As local governments in California breathe a sigh of relief following the governor’s veto of a bill that would have enhanced retirement benefits for police and firefighters — potentially raising annual taxpayer pension costs by millions of dollars — labor groups are taking stock of their loss and preparing to mount a new campaign for changes.

Assembly Bill 1383 would have allowed public safety employees to retire two years earlier and potentially with greater pension benefits than under current pension plans for most active workers.

Another clause in the measure would’ve raised the cap on annual pensionable earnings to be consistent with higher federal limits for all public employees.

Though the bill cleared both legislative chambers with near unanimous approval, it faced opposition from city and county governments and a coalition of organizations representing government agencies statewide who worried the changes would have rolled back reforms aimed at reining in runaway pension costs.

Statewide, employers and employees would’ve been on the hook to pay at least $282 million or more to the California Public Employees’ Retirement System, the state’s largest pension fund, according to a legislative analysis prepared by the California Finance Department.

That doesn’t include additional costs for county managed retirement systems, such as the Sonoma County Employees’ Retirement Association.

Santa Rosa, one of several local municipalities that formally opposed the measure, called on Gov. Gavin Newsom to strike down the bill, saying it would overburden the city’s already tight budget.

“This measure would expand pension benefits without identifying a funding source, imposing substantial unfunded costs on the city of Santa Rosa at a time when local budgets are already strained,” the city wrote in an August letter to Newsom.

Santa Rosa’s payments to CalPERS have been climbing, totaling $42 million last year, prompting the city in June to advance a repayment strategy that would result in more predictable payments and allow the city to more quickly pay off the unfunded portion of what it owes for current employees. The city did not have projections for how the changes proposed under AB 1383 would’ have impacted Santa Rosa’s current or future pension costs.

The 2012 Public Employees’ Pension Reform Act (PEPRA), signed by Newsom’s predecessor, Gov. Jerry Brown, raised retirement ages for public safety and general employees, put caps on some of the largest pensions and sought to limit other methods that workers use to juice their pensions at the end of their careers.

The moves came after the 2008 financial crash put a massive hole in public sector pension plans, forcing taxpayers to come to the rescue, devoting millions of dollars more every year from municipal governments to full fund benefits that had been steadily enriched over previous decades.

Police and fire groups, who have pushed in recent years to reverse some of the revisions, contended AB 1383 would not have eroded the most significant reforms.

Matt Tognozzi, president of Professional Firefighters of Sonoma County, Local 1401, said reducing the retirement age would help address the toll the job has on employees by allowing members to retire at a younger age with full benefits.

Police groups also have looked at pension enhancements as a tool to help fill vacancies and retain officers that they say are leaving for jobs with more lucrative benefits.

Tognozzi, whose group represents about 500 fire employees across seven agencies, said the governor’s decision was disappointing.

Pension pressure in Sacramento

Statewide organizations representing police and fire employees have indicated they intend to continue pushing for pension enhancements and have had preliminary discussions with gubernatorial candidates.

The bill, introduced last year by Assemblymember Tina McKinnor, D-Inglewood, was the result of years of advocacy by California Professional Firefighters and the Peace Officers Research Association of California, which represents police unions.

Earlier pension plans allowed employees to retire at a younger age with full benefits and provided far richer pensions to later generation of retirees. But steep investment losses in the Great Recession left local governments on the hook to make up the shortfall between promised benefits and funds available in the system, spurring the momentum for reforms.

The landmark 2012 law signed by Brown required employees to work longer for full benefits, capped pensionable compensation and instituted a minimum 50-50 cost-sharing requirement between employers and employees on a portion of pension contributions.

AB 1383 took aim at retirement ages for public safety ranks, allowing those employees to retire with full benefits at 55, rather than 57.

It also would’ve created a more generous pension formula that would’ve given public safety employees up to 3% of their income per year served — the same rate that existed pre-PEPRA — subject to contract negotiations.

The bill also raised the cap on pensionable income for all public employees from the 2013 federal Social Security limits to current sums — about $184,500 for nonsafety employees and $249,075 for safety members.

Tognozzi said while pension reform generated significant savings for local governments, it has had unintended consequences on members who are facing increased work-related hazards, including increased exposure to carcinogens on the job, leading some to leave their careers early.

Requiring firefighters to work more years raises the likelihood that employees will get injured or sick in the line of duty, leading to costlier medical-based retirement benefits and more workers compensation claims, he said.

