(October 31, 2011) — Following the California Governor’s pension reform proposal issued last week, two of the largest public pension funds in the United States have applauded the greater dialogue, while awaiting further details of the plan.

The CEO at the California Public Employees’ Retirement System (CalPERS) has encouraged “discussion between all parties to ensure that public employee retirement plans are sustainable, secure and cost-effective.”

“CalPERS is closely involved in the pension policy dialogue that will affect our employers and members in the State, schools and local government,” CalPERS CEO Anne Stausboll stated. “At CalPERS, we believe that defined benefit plans are an important cornerstone to adequate and secure retirement. Pension change dialogue should focus on the critical policy issue of how to provide adequate and secure retirement income for public workers in a cost-effective way, while honoring vested rights for existing employees. We are committed to serving as an honest broker of information and an expert in pension administration as all parties work together on pension solutions. As the pension policy discussion progresses through the Legislative process, CalPERS can assist with information on costs and potential savings over time to facilitate lawmakers in a fully informed discussion.”

Additionally, the California State Teachers’ Retirement System (CalSTRS) has asserted that it needs a plan of action to address its long-term funding shortfall, which only the Legislature and Governor have the authority to implement. “We will continue to work with the Governor, Legislature and our stakeholders to develop a plan that includes contribution increases that are gradual, predictable and fair to all parties,” the fund stated.

Last week, California Gov. Jerry Brown revealed that he is seeking massive pension cuts, which the administration estimates would save about $900 million annually. Some of the changes the Governor proposed include raising the retirement age to 67 for new employees who are not public safety workers and requiring state and local employees to pay more toward their retirement and health care.

“It’s time to fix our pension systems so that they are fair and sustainable over a long time horizon,” Brown said in a statement. “My plan raises the retirement age and bans abusive practices…while mandating that public employees pay an equal share of pension costs.” The governor also revealed aims to end so-called pension “spiking,” while also ending the practice of buying service credits.

Similarly, New York City is also facing a structural overhaul of its schemes. New York City Mayor Michael Bloomberg voiced aims last week to merge the investment management of the city’s five pension funds — representing the first major reform of pension investment structure in the city in roughly 70 years. “The current structure — with five separate boards and five separate pension investment structures — was put in place in 1941. This is an historic, game-changing move for the city, since the overhaul would allow us to be more nimble in today’s markets,” Mike Loughran, Senior Press Officer at the Office of NYC Comptroller John C. Liu, told aiCIO, noting that the move is based on efforts to lower costs, improve decision-making, and enhance returns.

The agreement was announced by Bloomberg, City Comptroller John Liu, and labor leaders at a press conference at City Hall. The proposal delegates investment authority for all five pension funds to one newly created body authorized to hire an independent professional manager. According to a release by the Office of the Mayor, the plan — which needs the approval of the state Legislature in Albany — would form an independent investment board along with a chief investment officer position.