California lawmakers pass pension hike for police, firefighters – CalMatters

from Adam AshtonCalMatters

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The Legislature wants to make wearing a California police or firefighter uniform more lucrative.

Three bills are moving forward that would also raising the wages of state firefighters or increasing pension income for public safety personnel.

Their supporters say the measures aim to compensate people who risk their lives for others and who, by the nature of their work, are exposed to dangers of career truncation. The proposals are moving through the legislature with bipartisan support and an overwhelming majority of lawmakers voting for them.

“Every day has a price, and it’s the price we pay with our lives,” Darrell Roberts, president of the California Professional Firefighters Union, said at a recent hearing in which he spoke in support of a bill that let public safety officers retire at 55two years earlier than currently allowed. “This job is physically and mentally demanding to the extreme, and being required to work until 57 pushes us not only to our limit, but beyond.”

The proposals carry significant price tags and could potentially increase annual costs by hundreds of millions of dollars. They could also swell the state’s long-term debt by billions of dollars. That could make them a tough sell for Gov. Gavin Newsom, given that the state predicts deficits in the near future.

The two retirement bills in particular bring back memories of California pension crisis during the Great Recession, when major funds lost tens of billions of dollars. At the time, taxpayer advocates pointed to sweetened benefits beforehand Governor Gray Davis signed the law just a few years before the crash when the stock market was booming.

Marcia Fritz, an accountant and longtime pension custodian in California, said the current push to expand Social Security retirement benefits is similar to the law signed by Davis. During Davis’ tenure, California’s pension funds were riding a wave of a booming stock market fueled by tech companies, and lawmakers believed the boom would continue.

Today, the two largest pension funds—CalPERS and CalSTRS— have not fully recovered from their losses from the recession. But they were exceeding their profit targetsthanks in part to the stock market, once again driven by the technology sector.

According to Fritz, lawmakers pushing the bill are “drinking the Kool Aid that the markets will never go down,” she said. “We’re the ones paying for it with reduced services.”

California cut benefits for workers hired after 2012, when former Gov. Jerry Brown signed into law which forced employees to work longer before receiving a full pension and forced them to pocket more money to fund their own pensions.

CalPERS estimated that Brown’s pension reform saved state agencies $4 billion in the first 10 years and projected that it would reduce their costs by another $24 billion over the next decade.

To taxpayer advocates like Fritz, it’s a sign the law is working and should continue as it is. To public safety unions, it means government agencies have the capacity to increase benefits without repealing the Brown Act entirely.

Continuing bills would:

• Allow public safety officers to retire at age 55, not 57. Assembly Bill 1383 it would also allow unions to negotiate more generous retirement formulas that would give public safety workers up to 3 percent of their earnings for each year in uniform. And it would raise the annual pension earnings cap by almost $60,000 to $249,000 a year.
• Create a new deferred retirement program for California Highway Patrol officers and Cal Fire firefighters. AB 1054 is intended to give officers and firefighters an incentive to continue working later in their careers by allowing them to accumulate money that they can cash in a single lump sum check when they retire.
• Increase the salaries of Cal Fire firefighters by recommending a new formula for their raises. AB 2129 would encourage the governor’s office to bring its compensation closer to — but not necessarily equal to — the average of what 20 local fire departments pay.

How much are they worth?

The bill, which would allow police and firefighters to retire earlier, carries the biggest potential costs, requiring an additional $282 million in annual contributions to the California Public Employees’ Retirement System and increasing long-term liabilities by $4.8 billion.

Its cost would increase if cities, counties and other local government agencies agree to offer more generous pension formulas to police and firefighters, as the bill would allow. If that happens, CalPERS estimates it would cost an additional $353 million in annual contributions and further increase the fund’s long-term debt.

These ratings do not count 20 county-operated retirement systems which are separate from CalPERS.

The potential cost is one reason California cities and counties oppose the measure. “We certainly support strong pension benefits, but those benefits must remain sustainable and fiscally responsible for our local agencies,” Johnny Pina, a lobbyist for the League of California Cities, said at a recent Senate hearing.

It is less clear how much the other two measures will cost.

Supporters of the bill, which would give CHP officers and Cal Fire firefighters access to an alternative retirement investment program during their last five years of service, say it is designed to be cost-neutral, although similar plans offered by cities and counties have increased costs. The bill would require CalPERS to evaluate the program every five years, which union representatives say would allow lawmakers to make adjustments if they see unwelcome shortcomings.

The measure, which would have prompted Newsom to raise the pay of Cal Fire firefighters, comes at an uncertain price because it was written in a way that would allow flexibility for the governor’s office.

It encourages the governor to bargain “in good faith” to bring Cal Fire’s compensation closer to what local governments pay, but doesn’t mandate it. And 2023 government compensation survey found that local fire departments pay firefighters between 11% and 29% more than Cal Fire.

“Instead of being the lowest paid, we’re inevitably going to be somewhere in the middle” if the bill becomes law, firefighters union lobbyist Terry McHale told lawmakers at a hearing earlier this year.

Last year, Newsom rejected a similar measure that was more forceful in demanding a pay increase for Cal Fire. Newsom wrote in a veto message that it would “create significant cost pressures on the state and circumvent the collective bargaining process.” Officials estimate it will cost between $373 million and $609 million in the first year.

The Cal Fire firefighters union is essentially asking for what only one other public employee group has: raises based on what other state agencies pay. CHP officers receive annual raises based on what several other large police departments in California pay; every other state worker union must negotiate compensation with the governor.

What will Newsom do?

All three measures face a major hurdle later this month in the Senate Appropriations Committeewho has the power to divert bills out of cost concerns. If they clear that committee, the bills have a good chance of reaching Newsom’s desk.

At the latest hearing, lawmakers said increasing incentives to recruit and retain first responders is so important that they would cut other programs to make room for additional spending. They praised emergency personnel who rushed to a chemical spill in Orange County in May without knowing whether the danger would harm them.

“I still cringe for these firefighters and their families who should have known that it was them, that it was them, that they were putting their lives online to save the explosion from happening, which they actually ended up doing,” Sen. Tony Strickland, R-Huntington Beach, said at the hearing.

“You can’t put a price on it,” he said.

Unions have also been a steady presence at the Capitol throughout Newsom’s tenure. Firefighter unions have contributed $6.2 million to lawmakers and legislative campaigns since 2019, and the law enforcement organization known as PORAC ​​has spent $4.5 million during that time, according to the CalMatters Digital Democracy database.

They have also been trusted allies of Newsom. The California Professional Firefighters and the California Correctional Officers Association were two of the largest donors in the helping the governor defeat a 2021 recall campaign.

But union support for Newsom and other lawmakers does not guarantee he will sign the bills. Newsom was mayor of San Francisco during the Great Recession, and he supported a successful ballot measure that required city officials to put more of their own money into their pensions.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.