Pension reforms roll back benfits for new state employees

By Alex Emslie
The Guardsman

Gov. Arnold Schwarzenegger’s threat to kill any budget not including significant reforms in both revenue and the state worker pension system has resulted in the inclusion of two landmark measures in the California 2010 Budget Act.

Budget Reform

Legislators drafted an amendment to the California constitution that, if approved by voters, would double the amount of funds transferred into the state’s budget stabilization account, or “rainy day fund.”

“This amendment forces Sacramento to save money in the good years and to cover shortfalls in the bad years, and that is the bottom line here,” Schwarzenegger told reporters Oct. 8, the day he signed the budget act.

Aimed at smoothing California’s traumatic boom and bust economy, the amendment would raise the rainy day fund’s ceiling from 5-10 percent of general fund revenue, and require a minimum 3 percent deposit of yearly state revenue into the rainy day fund.

This year, 3 percent of the general fund is approximately $2.5 billion.

Proposition 58, which passed overwhelmingly in 2004, created the fund. While campaigning for Prop 58, Schwarzenegger said the fund’s creation would safeguard California against future record budget deficits. The May 19 special election in 2009 included an attempt to strengthen rainy day funding that was staunchly rejected by voters.

City College political science instructor Jessica Williams said placing the amendment before primary voters instead of including it in the 2012 general election will likely entice more voters who are sympathetic to the rainy day fund’s fiscal conservatism. Barack Obama will almost certainly be the democratic incumbent presidential candidate, which could result in a low turnout for democrat primary.

“Generally, primary voters are more likely to live in suburbs and to be educated,” she said. “They are more likely to be Caucasian and middle aged—and that’s exactly why primary voters are generally more conservative.”

Pension Reform

The 2010-11 Budget Act’s pension reform includes a rollback of new employee pension benefits and a collective bargaining process with temporary and permanent cuts to current state-employee paychecks.

“We took an 8 percent pay cut,” said Jim Zamora, a spokesman for the Service Employees International Union Local 1000. “Three percent is permanent and goes to retirement. Five percent is temporary for one year, and it saves the state half a billion dollars.”

In addition to decreasing the state’s pension-funding obligation for new employees, legislators sought to end “pension spiking”—the practice of inflating income in the last year of employment to pad retirement benefits. The three highest-earning years will be used when calculating pension awards for all employees hired from now on.

The California Legislative Analyst’s Office concluded that pension reform for employees yet to be hired did not in any way contribute to bridging this year’s budget deficit.

Zamora, whose local union participated in collective bargaining with the state, called the rollback of SB 400 a “philosophical goal” of Schwarzenegger’s, which addresses future pension costs, but not this year’s.

“We’ve accepted this 5 percent pay cut, but until 2013, we’ve bought ourselves the security that they’re not going to further cut our pay,” Zamora said. “We’re hoping that by 2013, the economy will be a lot better and maybe we’ll get a raise.”