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BOOSTING RETIREMENT PAY

Governor criticizes new-hire pension enhancements

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POSTED August 21, 2014 12:30 a.m.

SACRAMENTO (AP) — The state pension board on Wednesday approved nearly 100 types of supplemental pay that can be used to boost retirement benefits for newer public employees, one of which drew a strong rebuke from Gov. Jerry Brown.

Brown said the California Public Employees’ Retirement System board erred in counting temporary raises toward retirement calculations.

“Today CalPERS got it wrong,” the Democratic governor said in a statement after the vote. “This vote undermines the pension reforms enacted just two years ago.”

The board voted 7-5 to allow supplemental payments to be credited toward pensions for employees hired after Jan. 1, 2013. Several municipalities also criticized the action, saying the board’s decision to base retirement calculations on normal monthly rate of pay as opposed to base pay could give the appearance of trying to get around the 2012 pension reforms.

The Democratic governor took issue with just one type of extra pay, a category for short-term promotions. He argued that it goes against the intent of his pension-reform law, which banned using unused vacation, leave and any one-time or ad hoc payments toward pension calculations.

Brown said he has asked his staff to review options for protecting the pension reforms.

Board members who supported the supplemental pay said workers who earned the extra pay are entitled to have it counted as part of their retirement compensation.

The CalPERS board vote Wednesday in favor of more generous retirement calculations was expected given its composition. It is stacked with Democratic appointees as well as past and present government workers who benefit from the public pension system.

Brown had proposed changing the makeup of the board but ultimately dropped it from his reform package. His 2012 pension law, AB340, was a bipartisan effort intended to save taxpayers billions of dollars by capping benefits, increasing retirement age, stopping pension spiking and requiring state employees to pay at least half their pension costs.

It applies only to workers hired after Jan. 1, 2013, while leaving previous benefits in place for employees hired before that date.

Sen. Mike Morrell, R-Rancho Cucamonga, criticized the board’s vote Wednesday on the Senate floor. He said the pension board should exercise prudence given the fund’s losses during the recession.

The state Department of Finance earlier this year estimated that California has nearly $218 billion in unfunded pension and retiree health care liabilities for CalPERS and the retirement systems for teachers, judges and University of California employees.

Cities with workers in the CalPERS system had also urged the pension board to review all the pay differentials because the calculations that are being adopted will affect local governments and the state for decades to come. The list includes special pay for audio visual and notary services, skills that municipal officials said were outdated and needed to be examined.

 

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