Home › Forums › Financial Markets/Economics › Excellent Economist Mag. article on CA’s Gov. retiree Pension problems
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November 16, 2011 at 7:24 PM #733085November 16, 2011 at 7:30 PM #733086
sdduuuude
Participant[quote=CA renter]If we had focused on the problems with the Fed and the Wall Street casino, we wouldn’t be having this discussion about the “financial crisis” or the “pension crisis.” Our problems are 100% related to Wall Street and our financial system, in general.[/quote]
Bubbles will happen in regulated markets, free markets, any markets, really. Its stupid and arrogant to think anyone can regulate the world to have no bubbles. Just as stupid to think you can de-regulate and have no bubbles.
What you can do is not bailout those who get burned by bursting bubbles.
Individuals can take matters into their own hands by not getting involved so it is sad that those taxpayers who had the wherewithal to not get burned are bailing out those who got burned.
Agree w/ your comment on the Fed, though.
November 16, 2011 at 8:16 PM #733088SK in CV
Participant[quote=sdduuuude]
Was just using a number. 15%, 2%, 20 %. Doesn’t matter. Effectively, the state is promising a certain return to its employees based on how much the employees pay to fund it and the amount they are promised. And, if that return isn’t met by the investors (which it wasn’t), it has to be made up by taxpayers. It’s a foolish thing to promise.[/quote]
Not exactly. The state doesn’t promise any return to it’s employees. It promises a certain series of payments to it’s retirees. It pre-funds these payments through a trust, and funding of the trust is based on certain actuarial assumptions. Funding is provided by a combination of payments from the state, payments from employees, and investment return. It is a sound model, one that has generally worked quite well for the last 70 years. But not one without risks. Current funding requires most current employees to cover about 55% of normal costs, while the state kicks in about 45% of normal costs. Unfunded liabilities are paid in by the state. So if the funds perform well, the state benefits.
November 16, 2011 at 8:39 PM #733089Participant[quote=SK in CV][quote=sdduuuude]
Was just using a number. 15%, 2%, 20 %. Doesn’t matter. Effectively, the state is promising a certain return to its employees based on how much the employees pay to fund it and the amount they are promised. And, if that return isn’t met by the investors (which it wasn’t), it has to be made up by taxpayers. It’s a foolish thing to promise.[/quote]
Not exactly. The state doesn’t promise any return to it’s employees. It promises a certain series of payments to it’s retirees. It pre-funds these payments through a trust, and funding of the trust is based on certain actuarial assumptions. Funding is provided by a combination of payments from the state, payments from employees, and investment return. It is a sound model, one that has generally worked quite well for the last 70 years. But not one without risks. Current funding requires most current employees to cover about 55% of normal costs, while the state kicks in about 45% of normal costs. Unfunded liabilities are paid in by the state. So if the funds perform well, the state benefits.[/quote]
Not exactly, but close enough. The taxypayers incur the risk.
November 17, 2011 at 3:46 AM #733093CA renter
Participant[quote=sdduuuude][quote=SK in CV][quote=sdduuuude]
Was just using a number. 15%, 2%, 20 %. Doesn’t matter. Effectively, the state is promising a certain return to its employees based on how much the employees pay to fund it and the amount they are promised. And, if that return isn’t met by the investors (which it wasn’t), it has to be made up by taxpayers. It’s a foolish thing to promise.[/quote]
Not exactly. The state doesn’t promise any return to it’s employees. It promises a certain series of payments to it’s retirees. It pre-funds these payments through a trust, and funding of the trust is based on certain actuarial assumptions. Funding is provided by a combination of payments from the state, payments from employees, and investment return. It is a sound model, one that has generally worked quite well for the last 70 years. But not one without risks. Current funding requires most current employees to cover about 55% of normal costs, while the state kicks in about 45% of normal costs. Unfunded liabilities are paid in by the state. So if the funds perform well, the state benefits.[/quote]
Not exactly, but close enough. The taxypayers incur the risk.[/quote]
Not true at all. Right at this very moment, public employers across the state are negotiating for higher contribution requirements from EMPLOYEES.
