Jan. 19 (Bloomberg) -- California Governor Jerry Brown said he will propose changes to the most-populous U.S. state’s underfunded public-employee retirement plans.
Brown did not say specifically what facets of the two biggest pension systems he would like to alter. His administration will release ideas in coming weeks, Brown said today in a speech to the League of California Cities, a conference in Sacramento for mayors, city council members and administrators.
“It’s going to be a continuing process as we understand exactly what the stock market provides and what the stock market doesn’t provide,” said Brown, who was Oakland’s mayor from 1999 until 2007.
Public pensions across the U.S. face a gap of as much as $3 trillion between their recession-battered assets and promised retiree benefits, according to a June study by researchers at George Mason University’s Mercatus Center in Arlington, Virginia. That puts pressure on states, cities and counties struggling with a drop in tax collections.
The California Public Employees Retirement System, which covers state and local government workers, has no more than 70 percent of the assets it needs to pay for benefits over several decades, according to fund staff. The California State Teachers Retirement System as of June 30 could pay 78 percent of promised benefits, with an unfunded liability of $40.5 billion.
Brown’s proposals will be scrutinized, said Pat Macht, a spokeswoman for Calpers.
“Everyone who cares about pensions will be interested in the details,” she said in an interview.
Fred Glass, a spokesman for the California Federation of Teachers in Alameda, said in a telephone interview that members expect their due.
“I’m assuming they are going to live up to the obligations that government has made over the years,” he said. “Public employees, including educators, typically earn less than their private-sector counterparts. The way they get close in compensation is by having strong pensions.”
Brown, a 72-year-old Democrat who took office this month, has proposed an $84.6 billion general-fund budget that calls for $12.5 billion in spending cuts, mostly to welfare programs and public universities, and $12 billion of additional revenue raised in part by asking voters to extend for five years higher income and sales taxes and vehicle-registration fees set to expire this year.
With an economy bigger than Russia’s, California has the deepest deficit of all U.S. states. The state has coped with $100 billion of budget gaps in the past three years amid the global recession.
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