Going Hafsies on Pensions?

Over at CalPensions.com, Ed Mendel tracks , well, state pensions, and he has an interesting story today about the potential for Jerry Brown “half move” toward an individual 401K style plan rather than the pensions that have helped move millions of Californians into the middle class.

Gov. Brown is proposing that the state give CalPERS $1.5 million to identify and study alternatives for a “hybrid” retirement plan, a cost-cutting combination of pensions and 401(k)-style individual investment plans.

The item in the governor’s revised state budget plan last week is a reminder that the “12-point pension reform plan” he proposed last March listed a “hybrid option” as one of five points still under development.

Brown issued the reform plan after a breakdown in talks with a handful of Republican legislators, who must provide at least four of the votes needed to extend an expiring tax increase.

The Republicans are said to be seeking pension reform along with a state spending limit and business-friendly regulatory changes. A news release in March said Brown intends to “introduce these pension reforms with or without Republican support.”

Back in 1978, Jerry probably missed a bit of writing on the wall with Prop 13, and so perhaps he is tryinig to be a bit more proactive this time aroung.  In general that is a good thing, as this issue really resonates for some reason.  Perhaps it is because the retirement account nightmares of the last few years of millions of middle class families, and that we have completely failed to articulate the value of pensions and the long term security they offer.  Wall Street has done a really, really good job of telling people that private investments (you know, through them taking a big cut)p are far better.  Of course, the numbers don’t really bear that out, but Wall Street has better marketing people than CalPERS does.

I cetainly understand the Governor’s intetnion of pushing this “reform”, but is certainly worrying when we are talking about dismantling, perhaps just a few bricks at a time, one of the strongest pension systems developed in the US or anywhere else.

3 thoughts on “Going Hafsies on Pensions?”

  1. How about half pension fund and the other half California Muni or state bonds.  Japan gets a lot of flexibility at 200% of gdp debt because most of it is held by its own citizens.

    I would also push that any pension legislators/govt officials get be only put in a california bond fund. That way they have a vested interest in keeping the state solvent.

  2. Pension reform is  needed in California.

    While it is certainly not a crisis, the cost of pensions, and particularly local public safety pension contributions is a major problem. The teachers’ system (CalSTRS) is at a point where it cannot be solved actuarially.

    I’d like to see a dollar cap on pensions where pensions on the first 66,000 (or negotiate some other number)in income , remain in defined benefit pensions systems, while any amount over that is in a defined contribution system with employees and employers each paying an 8% contribution invested by CalPERS.

    Lower paid employers are protected. Employee contribution remains similar to what it is now, and investments continue to fund most of the retirement payments.

    This protects pensions, solves most of the long term problem for the systems, and would take away the Republicans only popular position.

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