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Brown's pension deal to have big local impact

Published: Thursday, August 30, 2012 at 11:32 a.m.
Last Modified: Thursday, August 30, 2012 at 11:32 a.m.

After spending a day digesting the details of Gov. Jerry Brown's complex pension deal pending in the Legislature, local officials say it would impact not only future local public employees but thousands of current workers, too.

By enacting "anti-spiking" provisions for existing workers, requiring employees to pay half the cost of their pensions and shifting the landscape for labor negotiations, it is becoming clear that the governor's plan goes beyond state employees and would have wide-ranging implications for local governments.

Future employees would face caps on pensions and less generous pension formulas.

The deal with Democrats in the Legislature could become law by the end of the week and for some, those changes are welcomed.

"It certainly seems to give us more flexibility," Sonoma County Supervisor David Rabbitt said Wednesday after a day of meetings with county staff on the subject. "How we use that flexibility to make sure we come out on a sustainable path is yet to be determined."

Union officials, however, warned of the dangers of making unilateral changes without bargaining with workers. Ed Clites, president of the 500-member Sonoma County Law Enforcement Association, said some of the changes were "wiping away 40 years of gains with the swipe of a pen."

"It's less pension and you have to stay longer to get there, and that's really where the concern is," Clites said, citing new tiers of benefits for public safety workers.

Currently, county public safety workers can retire at age 50 with 3 percent of salary for every year worked, a formula referred to as "3 at 50." Clites said his members have expressed a willingness to drop to 3 at 55 for new workers.

But Brown's proposal imposes a range of new public safety tiers as low as 2.7 percent of salary at 57 years of age. County officials say the most likely new tier for their public safety workers would be 2.5 percent per year at 55.

That's where things could get dicey at the bargaining table. The county is in the middle of talks with most of its workers and just opened talks with its public safety workers, in both cases seeking salary reductions in addition to second tiers and anti-spiking provisions.

Clites suggested the imposition of even lower tiers for new workers would make them less receptive to the 3 percent compensation reduction the county seeks. He said the union may point to that lower tier and say "there's your 3 percent -- the governor did it for you."

County Administrator Veronica Ferguson said officials had only about 12 hours to analyze the changes, but it is clear they could shift the negotiations.

"That will be interesting to see if the unions will be willing to agree to that new tier and continue to reach the 3 percent savings target," she said. "I'm hopeful that the new formula won't derail the conversation."

Among local governments, the anti-spiking provisions would affect county government most, reining in generous extra pay and perks that CalPERS, the state pension giant that also oversees many city retirement benefits, does not recognize in pension calculations.

The anti-spiking provisions are strongest for future hires, limiting income that would qualify for pension calculation almost exclusively to base pay or salary. For Sonoma County, that would exclude such things as leave cash-outs, car, cash and uniform allowances and county contributions to deferred compensation retirement accounts.

"That's a pretty big change," said Eraina Ortega, legislative representative for the California State Association of Counties.

On average, those perks add more than 11 percent to the final earnings used to determine a pension for county employees. The boost is more than 14 percent for deputies and other public safety officers. Those perks added nearly $3 million to final earnings for the 261 county and special district workers who retired in 2011, retirement records show.

For current county employees, the anti-spiking provisions would cap leave cash-outs, including vacation and holidays and compensatory time, to those hours earned during a 12-month period.

The effect on county supervisors and elected officials would be greatest. Currently they can cash out up to 200 hours of administrative leave a year. They earn just under 80 hours a year and can bank unused hours.

Under the proposal, the county's top pensioner, Rod Dole, the retired auditor-controller-treasurer-tax collector, would not have been able to cash out $19,994 to boost his pension of $254,625 per year. Instead, his cash-out would have been limited to $7,700.

Cash-outs and conversions for all other employees already are limited to 80 hours of vacation, 24 hours of sick leave and yearly holiday allocations.

Still, the county is hoping to exclude those perks entirely from pension calculations for current employees as part of contract talks.

Just how many future employees would be affected by the proposed pension caps is speculative. For those receiving Social Security, including county employees, the cap would be $110,000 a year, while those who don't receive the federal benefit, the cap would be just over $132,000.

County payroll records from 2011 show 553 of 4,700 employees make at least $110,000 in salary and other ongoing pensionable pay. In Santa Rosa, records show 52 of about 1,200 employees made more than $132,000 in 2011.

One of the consequences of the changes could be that cities such as Petaluma might find it harder to recruit new workers from other agencies, said City Manager John Brown. Many workers might decide to "hunker down" where they are instead of looking to jump to a new organization out of concern that they'll become a new employee and drop to a lower tier.

Another possible problem could be higher workers compensation costs from requiring employees to work longer, said Santa Rosa City Councilman Scott Bartley.

"One worker's comp claims could negate all the savings that would be generated in a year," said Bartley, who served on the city's Pension Reform Task Force.

Clites agreed such on-the-job injuries aren't in the best interests of taxpayers. "Our concern with that age is, do you want cops and corrections deputies and probation officers at 57 running around chasing bad guys?"

Just as union officials were quick to criticize the plan, which is on track for a vote Friday in the Legislature, pension critics said it doesn't go far enough.

Former North Bay Assemblyman Joe Nation, now a Stanford public policy professor and pension critic, said the protests of some union representatives were "Academy Award worthy performances."

CalPERS officials estimate the savings from the measures will be $40 billion to $60 billion, Nation said. But the state faces a $300 billion pension shortfall, by Nation's calculations.

"Obviously, this does not solve the problem," he said.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com.

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