No offense, but why do so many people continue with the lies about public sector workers not taking a hit? IMHO, many of them are going to see 10-35% pay cuts going forward. Some have already seen rather significant cuts already.
November 17, 2011 at 8:11 AM #733095Anonymous
Guest[quote]No offense, but why do so many people continue with the lies about public sector workers not taking a hit?[/quote]
Nobody said they aren’t “taking a hit.” We saying that they are offering only a token, insignificant amount.
And they are using these minor concessions as a propaganda tool – trying to convince the voters that the public-sector employees are somehow the victims.
The facts clearly show which side is telling the truth.
The changes that are happening in public-sector compensation only address future pension obligations. They do not address the crux of the problem: The commitments that have already been made.
These changes you keep pointing out will not solve the problem, they will at best only help prevent it from becoming worse.
Apparently you didn’t even read (or comprehend) the very basic facts laid out in the OP article:
California’s unfunded pension liabilities are staggering, he points out; they have been estimated at between $240 billion and $500 billion. Plugging that hole will increasingly crowd out other things that Democrats care about, such as schools, parks and courts. But Mr Brown’s plan might save at best $11 billion over 30 years.
Even Brown’s current proposal, which is already facing resistance from the public-sector employees, will resolve less than 5% of the shortfall.
The real question is this:
Why do you continue to claim that these token concessions offered by a few public-sector employees will somehow make this massive problem go away?
You ignore the hundreds of thousands of state employees who will receive million-dollar (plus) retirement packages, and instead focus on the fraction of (mostly young) employees who will see their compensation cut to market levels.
There is no evidence that public-sector employees are making any sincere effort to address the problem. I don’t blame them, if I had managed to hustle such a sweet deal, I would be reluctant to give any of it back also. But as a taxpayer (their employer), I’m going to do what I can to make things right.
We are sacrificing the education of the next generation in order to allow a minority from our own generation to retire early and in extraordinary comfort. It’s disgusting.
November 17, 2011 at 8:49 AM #733096bearishgurl
Participant[quote=CA renter] . . . many of them are going to see 10-35% pay cuts going forward. Some have already seen rather significant cuts already.[/quote]
Every time a public worker is ordered to take a “furlough,” whether 1-2 days per month, X-mas thru New Years, etc (and the public is inconvenienced because gov’mt offices are short-staffed or closed), those workers go unpaid for those days unless they wish to use paid vacation for this time.
This amounts to a pay cut in the amount of days per year they are ordered to take furloughs and this practice has been going on for the last several years in nearly every jurisdiction.
Edit: It’s not uncommon for govm’t workers to be ordered to take 12 (CA Court system) to 21 working days per year in unpaid “furlough.” These furloughs alone are akin a 4.6% to 8% pay cut.
November 17, 2011 at 8:58 AM #733099ParticipantThese “furloughs” affect workers of ALL ranks and seniority levels . . . even those slated to “retire” in the next 3 years. They also have the effect of negating end-career “retired-pay spiking” (whether deliberate or not) since public retirement benefits are based upon the highest 1 yr or avg of 3 yrs salary. If a rank-and-file member at the “height” of their “career” and close to retirement gets a 3-5% annual “step raise” in accordance with their union contract, any furlough taken that calendar year wipes out part or all of that raise, keeping their annual gross pay for that year down to a previous level even though they are now making more per hr.
November 17, 2011 at 9:18 AM #733102Participant[quote=pri_dk] . . . We are sacrificing the education of the next generation in order to allow a minority from our own generation to retire early and in extraordinary comfort. It’s disgusting.[/quote]
pri_dk, I know several retired teachers and school administrators (now between the ages of 65-75). I would hardly call their retirement conditions living in “extraordinary comfort.” ALL of them own properties (both personal residence and rentals) in areas of SD (in the school district they retired from) that many on this forum have stated they wouldn’t even drive into. Several HAVE TO DEPEND upon their rental incomes to keep them afloat if their primary residences are not paid off. Of course, they manage them themselves.
