Oct. 14 (Bloomberg) -- California Governor Jerry Brown said some of his proposals to shore up two public pension systems may require voter approval to alter the state Constitution.
Brown said he’ll introduce measures “very soon” to bolster the pension systems that are more than $100 billion short of funds needed to meet projected obligations to retirees.
The most-populous U.S. state is home to the two largest public pensions -- the $225 billion California Public Employees’ Retirement System, known as Calpers, and the $146.6 billion California State Teachers’ Retirement System, or Calstrs -- which both saw their unfunded liabilities rise in part because of investment losses.
“I will make specific reforms,” Brown said yesterday at a conference in Beverly Hills, without elaborating. “Some of them will take constitutional changes so ultimately it will have to get on the ballot and the people will have to vote on it.”
Calpers had $49 billion less in assets than needed to cover its expected obligations as of June 30, 2009, the latest figure available, spokesman Brad Pacheco said. Calstrs was $56 billion behind its ability to pay anticipated obligations as of June 30, 2010, according to a staff report in April.
“There is no doubt that we are going to have to adjust our pensions so that money coming in is going to be equal to what we can expect what the money going out will be,” Brown said. “It’s not even a matter of higher math. It’s fifth-grade arithmetic.”
The 73-year-old Democrat has said he’s weighing a hybrid system in which retirees would receive both a guaranteed pension and a 401(k)-style account in which they bear investment risk.
Caps on Payouts
Brown also has said that he was considering caps on retirement payouts to public employees and measures to crack down on double dipping -- workers simultaneously receiving pensions and government salaries -- and spiking, the practice of inflating late-career salaries to boost pensions.
Brown’s remarks came as state Assembly Speaker John A. Perez and Senate President Pro Tem Darrell Steinberg, both Democrats, appointed six lawmakers to a new conference committee tasked with evaluating changes to pensions. The committee consists of four Democrats and two Republicans.
The constitutional changes Brown mentioned may refer to Proposition 162, a measure approved by voters in 1992 that granted pension boards “sole and exclusive” authority over investments, said Dave Low, chairman of union-backed Californians for Retirement Security.
--With assistance from Nadja Brandt and David Evans in Los Angeles. Editors: Pete Young, Ted Bunker.
--With assistance from Nadja Brandt and David Evans in Los Angeles. Editors: Pete Young, Ted Bunker
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