Arnold to kill death benefits for widows?

By Harrison Sheppard
Los Angeles Daily News
Sacramento Bureau

Sunday, March 20, 2005 - SACRAMENTO -- Already on the defensive over his proposals to reform state government, Gov. Arnold Schwarzenegger finds himself fending off charges that his plan would cut off benefits to widows and orphans of firefighters and cops who die in the line of duty.

Schwarzenegger's critics claim that, among other things, his plan to reform the state pension system would eliminate death and disability benefits for public employees, a charge the governor denies.

"We have a membership that's pretty charged up about this," said Carroll Wills, spokesman for the California Professional Firefighters union.

"Retirement security is a gut-level issue for firefighters. It's a dangerous job and they could die with the next call. Protecting their families and having security when their bodies wear out from the rigors of the job -- it's not a close question for them.

"I don't think the governor could have picked an issue on which firefighters would have been more united and more galvanized than this one."

The union has about 30,000 members -- and even though about 55 percent of them are Republicans, they are united in their opposition to the governor on this issue, Wills said.

Firefighters and other union members such as nurses and teachers have joined together in a group called the Alliance for a Better California. The coalition has begun sending protesters to dog the governor at most of his public events.

At a recent legislative hearing on the issue, several widows of fallen firefighters delivered emotional testimony describing how important the death benefits were to them.

But a spokeswoman for the governor said the unions are misleading the public on the death and disability issue. Schwarzenegger does not intend to cut the benefits and is willing to see that legislation is written to express that intent explicitly.

"The governor has sympathy for firefighters and for policemen and really values their service, which is one of the reasons why it's so frustrating when misinformation is being passed around," said the governor's press secretary, Margita Thompson. "The governor has been very clear: Death and disability payments will not be altered."

"This is a pension-reform proposal. Pension is a separate issue from other benefits that are administered. The governor has said over and over again that death and disability payments will remain for these much-needed and much-valued community protectors."

Schwarzenegger is willing to discuss counterproposals by legislators but has yet to hear any, she said.

Political analysts said the issue, although complex, could make a powerful argument if the public-safety unions can use good will toward firefighters and police to draw on public sympathy.

"There is a real fondness, post-9-11, for first responders and that's still evident in polling," said Barbara O'Connor, director of the Institute for the Study of Politics and the Media at California State University, Sacramento. "The further out you are from those heroic pictures, the less a person would automatically make the reference, but they're still held in high esteem."

Schwarzenegger, she noted, is also popular, but his poll numbers have been sagging recently in the face of stepped-up protests by the groups he often criticizes as "special interests," such as nurses, teachers and public-safety officers.

Still, she said, the issue of death and disability benefits and pension reform may be a tough one to explain in a 30-second television ad. The unions will need to rely heavily on grass-roots efforts, getting their own members to campaign and vote.

The governor and his allies hope to deflate the death and disability issue by crafting their own plan to provide the benefits, separate from the pension system.

Assemblyman Keith Richman, R-Granada Hills, who authored the pension legislation that the governor supports, said he plans to work with other legislators to introduce a measure that would allow state and local government agencies to provide death and disability benefits separate from the new retirement savings plan.

Although he has not yet worked out details, he said it would not require a separate ballot measure or constitutional amendment and it could be done through the Legislature.

"It's a bogus argument," Richman said. "The constitutional amendment was written with the clear intention that death and disability benefits and other specifics of benefit design would be left to the governmental entity to enact."

For example, Richman noted that legislators currently receive death and disability benefits, even though their pension plans were eliminated by Proposition 140, the term-limits measure voters approved in 1990.

Currently, for example, state senators have separate death and disability benefit plans provided by a private insurer that cost the state about $68,000 total per year for 40 senators, or about $1,700 per person, according to the Senate Rules Committee.

There are about 800,000 active state and local employees participating in the California Public Employees' Retirement System, according to CalPERS spokesman Darin Hall.

Hypothetically, that would mean a private insurance plan based on the same rate as the Senate plan would cost about $1.36 billion.

Last year, CalPERS paid out about $1.3 billion for death and disability benefits.

While the figures may seem relatively close, Hall noted that it is a difficult comparison to accurately make because it is unclear how the contribution rates from a private insurer might be adjusted upward based on the higher risk faced by public-safety employees or negotiated downward to account for the bulk price of insuring that many people, among other factors.

Also, the details of the plans are different. The Senate plan pays benefits to a disabled senator only until he or she reaches retirement age, while CalPERS provides a lifetime benefit.

And, while CalPERS could be selected to administer a separate death and disability plan, some officials within the agency have been studying whether operating essentially like an insurer rather than a pension plan could eventually affect its tax-protected status, and therefore significantly increase its costs, Hall said.

CalPERS paid out $6.1 billion in standard retirement pension benefits last year. Employees contributed about $2.2 billion into the system through paycheck deductions, while government contributions were $4.2 billion. The system's $183 billion in assets generated about $24.2 billion in investment income.

The benefits are integrated into the pension plan, so that contributions from employers and employees fund both pension benefits and death and disability benefits.

Schwarzenegger's plan would only apply to new employees hired after July 1, 2007. The existing pension system would continue for those who are already in it, but they would be given an option to switch to the new defined-contribution plan.