How did these lowly teachers acquire all these investment properties, you may ask? First of all, they ALL worked >=30 years, most the entire time with the same district. They lived, ate, dressed and drove frugally all along and within their means. They kept an eye out for good deals (whether listed or not) in their respective immediate areas. They bought fixers and fixed them up for tenants on school vacations and weekends.
Many, many retired law enforcement here in SD County have done the exact same thing to supplement their retirements. The only difference between them and the educators is that they were able to retire 10 years younger than educators with the same level of benefits, due to their “Class C” retirements, by law. If YOU wish to work the street for 2/3 to 3/4 of your career, YOU can have the same. Your first “duty station” will be the SDPD Southeastern Station located at 7222 Skyline Drive, 92114. You’ll be there for 8-10 years before you’ll be able to “pick” your next stn from a pool or lottery – that is … if you make it that far …
Get crackin’ on the “hiring process,” Piggs. Your “usual haunts” on Imperial Ave beckon . . .
http://www.sandiego.gov/police/recruiting/join/
Time’s a wastin’! You could have been “vested” by now!!
November 17, 2011 at 9:23 AM #733103Participant[quote=pri_dk][quote]No offense, but why do so many people continue with the lies about public sector workers not taking a hit?[/quote]
Nobody said they aren’t “taking a hit.” We saying that they are offering only a token, insignificant amount.
[/quote]
Token, insignificant amount? Really? In addition to the mandatory furloughs which equate to a 4-7% pay cut, they’ve also increased their pension contributions by up to 5% of pay. So a 10% cut in take home pay is token? You can bitch all you want that too many government employees get way too much money. But the vast majority are paid fairly for their work. Average California civil servant makes around $65K a year. 10% cut from that is just a token? Really?
November 17, 2011 at 9:57 AM #733106Guest[quote=SK in CV]Token, insignificant amount? Really? In addition to the mandatory furloughs which equate to a 4-7% pay cut, they’ve also increased their pension contributions by up to 5% of pay. So a 10% cut in take home pay is token? You can bitch all you want that too many government employees get way too much money. But the vast majority are paid fairly for their work. Average California civil servant makes around $65K a year. 10% cut from that is just a token? Really?[/quote]
Mandatory furloughs: 4-7% cut in salary, which is only a portion of compensation. 4-7% increase in days they don’t have to go to work (some would call this “vacation” – unpaid vacation, true, but still vacation.) Zero cut in other compensation (medical insurance, etc.)
Pension Contributions of 5%: Most public-sector employees have to put 10% into their 401Ks to even have a chance at a decent retirement nest egg.
Average pay of $65K: Useless number without context. What’s the average pay of the private sector? How does the total compensation compare for equivalent jobs?
It is a token amount relative to the magnitude of the problem. If you are overcompensated by 20% and you take a 10% cut, you really aren’t “taking a hit.”
November 17, 2011 at 9:59 AM #733104Guestbg,
I agree that teachers should not necessary be lumped in with all state employees. In general, public school teachers compensation is not overly generous. As far as public employees go, teachers are the least of the problem (I’ve seen studies that confirm this, but I don’t have the links handy.)
As for the “if they’ve got it so good, why don’t you do it yourself?” argument, that is totally irrelevant.
Got a problem with bankers, traders, and Wall Street types? Why don’t you do it yourself if they’ve got it so good?
See how easy it is to turn the argument around?
Anyway, the OP article is about the STATE pension shortfalls, so if you want to tell us dramatic, peripherally relevant anecdotes about the hardships of pension beneficiaries, you should be linking the CHP website.
Of course nobody on this thread rooting for the public sector employees has even attempted to answer the fundamental question:
Who is going to to pay for the $240-$500 billion shortfall?
Whether I join the police force or not, the question still remains.
November 17, 2011 at 10:37 AM #733107Participant[quote=pri_dk] . . . Got a problem with bankers, traders, and Wall Street types? Why don’t you do it yourself if they’ve got it so good?