“The job is difficult, it’s dangerous, and it puts you in situations where your body is pushed to extremes. When you get older it gets so much harder to bounce back from that strain on your body,” he said. “This would’ve given members two additional years to be home with family to spend in retirement and we felt that was worth supporting.”

Members of Local 1401 joined other public safety employees in Sacramento on several occasions, most recently in late June, to rally for the bill and met with local leaders, including in Santa Rosa, to urge their support. The city ultimately opposed the measure over budgetary concerns.

“Our take is that this was not going to impact their bottom line,” Tognozzi said. “I don’t fault them for it but I do wish that they were able to have supported this.”

Damian Evans, president of the Sonoma County Law Enforcement Association, which represents about 550 correctional and probation officers as well as other first responders, fire inspectors and district attorney investigators, said local public safety agencies have been impacted by staffing shortages with employees leaving for state and federal jobs or other higher-wage roles.

That has resulted in increased overtime and greater strain on the remaining staff, he said.

Increasing retirement incentives could have boosted recruitment and retension of public safety employees and addressed those issues, he said.

AB 1383 would’ve represented the state’s first enhancements to public employee pensions since 2012.

‘Serious cost’ increases eyed

The Sonoma County Mayor’s and Councilmembers’ Association, which opposed the bill over associated costs, said pension reform efforts more than a decade ago were “a major step in helping local agencies better manage future pension costs.”

The bill for current employees, including a tier of older workers with richer pre-reform benefits and others with reduced pensions, is still coming due — and remains on the rise for most cities and counties, at least until the older tier is phased out.

“While we recognize and appreciate the intent of the bill … the bill would increase mandated costs without funding,” the mayor’s and councilmember’s group wrote in a letter to state lawmakers. “The potential cost of this bill comes at a time of uncertainty. The fiscal volatility in the market compounded with the increased benefit costs from the bill could lead to serious cost increases for local government.”

In Cotati, preliminary estimates showed that in the first year, the changes would’ve resulted in the percentage of pensionable payroll costs the city pays CalPERS increasing by up to 5.5%.

Rohnert Park Finance Director Betsy Howze said the legislation would’ve potentially doubled the percent of wages the city contributes toward CalPERS payments for public safety employees.

The increased pension costs would’ve undermined the city’s long-term financial stability, she said, though she said the city did not have projections of what the financial impact would be.

County officials also were wary.

Nikolas Klein, an administrative analyst in the Sonoma County Executive’s Office, said the changes would’ve cost the county up to an estimated $3.54 million annually over current contributions to the county pension system.

Still, in California’s Legislature, where public sector labor groups have long had sway, the bill received bipartisan support, passing unanimously in the Senate, and with only two no votes in the Assembly before being sent to Newsom’s desk Sept. 9.

Newsom, in his Sept. 20 veto message, sided with cities and other government agencies, raising concerns that the changes would reverse pension reforms.

“PEPRA was a necessary reform born of a crisis exacerbated by past policy decisions,” he wrote. “I still recall — before PEPRA’s passage in 2012 — the alarming forecasts, the fierce criticism of public employees, and the growing pressure to eliminate defined benefit plans altogether.”

He said AB 1383 would lead to higher pension costs and he worried it would trigger additional enhancements for non-safety employees in the future that would further burden government agencies and the pension system.

“This is an era of California history I do not want to repeat,” he wrote.

Evans, the SCLEA president who also is director-at-large of the local chapter of the Peace Officers Research Association, fired back at much of the criticism and said the statewide organization advocated for several provisions that would’ve reduced risks associated with the older pension plans.

The changes were prospective and didn’t apply retroactively, he said. And, rather than mandating the more generous pension formulas statewide, labor groups would’ve been required to negotiate for them.

Employees also would’ve still been required, he noted, to contribute at least 50% toward normal pension costs — although, significantly, that cost share does not govern the contributions required to make up for market losses, leaving most liability in such cases in the hands of taxpayers.

Evans said while labor groups, who have been an ally of the governor, were initially optimistic given the bipartisan legislative support, he said he wasn’t surprised by Newsom’s decision, noting his White House aspirations.

Leaders with PORAC and California Professional Firefighters said they’re committed to continue fighting for pension enrichments and have indicated they intend to sponsor legislation next session, when they will be dealing with a new governor.

You can reach Staff Writer Paulina Pineda at 707-521-5268 or paulina.pineda@pressdemocrat.com.