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Oct 27 (Reuters) - Pension reform has become a front-burner issue in California’s gubernatorial race between Democrat Jerry Brown and Republican Meg Whitman. Reform measures are slated to appear on ballots in several California cities. [ID:nN26167684]
Other states and large cities have seen their public pension fund assets drop dramatically in the recession and housing crisis and are scrambling to plug funding gaps.
Here are some key facts about public pension reform:
CALIFORNIA‘S PENSION WOES:
* Three big California public pension funds, the California Public Employees Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS) and the University of California Retirement System (UCRS), face a collective shortfall of more than $500 billion over the next 16 years, well above the funds’ own estimates of $55 billion, according to an April study by the Stanford Institute for Economic Policy Research.
* CalPERS, CALSTRS and UCRS combined administer the pensions of about 2.6 million Californians.
CALIFORNIA‘S PROPOSED REFORMS:
* Jerry Brown favors renegotiating current pension formulas to require employees to contribute more toward their pensions and to work to a later age for full retirement benefits.
* Meg Whitman favors adopting a 401k-style defined contribution plan for new government hires and raising the retirement age to 65 from 55 for most state employees outside the public safety sector.
* Proposition B in San Francisco would increase employee contributions to their pensions to 9 to 10 percent from 7.5 percent to save the city $120 million a year. It is opposed by the city’s unions but supported by some labor-friendly politicians, including former Mayor Willie Brown.
* A San Jose ballot measure would remove language from that city’s charter that defines the rules for the age at which city employees can retire and how much the city must pay into their pension fund. It would apply to workers hired after 2011.
* Los Angeles Mayor Antonio Villaraigosa last week announced what he called a “landmark proposal” to reform pensions and retiree health benefits for newly hired police officers and firefighters. The reform would require new workers to contribute 11 percent toward their pensions, up from a current 9 percent, and would pare back the size of pensions. The measure is expected to save the city $173 million for every 1,000 new police officers and firefighters hired.
* U.S. states face a total shortfall of at least $1 trillion in their funds for employees’ pensions and retirement benefits, according to a report released by the Pew Center on the States in February. The report found that states did not save for the future or manage costs well, but they also typically expect an 8 percent return on investments.
* In August, Illinois said its public pension funds may have to shed $960 million in assets to pay retirees because the state has not come up with fiscal 2011 payments. In March, Illinois passed a bill to reduce benefits for new hires and raised the state retirement age, which it said would save $119 billion between now and 2045.
* Michigan in May passed a law requiring teachers to contribute 3 percent of their salaries to a new retiree health care fund.
* The U.S. Securities and Exchange Commission in August charged New Jersey with securities fraud for failing to disclose to municipal bond investors that it was underfunding its pensions. New Jersey agreed to settle the case without admitting or denying the findings. It was not required to pay any civil fines or penalties, but was ordered to cease and desist from future violations. (Reporting by Nichola Groom Los Angeles, editing by Mary Milliken and Jim Marshall)