California Republicans Join Democrats in Rolling Back Pension Reforms

California lawmakers are advancing a pair of bills that critics say would erode fiscal restraint and deepen the state’s long-term pension liabilities, despite ongoing warnings from budget analysts about unsustainable spending.

Assembly Bill 1383, a pension reform rollback backed by public-sector unions, would undo key provisions of the 2012 Public Employee Pension Reform Act (PEPRA). That law, championed by former Governor Jerry Brown, reduced pension formulas for newly hired public workers, a change designed to stabilize California’s growing retirement costs over time. Under PEPRA, new employees hired after 2013 contribute more toward their pensions and accrue benefits at lower rates. The Legislative Analyst’s Office (LAO) previously estimated these reforms would save billions over two decades.

Now, AB 1383 seeks to lower the retirement age for public safety workers and increase the cap on pensionable compensation, measures that analysts say could reverse those savings. Supporters argue the changes are needed to address a claimed shortage of firefighters and police officers. However, the LAO has found no evidence of a retention crisis, noting that recruitment remains highly competitive with long applicant waitlists for public-safety positions.

Opponents also point to data showing that many veteran public-safety employees already earn total compensation—including overtime, special pays, and pensions—exceeding $500,000 annually, based on records from Transparent California, a nonpartisan transparency database. Critics warn that expanding benefits will accelerate pension costs, which already strain local budgets across the state.

A second bill, Assembly Bill 1054, would expand Deferred Retirement Option Plans (DROPs), which allow public employees to retire early while continuing to work and accrue additional pension benefits. These programs have been criticized as costly incentives encouraging early retirement, even when workers remain on the job.

While Democrats, who control the Legislature, have broadly supported both measures, the bills have also drawn bipartisan backing in committee votes. Only two Republicans—A. C. DeMaio of San Diego and David Tangipa of Fresno—have voted against them to date. Republican leadership has not mounted significant opposition despite long-standing rhetoric about fiscal discipline.

The moves come amid growing concern over California’s structural budget deficit. The state enjoyed a $97.5 billion surplus in 2022, but the LAO now projects chronic shortfalls due to rising costs in health care, education, and retirement obligations. Pension liabilities, in particular, have ballooned: California’s unfunded pension debt is estimated at over $200 billion across state and local systems, with CalPERS reporting a funded ratio below 70 percent.

The pension bills follow a pattern critics say reflects poor fiscal governance. Despite repeated warnings from nonpartisan analysts, lawmakers continue to expand benefits with uncertain funding sources. Past expansions, such as the 1999 SB 400 which boosted California Highway Patrol pensions retroactively, were later revealed to have cost billions more than projected.

Budget experts say California’s “California Rule”—which prohibits reducing pension benefits for current workers—limits options for reform, forcing reliance on gradual changes like PEPRA. Efforts to roll back those changes risk reversing years of progress and could saddle future generations with higher costs.

As the bills move toward final votes, fiscal watchdogs urge lawmakers to prioritize long-term sustainability over short-term union demands. The outcome will test whether California’s government can balance competing priorities or succumb to the same spending pressures it has struggled to control for decades.