Gov Brown Proposes State Worker Pension Changes

[paramount]

It’s interesting in that I haven’t heard any democratic assembly members introducing legislation to promote pensions for private employees.

Except for true public safety workers, no California gov’t workers deserve ANY pension/defined benefit at all. And make it retroactive as well.

For all those who are producers (private sector), you are being ROBBED by the public sector, period.

[paramount]

Plundering California

Their pay levels are soaring, they enjoy unmatched benefits, and they remain largely immune from layoffs, except for some overly publicized cutbacks around the margins.

To make matters worse, government employees—thanks largely to the power of their unions—have carved out special protections that exempt them from many of the rules that other working Americans must live by. California has been on the cutting edge of this dangerous trend, which has essentially turned government employees into a special class of citizens.
When I recently appeared on Glenn Beck’s TV show to discuss California’s dreadful fiscal situation, I mentioned that in Orange County, where I had been a columnist for the Orange County Register, the average pay and benefits package for firefighters was $175,000 per year. After the show, I heard from viewers who couldn’t believe the figure, but it’s true.

Firefighters, like all public-safety officials in California, also receive a gold-plated retirement plan: a defined-benefit annual pension that offers 90 percent or more of the worker’s final year’s pay, guaranteed for the rest of his life (and the life of his spouse).

Government employees use various scams to boost their already generous benefits, which include fully paid health care and cost-of-living adjustments. The Sacramento Bee coined the term “chief’s disease,” for example, to refer to the 82 percent (in 2002) of chief’s-level employees at the California Highway Patrol who discovered a disabling injury about one year before retiring. That provides an extra year off work, with pay, and shields 50 percent of their final retirement pay from taxes. Most of these disabilities stem from back pain, knee pain, irritable bowel syndrome, and the like—not from taking bullets from bad guys. The disability numbers soared after CHP disbanded its fraud unit.

As I document in my new book, Plunder!, government employees of all stripes have manipulated the system to spike their pensions. Because California bases pensions for employees on their final year’s salary, some workers move to other jurisdictions for just that final year to increase their pay and thus the pension. Even government employees convicted of on-the-job crimes continue to collect benefits. Municipalities have adopted Defined Retirement Option Plans, or DROPs, in which the employee earns his salary and his full defined-benefit retirement pay at the same time, with the retirement pay going into an account payable upon actual retirement. And as average Americans work longer to sustain themselves, public employees can retire in their early fifties with their plush benefits.

The old deal seemed fair: public employees would earn lower salaries than Americans working in the private sector, but would receive a somewhat better retirement and more days off. Now, public employees get higher average pay, far higher benefits, and many more days off and other fringe benefits. They have also obtained greatly reduced work schedules, thus limiting public services even as pay and benefits shoot ever higher. The new deal is starting to raise eyebrows, thanks to efforts by groups such as the California Foundation for Fiscal Responsibility, which publishes the $100,000 Club, a list of thousands of California government retirees with six-figure, taxpayer-guaranteed incomes. But even in these tough times, public employees continue to press city councils for retroactive pension increases, which amount to gifts of public funds for past services. Officials fear the clout that these unions, especially police and fire unions, wield on Election Day.

The story doesn’t end with the imbalance in pay and benefits. Government workers also enjoy absurd protections. The Los Angeles Times did a recent series about the city’s public school district, which doesn’t even try to fire incompetent teachers and is seldom able to get rid of those credibly accused of misconduct or abuse. Misbehaving teachers are sometimes kept from teaching, but they may spend years, even a decade, getting paid while they fight attempts to fire them. A state law referred to as the Peace Officers Bill of Rights, along with excessive privacy restrictions, likewise makes it nearly impossible to fire police officers who abuse their authority.

The media have finally started to take notice, largely because of some impossible-to-ignore financial excesses, particularly the tens of billions of dollars in “unfunded liabilities”—that is, future debt—run up by politicians more interested in pleasing union officials than in looking after the public’s finances. News reports have also focused on scandals at CalPERS, the California Public Employees’ Retirement System, which has faced record losses after making risky leveraged investments in bizarre real-estate deals. (The government pension system encourages such risky behavior: with defined-benefit systems, union members stand to gain if the investments go well, while taxpayers shoulder the burden if they don’t.) Meanwhile, the Los Angeles Times reported on a politically connected insider who received $53 million in finder’s fees from CalPERS, raising questions of pay-to-play deals.

But the real scandal is a two-tier society where government workers enjoy benefits far in excess of those for whom they supposedly work. It’s past time to start cleaning up the mess by reforming retirement systems and limiting the public unions’ power. If we don’t, California’s financial problems will become insurmountable.

