(September 5, 2012) — The California Legislature successfully passed a bill to overhaul the state’s public pension system on Friday, the final day of the 2012 legislative session.
The Assembly voted 48 to 8 in favor of the legislation, and the Senate passed it 38 to 1. In an all-too-rare display of political efficiency, California Governor Jerry Brown had introduced the reform package (bill AB340) just three days prior to its approval. He is expected to sign it into law shortly.
The legislation, which takes effect in January, stipulates that new public employees must pay for at least half of their pensions, and grants local governments the power to raise employee contributions. Under the reformed rules, the retirement age for new state, county and municipal workers rises from 55 to 67 for general employees, and 50 to 57 for police and firefighters.
The nation’s largest public pension, the California Public Employees’ Retirement System (CalPERS), has come out in support of the newly passed reform package’s goals. “The long, arduous and often contentious journey of public pension reform has reached a major milestone,” wrote CalPERS’ President Rob Feckner and CEO Anne Stausboll in a statement. “The legislative leaders and stakeholders involved in the pension reform process have done extraordinary work. They have produced a set of reforms that moves us forward to having a stronger and more affordable system. While the reforms may not satisfy those on each extreme of the spectrum, they are a positive and significant step in ensuring that public pensions are sustainable, secure and cost-effective.”
Feckner and Stausboll estimate the reforms will save California taxpayers between $42 billion and $55 billion over 30 years for CalPERS plans alone. For the state’s teachers’ retirement system, the new legislation will reduce required contributions by roughly $23 billion by 2032. In their statement, the two heads of CalPERS’ call these “real and significant savings.”