(Bloomberg News)  California Governor Jerry Brown, who resisted some Republican demands for an overhaul of state retirement plans during unsuccessful budget talks, proposed bills to end pension abuses and said he's exploring a hybrid between traditional plans and 401(k)-style accounts.

Brown, a Democrat, offered seven measures yesterday that among other things would prohibit employees from pension "spiking" by manipulating overtime, unused vacation and special compensation to create an inflated benchmark for future benefits. Other bills would ban retroactive benefits and forbid workers from purchasing additional service credits.

Brown conceded earlier this week that he was unable to get enough Republican support for a June referendum on the cornerstone of his deficit-cutting plan, extending $9.3 billion of expiring taxes. The pension bills he proposed include much of what Brown and Republicans had agreed upon before talks broke down.

"These pensions will bankrupt the state of California unless we have some reform," said Senator Tony Strickland of Moorpark, co-chair of the Republican-led Taxpayers' Caucus. "These are very important issues and I commend the governor for addressing them."

Strickland said the proposals are a step in the right direction, though he stopped short of a wholesale endorsement, saying "the devil is in the details."

Brown said he'd push through the pension bills with or without Republican support. The bills are written with a so- called urgency clause allowing them to take effect immediately. Passing a bill with an urgency clause requires a two-thirds vote in the Legislature, and Democrats are a total of four votes short of that supermajority.

Ballot Measure

During budget negotiations, Republican lawmakers sought a ballot measure that would dismantle the existing pension system that guarantees benefit levels regardless of investment returns, replacing it with a hybrid that includes elements of a traditional plan and a 401(k) account, where beneficiaries bear more of the investment risk.

Brown said he'll develop a bill that would give government workers the option of such a hybrid plan, though he didn't provide details.

"Governor Brown's proposal assumes public employees will volunteer for lower benefits, which ignores reality," Senate Republican Leader Bob Dutton of Rancho Cucamonga said yesterday.

Dutton said Brown's plans fall short because they would be enacted by legislation that can easily be undone later by lawmakers. He wants the pension issues put to a vote that can only be undone through a referendum or ballot initiative.

Republican Negotiations

After budget negotiations broke down March 25, Senate Republicans asserted that Brown had refused proposals for splitting pension costs equally between employers and employees, and for increasing eligibility standards for retirement, among other measures.

Brown said yesterday he's also putting together a plan to deal with the growing gap between assets and expected obligations of the California State Teachers' Retirement System, the second-largest public pension in the U.S.

Calstrs' so-called unfunded liability grew to $56 billion at the end of June, according to a report released yesterday. The 38 percent increase will require the state to boost its annual contribution by $140 million to $150 million, according to the pension fund. California paid $573 million toward teacher retirements last year.

Service Credits

Since 1999, teachers have been allowed to purchase up to five years of service credit to retire early and collect a full pension. Brown would repeal that benefit beginning in July.

Brown said he intends to set a maximum on the pension that a retired state worker can receive. He also wants to ban so- called double-dipping, when a retiree who is collecting a pension takes another government job.

Californians for Health Care and Retirement Security, a union-backed coalition that claims 1.5 million public employees and retirees, issued a statement criticizing Brown's proposal. The group's chairman, Dave Low, who is executive director of the California School Employees Association, said unions already agreed to concessions that saved state and local governments hundreds of millions of dollars.

"These unilateral changes fly in the face of collective bargaining law and amount to a breach of agreements that state government has made with millions of workers," Low said in a statement. "California's policymakers need to take a careful look at the billions of dollars in tax breaks for the wealthy in our state budget before they launch an assault on California's middle class."