Steven Greenhut is the author of Plunder! How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives And Bankrupting The Nation. He is the director of the Pacific Research Institute’s Journalism Center in Sacramento and was a longtime columnist for the Orange County Register in Santa Ana.

[bearishgurl]

[quote=paramount]

Plundering California

…As I document in my new book, Plunder!, government employees of all stripes have manipulated the system to spike their pensions. Because California bases pensions for employees on their final year’s salary, some workers move to other jurisdictions for just that final year to increase their pay and thus the pension. Even government employees convicted of on-the-job crimes continue to collect benefits. Municipalities have adopted Defined Retirement Option Plans, or DROPs, in which the employee earns his salary and his full defined-benefit retirement pay at the same time, with the retirement pay going into an account payable upon actual retirement. And as average Americans work longer to sustain themselves, public employees can retire in their early fifties with their plush benefits…

[/quote]

Correct me if I’m wrong, but I believe some retirement systems in CA are now averaging the top 3 years of pay to calculate a retirement benefit.

Back in the spring, SD’s City Council was considering modifications to its DROP program.

see: http://www.signonsandiego.com/news/2011/mar/07/battle-brewing-to-change-controversial-retirement/

…A lengthy court fight led to rulings that gave city leaders the power to make sweeping changes to DROP, but a judge has yet to rule on whether the city can eliminate the program altogether. . . . “It’s not a bad thing to keep experienced people, but what we’ve done is we set it up so that it’s more lucrative to be in DROP than it is to be an employee because you don’t have to contribute to the pension system,” Goldsmith said. “That’s where we went wrong.”…

I don’t agree with soon-to-retire employees being able to use “pension-spiking tactics” to increase their pensions. Nor do I agree with employees being able to “purchase” periods of broken service (where they were not on the payroll for whatever reason) so as to have “continuous service” or to help them vest.

The only public employees that I know of that can retire “in their early fifties with their plush benefit” are sworn staff (aka law enforcement and firefighters). All “general retirees” will not be able to get their full benefit until age 62. If they decide they want to collect their benefit earlier than that, it will be a partial benefit for life, calculated in part upon their age at the time they decide to begin to collect it. This would make sense if the “deferred retiree” was terminally ill or otherwise unable to eek out any kind of a living. Otherwise, why take a partial benefit early??

All this “plundering talk” is obviously coming from half-cocked ignoramuses.

[paramount]

[quote=bearishgurl]
All this “plundering talk” is obviously coming from half-cocked ignoramuses.[/quote]

No, it’s coming from those of us who are more than fed up with getting fleeced by gov’t workers.

[bearishgurl]

[quote=paramount][quote=bearishgurl]
All this “plundering talk” is obviously coming from half-cocked ignoramuses.[/quote]

No, it’s coming from those of us who are more than fed up with getting fleeced by gov’t workers.[/quote]

paramount, we’ve had this “discussion” in numerous threads in which YOU have taken part. Here’s one which comes to mind:

http://piggington.com/are_federal_workers_overpaid_avg_123k_it039s_insane

Submitted by bearishgurl on August 10, 2010 – 3:45pm.

I now wish to draw Piggs’ attention to the SF-171:

http://forms.nih.gov/adobe/personnel/sf171.pdf

Just fill it out and get on a hiring list! Hopefully, you too can avail yourself of all these bennies, that is, after you have been “put thru the paces,” up to and including `nine separate interviews,'” and, of course, a thorough background check. What will your neighbors say about you??

Oh, and uh, I forgot to mention the six-month to one-year “probationary period.” Only a fraction of the bennies will kick in before this period is over. During this time, your “future career” could be in the hands of a bureaucrat who has 1/10th of your education and experience, but by virtue of longetivity, connections, knowing too much (or all three of these), occupies the position as your “supervisor.” This is where you will find that whatever you thought you knew doesn’t matter. Hang in there, refrain from pointing your antlers towards anything resembling a headlight . . . and . . . chin DOWN!

Everybody’s got to pay their dues at one time or another. You’ll get through it :=)

[bearishgurl]

Hey, paramount . . . I’ve taken the liberty of assisting you in your search for a CA position with “plush bennies” and a “retirement plan.” See the following links:

http://www.spb.ca.gov/std678.pdf

http://www.spb.ca.gov/instructions.pdf

http://www.spb.ca.gov/crsq.pdf

http://jobs.cityoftemecula.org/Default.aspx

[EconProf]

