Gov. Jerry Brown defends plan to reduce pension costs
As he puts the final touches on a proposed ballot measure to raise taxes on California’s high-income earners, Gov. Jerry Brown on Thursday defended his attempt to rein in public pension costs — arguing that government workers must accept lower benefits to help restore the state’s financial stability.
Appearing before a joint legislative committee, Brown said his proposal to raise the retirement age for future public workers to 67 and enroll them in a partial 401(k) plan was needed to stave off budgetary disaster.
“In my opinion, this is the minimum,” Brown told the lawmakers. “This is what makes sense, consistent with the law and even consistent with what I think the Legislature can get to.”
Brown argued that tough pension reform also was needed in order to get voters to approve higher taxes and possibly avert bigger budget cuts.
“We’ve got to win the confidence of the people to achieve some of the other things we want to achieve,” the Democratic governor said. “Without pension reform, I don’t think we will have the credibility to ask the people to do other things that are very much needed.”
Brown has staked his legacy on winning voter approval of those levies to end the state’s perennial budget crisis.
Details of Brown’s tax plan have trickled out as his office races to file it with the attorney general’s office and begin gathering the signatures needed to place it on the November ballot.
Barring last-minute tweaks, sources said, Brown would seek a half-cent increase in the state sales tax and a series of higher rates on wealthy filers. Individuals making $250,000 to $300,000 would be taxed an additional 1%. Those making $300,000 to $500,000 would see their taxes go up 1.5%. And those earning more than $500,000 would see a 2% hike.
The proposal would generate $6 billion to $7 billion a year, said the sources, who requested anonymity because the planning process was ongoing. That would not be enough to close the expected $13-billion deficit the state faces next year, or enable it to dodge another round of automatic cuts in the face of an immediate $3.7-billion deficit. But new revenues of that size could significantly change the fiscal dynamic.
The governor declined to publicly discuss the proposal Thursday.
Both the tax and pension proposals face uphill battles.
For the pension plan to become a reality, it must be approved by the Legislature, despite expected opposition from unions that have great sway with the Democrat-controlled statehouse. Many of the most contentious parts must be placed on the ballot and approved by voters to become law. To do that, Brown must persuade two-thirds of the Legislature to send the measures to the voters.
Meanwhile, California voters have not approved a statewide tax increase since 2004 and are in a sour political mood, recent polls suggest.
“I think tax increases in this economy are pure folly,” said Jon Coupal, president of the Howard Jarvis Taxpayers Assn., which opposes Brown’s plan.
Legislative critics of Brown’s pension plan also came out swinging Thursday, starting with one of the co-chairs of the joint legislative committee, Assemblyman Warren Furutani (D-Gardena). He argued that the focus should be on those public employees who manipulate the system to get six-figure retirement benefits, rather than making changes to the pensions earned by teachers and others who will not see a large payout.
“There is no one big solution,” Furutani said.
But Brown said a new level of austerity is required because of changes in the world economy, pointing to debt problems plaguing the U.S. and European countries.
“We’ve been living on a gravy train based on mortgage bubbles, speculation, funny money, central banks creating a lot of purchasing power and it came crashing down. And now we have to dig ourselves out,” Brown said.
The 73-year-old governor, who is not drawing a pension, added his own twist on generational warfare. “Speaking for the old geezers,” he said, “we should be given our due but not overdue.”