There will be no significant pension reform this year.
SB 27, anti-spiking legislation sponsored by Sen. Joe Simitian, never made it out of the Assembly Appropriations Committee on Thursday, the day that Appropriations in the Assembly and the Senate decided the fate of hundreds of bills.
The bill would have imposed a six-month waiting period for retirees eligible for CalSTRS or CalPERS pensions to return to work. It also would have combated spiking – the practice of jacking up public employees’ pay in the final years to qualify them for higher pensions – by limiting how much of a raise could qualify for a defined benefit pension. CalSTRS and the California Teachers Assn. opposed applying the bill to current employees and had proposed alternate controls.
But the bill was not brought up for a committee vote. AB 27 will now become a two-year bill, with the possibility that it might be combined with grander reforms of the system next year. I hope to reach Simitian for his perspective later today.
UPDATE: I did reach Sen. Simitian, who says the future of the bill remains uncertain as of today. It could be turned into a two-year bill and become rolled into a bigger pension reform bill next year, or it still may be brought up for a final vote, which is his preference. Look for some indication soon from Gov. Brown, whom Simitian anticipates will make a statement on pension reform.
Meanwhile, he and CalSTRS did reach a compromise on the language of SB 27. Those following my previous post on the bill will recall the disagreement: SB 27 called for a maximum 25 percent raise in pay during the last five years of work for purposes of calculating the person’s defined benefit pension. The difference beyond that would qualify for the defined benefit supplement program only.
CalSTRS, for simplicity sake, proposed a maximum of $147,000 income per year qualifying for a defined benefit pension.
The compromise reached: A maximum of a 7 percent raise in the final year of employment can be applied toward the defined benefit calculation, according to Simitian. There would be no income ceiling. Most elements of the bill, including new definitions of what sorts of income qualify for defined benefit and which for the supplement, would apply to current and future employees. The 7 percent pay increase for defined benefit calculations would apply only to future employees.
(My preference for the future: Put a ceiling on income for defined benefit purposes as part of a larger reform – and $147,000 is too high.)