California’s state and local government workers make salaries similar to those at large private-sector employers but get significantly higher retirement benefits, a study issued Thursday concluded.
Teachers, however, make far less after retirement than other public employees in the state.
The conclusions were part of a report by consultants hired by the California Foundation for Fiscal Responsibility, a nonprofit involved in research on pension reform.
The study found taxpayers spend roughly three times what large private employers spend per employee for pensions and retiree health benefits. The gap is far smaller for teachers.
State employees earning $60,000 a year build up pension and retirement health benefits at the rate of $19,000 a year, the consultants found, while a worker at a large California company who earns roughly the same amount will garner retirement benefits each year worth $5,720.
A local government worker who starts employment at age 27 with a base salary of $45,000 a year and receives standard raises can retire in 30 years with retirement benefits worth a total of nearly $1.2 million, the consultants reported.
A teacher in similar circumstances would get retirement benefits worth a total of $500,000, and a worker at a large private corporation would get $400,000, the report said.
Public pensions have been the subject of hot debate across the nation, with critics arguing the plans provide richer benefits, guaranteed by taxpayers, than other workers get. Although pension funds have gained back some of the deep losses suffered during the recession, the plans remain underfunded by billions of dollars, and projections show costs to governments increasing in the future as more baby boomers retire.
Capitol Matrix Consulting looked at retirement benefits based on current value for both the public systems and several large private employers, assembling data that could be used to compare different sets of benefits, said Michael Genest, a former state finance director and now a principal with the consulting firm.
“There’s no question that there’s a funding problem,” Genest said.
The new study provides hard data that can inform the debate on solving pension problems, he said.
“The rationale for generous public pensions used to be that public employees accept lower salaries, but that doesn’t withstand scrutiny any longer,” Marcia Fritz, president of the California Foundation for Fiscal Responsibility, said in a news release.
She said a state constitutional amendment aligning public and private retirement benefits will save billions of dollars that could be used to support education, public safety and other government services.
The state’s largest pension fund and a coalition of retired workers and public-employee unions quickly raised questions about the study.
The California Public Employees’ Retirement System was not allowed to review the report before it was issued, said chief executive officer Anne Staussboll.
“What we have seen reported raises significant policy and legal questions,” she said.
Which private sector employees have jobs that are similar to those being questioned in the public sector? Are we comparing cubicle workers to prison guards? Maybe that’s why teachers’ pay/benefits don’t seem so outrageous — these jobs are comparable to other, white-collar jobs, but what about public safety personnel? You can’t compare the compensation of these employees to that of cubicle dwellers.
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“Although pension funds have gained back some of the deep losses suffered during the recession, the plans remain underfunded by billions of dollars, and projections show costs to governments increasing in the future as more baby boomers retire.”
This claim also needs to be addressed. The largest pension funds are obligated to pay out benefits according to contracts, but most of their funding is NOT from “taxpayers.” Employees pay a portion, employers pay a portion, but the majority comes from investment returns. If the investment returns end up being insufficient, they can always extract more from the employees.
The notion that “taxpayers” are the ones paying for everything is pure B.S. It has not been that way, and I highly doubt it will ever be that way. People need to understand how the system works before they spout off about it.
