SAN FRANCISCO (Reuters) - California Governor Jerry Brown signed on Wednesday a pension reform bill that he said puts into law the "biggest rollback to public pension benefits in the history of California pensions."
The legislation raises minimum retirement ages and will reduce pension benefits for new public workers, moves that Brown said will save billions of dollars.
"Under the new rules, employers and employees alike are going to contribute their fair share of the costs, resulting in a more sustainable system," Brown said in a statement.
Spending on public-sector pensions has become a major issue across the nation as state and local governments have had to honor pension obligations while lean revenue has forced them to slash spending on services.
Voters in San Diego and San Jose, California's second and third largest cities after Los Angeles, sent a signal to state leaders in June by overwhelmingly approving local measures to alter pensions for city workers to rein in retirement-related spending.
Brown aims to promote the pension legislation as evidence of fiscal discipline to help rally support for a November ballot measure to raise sales and income taxes.
In addition to raising the retirement age for state employees, the legislation imposes new formulas for calculating pensions for new public sector workers.
New hires will also split payments to their pension accounts at least evenly with their employers. Government employers will have greater authority to negotiate similar 50-50 contributions with current employees.
The legislation contains most of the pension overhaul proposals that Brown last year had put to fellow Democrats who control the legislature.
The state Senate and Assembly approved the bill on strong bipartisan votes last month on the final day of their session.
The tax measure on the November ballot would increase the state's sales tax and raise income tax rates on the state's highest earners. Revenue would be used to prevent spending cuts to education programs in the near term and bolster the state's finances in coming years.
Moody's Investors Service said on Monday the pension legislation is a positive development for California's credit and for local governments and agencies that manage pension accounts through the California Public Employees' Retirement System and the California State Teachers' Retirement System.
Moody's rates California A1 with a stable outlook.
(Reporting by Jim Christie; Editing by Leslie Adler)