See how easy it is to turn the argument around?[/quote]
Actually, no I don’t. I believe in karma. Those “wall st types” not only live on constant stress, they have absolutely no control over their own incomes or futures. Their house of cards could come tumbling down on ANY bad morning. Many already have. I wouldn’t want any of those jobs even if I were “qualified” for them.
[quote=pri_dk]Anyway, the OP article is about the STATE pension shortfalls, so if you want to tell us dramatic, peripherally relevant anecdotes about the hardships of pension beneficiaries, you should be linking the the CHP website.[/quote]
Not sure what you’re stating here about the “cushy” existence of “CHP retirees.” This is of course after acquiring PTSD (at the very least) in decades of chasing vehicles on the fwy (incl speeding vans full of 20+ illegal aliens driven by smugglers), standing on a fwy shoulder/median several times per day and night and responding to numerous fatal accidents, etc! pri-dk, are you aware that CHP officers MUST serve 2-3 years out of every decade of service in “BFE??” Of course, while serving in “BFE” the CHP will put you (and your family, if they can stomach it) up in their awesome, state-owned houses in the heart of Death Valley, Salton Sea, Pacheco Pass, Needles, Mono Lake, McCloud, Madera/Chowchilla . . . you get the picture! Not what you’re used to or the size your family expects? No “carefully-planned” developments within a 100 mi radius? Not “Tuscan-style” and has a 20+ mi bus ride to school?? TOUGH SHIT! Leave your family back in suburbia or exurbia and visit them every other wknd or so!
pri_dk, what are you waiting for? This is your chance to become vested in CalPERS!
[quote=pri_dk]Of course nobody on this thread rooting for the public sector employees has even attempted to answer the fundamental question:
Who is going to to pay for the $240-$500 billion shortfall? . . . [/quote]
pri_dk, can you point me to a link where you obtained this information? If it is already posted on this thread and I overlooked it, can you point me there? Thank you 🙂
November 17, 2011 at 11:53 AM #733112Participant[quote=CA renter]No offense, but why do so many people continue with the lies about public sector workers not taking a hit? IMHO, many of them are going to see 10-35% pay cuts going forward. Some have already seen rather significant cuts already.[/quote]
Well, back to the original point someone made about defined contrib. vs. defined benefit.
If the public employees are taking a hit to boost their pension, then that is more like a defined contribution plan, which is a good thing. In a defined benefit plan, they wouldn’t take that hit – the state would have to.
So yes – some public employees may not be on a defined benefit plan.
This doesn’t mean I’m happy about the ones that are.
November 17, 2011 at 2:40 PM #733119Guest[quote=bearishgurl]pri_dk, can you point me to a link where you obtained this information? If it is already posted on this thread and I overlooked it, can you point me there? Thank you :)[/quote]
Um, the article linked in original post of this thread.
Please spare us the melodrama about the hardships of anybody’s career choice. I come from a family of steelworkers and coal miners. (My father was a electrical utility worker – a job with a higher workplace fatality rate than police officer.) Most of my uncles were promised a pension and got almost nothing when their employers went bankrupt. My father’s job was spared when the steel industry collapsed, so we helped out the rest of our family. That’s how it should work – there’s no certainty in the future and nobody should be forced to bail others out when rosy plans don’t quite work out.
As for me, I’m now too old to become a cop, and way too old to ever “vest.”
But, I promise not to bother you with my anecdotes if you agree not to waste space on this page with yours. Both are irrelevant to the issue presented here.
Like I said before, the fact that I, choose or do not choose a career as a cop doesn’t change the facts in the issue or the validity of my arguments. It it turned out that I was a retired CHP officer, will that make suddenly make all my points more correct? Or are you suggesting that public employees can set whatever salary they choose, and that taxpayers have no say?
So let’s try again:
Who is going to to pay for the $240-$500 billion shortfall?
And just to give some context to the number: That works out to an average of about $150-$312 thousand dollars per CalPERS participant. We effectively have to come up with enough money to buy a house for every one of the 1.6 million public employees in CalPERS.
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