. Police and Fire don’t get rich risking their lives for 35 bucks an hour. And as far as full retirement benefits…it’s money only, no other benefits unless YOU (the retiree)pays for it. Very few public safety employees could last more than 30-35 years of this type of work. No one gets full benefits at age 50.

  4. Wobbles says:

    How many surgeries will you have in your carrer as a resut of your job Dave? How many people will try and hurt or kill you in that 35 years? How many holidays and other important dates with your family will you miss in your career? How many biological and chemical hazards will you be exposed to in your career?

    There’s a reason why law enforcement retirements are good. They earn them.Why should your pension be the same for sitting at a desk pushing paper and never risking anything more serious than a paper cut or carpal tunnel syndrome?

  5. Joe says:

    That’s right, let’s blame pension funds and labor unions for the financial woes of the State and Federal Governments while the real culprits and causes fade into the shadows: Incompetent, corrupt self-serving government officials and the oligarchy that controls the financial system and caused its collapse. Instead of expelling or prosecuting these culprits, they are running free and undoubtedly cherishing—perhaps even promoting—the propaganda that points to anyone but them. Increasing the burden of the middle class—who support the rich and the poor—is not the way to promote economic health.

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