Don’t gut 2013 PEPRA pension reform, reject AB 569

Sometimes you just have to shake your head over what goes on in the California Legislature. The latest dive into unreality is Assembly Bill 569, by Assemblymember Catherine Stefani, D-San Francisco. It would gut the California Public Employees’ Pension Reform Act of 2013, the signature fiscal achievement of Gov. Jerry Brown.

PEPRA affected the California Public Employees’ Retirement System, which is the nation’s largest public pension fund and serves more than 2 million state and local government employees. To deal with runaway pension costs, among other things PEPRA ended the “pension spiking” that began a decade earlier, raised retirement ages and prohibited retroactive increases. But PEPRA affected only new hires and only partly reduced pension liabilities. As of its June 30, 2024 report, CalPERS is only 75% funded and its unfunded actuarial liability is $164 billion. Even with PEPRA in place, pension costs have continued to put pressure on government budgets, crowded out spending and have prompted tax increases up and down the state.

Despite this, AB 569’s language reads, “Notwithstanding” the bans in PEPRA, “a public employer…may bargain over contributions for supplemental retirement benefits.” The Assembly Committee on Public Employment and Retirement held hearings on April 23. The committee’s analysis quoted Stefani, who said the bill would “provide local governments with more options to improve retirement benefits, increase retirement security, and recruit and retain a quality workforce by allowing employees to participate in a supplemental pension plan.”

“It’s awkward because the bill is supposed to provide better pension benefits for recruitment even as major cities are laying off employees,” former state Sen. John Moorlach told us; he’s currently the director of the Center for Public Accountability at the California Policy Center. “It shows who’s really running the Legislature. It’s the unions and the public employees who want to pad their retirements.”

The committee analysis itself also noted a problem with the “notwithstanding” word in AB 569, which “potentially could circumvent the limitations and prohibitions of the affected PEPRA provision in a manner contrary to the original intents and purposes” of the 2013 law. However, the analysis also noted, “[T]he committee proposes amendments to address concerns.”

All seven committee members voted to move the bill ahead, including the two Republicans. They are Assemblymember Juan Alanis of Modesto, formerly a Stanislaus County sheriff’s sergeant; and Assemblymember Tom Lackey of Palmdale, a former California highway patrolman. It’s no surprise they look out for their fellow public employees. The bill is sponsored by the California Teamsters Public Affairs Council and backed by the California Federation of Labor Unions, AFL-CIO.

But given the Democratic Party is heavily influenced by the public-employee unions, if Republicans don’t stand up for the taxpayers against excessive and unaffordable compensation, who will?

It’s also a shame Brown’s 2013 reform later wasn’t improved to cover not just new hires, but all CalPERS members. In any event, as the years go by, eventually all CalPERS members will fall under PEPRA. To reduce its crucial reforms with AB 569 would be the height of fiscal folly.

If it passes, Gov. Gavin Newsom must veto it.