LOS ANGELES — The California Legislative Analyst's Office has released its fiscal analysis on the Pension Reform Act of 2014, finding that, while the proposed ballot measure could increase costs for the state and local governments, such costs would be more than offset by future savings.

The pension initiative, led by San Jose Mayor Reed and three other California mayors, seeks to amend the state constitution to allow state and local government employers to cut future accrual of pension benefits by current employees, while protecting benefits already earned.

Papers have been filed with the California attorney general in the first step toward qualifying the measure for the November 2014 ballot.

The LAO review said that the measure would result in a "potential net reduction of hundreds of millions to billions of dollars per year in state and local government costs. Net savings — emerging over time — would depend on how much governments reduce retirement benefits and increase salary and other benefits."

The LAO, a nonpartisan government agency that has been providing fiscal and policy advice to the California Legislature since 1941, sent its report to the state's attorney general, Kamala Harris, on Thursday.

"The LAO's analysis shows that providing local governments with this critical tool can generate significant immediate savings that can be used to protect essential public services and the long-term health of their retirement plans," Reed said.

The review also noted that state and local governments choosing to increase contributions for unfunded liabilities would see increased annual costs — potentially in the hundreds of millions to billions of dollars — over the next two decades.

The review added that these costs would be more than offset by retirement costs savings in future decades.

The LAO said state and local governments would also see increased costs to develop retirement system funding reports and to modify procedures and information technology.

The increase costs would be a result of the proposed measure's requirement that government employers prepare a funding status report for any pension or retiree health plan with assets equaling less than 80% of its liabilities.

Those costs could exceed tens of millions of dollars initially, but would decline in future years, the report said.

Public employee unions are expected to fight the measure tooth-and-nail.

Dave Low, chairman of Californians for Retirement Security, a 1.6 million member coalition of public employees and retirees, said the LAO's assessment raises significant questions about the financial impact of this measure.

"It's clear from this assessment that this poorly crafted measure will not only add to the retirement crisis in our state by eliminating vested retirement benefits for teachers, nurses, firefighters, school bus drivers and other public employees, but also cost our communities and state billions of dollars," Low said. "This measure would be a financial disaster for taxpayers and retirees alike."

The LAO said that public employee unions opposing this initiative have noted the cost increases, but fail to acknowledge that the LAO found that these increases would be more than offset by potential savings from the initiative.

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