First, I did not know Paramount was Steven Greenhut, a noted researcher and author on CA politics and economics who is often interviewed and quoted by various media. Welcome to the Piggs.
Second, Bearish Girl, I’m not sure your links help you make your case. I’ve looked at each, and they are standard-issue application forms–a little long and involved, but nothing surprising considering that once one gets hired by a gov’t agency, it tends to be for a longer time than hires in the private sector. The latter are more subject to layoffs and firings, and the application process is less bureaucratic. Relatively fewer people actually quit government jobs, so it stands to reason that the application process is longer and more involved.
Another of your links described a job opening in Temecula for a Theatre Manager, and showed the pay and benefits. Starting salary of $66,000 and topping out at $84,000. I wonder what the manager of the local Regal theatre makes. And I bet they don’t get 5 weeks of vacation after ten years and retirement @55 with 2.7%, plus the other fringe benefits shown. Hmm…I was in Teahouse of the August Moon during college…I wonder if…..

[CA renter]

[quote=SK in CV][quote=bearishgurl]
Also, I wanted to add that government pensions are paid ONLY out of their respective retirement systems. Those systems are run by Boards elected periodically by their members. These systems are funded by a combination of employee and employer contributions and are invested for growth, dividends and income. Some systems are more “solvent” than others (depending on the management skills of each Board and investment performance).[/quote]

That’s a key point in the discussion. THE main problem with retirement plan funding has not been the plans themselves, but rather, the poor investment performance over the last 4 or 5 years.

The UC retirement plan, for instance, was so successful over the two decades preceding 2007, that no employee contributions were required and very little (on a per employee basis) from the employers. It was significantly over-funded, solely as a result of excellent investment performance. There are employees who had worked for the system for more than 20 years who had never contributed a dime. Not so anymore. If the market hadn’t crashed, this discussion would not be at the forefront as it is.

The same is true for many public retirement systems across the country.

(Please note, I’m not commenting on the appropriateness of any of the public retirement plans, only the reason it’s currently a discussion point.)[/quote]

Exactly right, SK.

Too many people don’t understand why we’re in the mess we’re in. It’s not because of “greedy union workers,” but because of the Federal Reserve (holding rates too low for too long, and giving the impression that they would always come to the rescue of traders/investors) and the financial system that ecnourages a trading mentality and *demands* perpetual growth (as opposed to stable, sustainable growth). This results in the boom-bust cycles that make it nearly impossible to accurately and safely project returns, and causes politicians/penions plans to offer more than they should in the long run.

BTW, the unions were opposed to the “contribution holidays” in most cases. If not for the lack of contributions during the good years (saving the taxpayers money in the short run), the pension plans would be much better off today.

[CA renter]

[quote=paramount][quote=UCGal]
Rather than trying to ripp the pensions from people who still have them, why not argue that this trend should be reversed in the private sector.
[/quote]

Can I ask you a serious question UCGal? Ok, cool…

What world do you live in?

In case you haven’t heard the news in your world, 99%ers are DESPERATE for work. Pensions AIN’T making a come back.

Back to the OP, even those modest proposals won’t pass. The only hope for justice with regard to these outrageous pensions/benefits/salaries is for Cali to go bankrupt – which is the best thing in the long run I do believe.

I heard a public employee union goon on the news asking: Well how will these workers be able to provide for themselves and family when they retire.

In a way that statement is propaganda to give the impression that the Brown proposals are not just window dressing but are real and deep cuts. On the other hand this tool also really is that out of touch.[/quote]

I find it ironic that you are the spokesperson for the very entities that have made the 99%ers so desperate for a job.

The only ones who were trying to save American jobs were the unions and their supporters. Oddly enough you don’t seem to grasp which entities are responisible for decimating our job base, as you constantly advocate on their behalf.

How did the 1% manage to convince so many in the 99% to work against their (and the country’s) own best interests?

[briansd1]

[quote=CA renter]
How did the 1% manage to convince so many in the 99% to work against their (and the country’s) own best interests?[/quote]

Jesus, Fox News, junk food, and credit cards?

[briansd1]

[quote=CA renter] BTW, the unions were opposed to the “contribution holidays” in most cases. If not for the lack of contributions during the good years (saving the taxpayers money in the short run), the pension plans would be much better off today.[/quote]

So wouldn’t it be fair that we ask for those employee contributions now?

I support pensions, but the system needs to be reformed. Employees and employers should always contribute.

[CA renter]

[quote=briansd1][quote=CA renter] BTW, the unions were opposed to the “contribution holidays” in most cases. If not for the lack of contributions during the good years (saving the taxpayers money in the short run), the pension plans would be much better off today.[/quote]

So wouldn’t it be fair that we ask for those employee contributions now?

I support pensions, but the system needs to be reformed. Employees and employers should always contribute.[/quote]

I’ve always said that employees should pay their fair share, not to mention the fact that some pensions are too generous and (IMHO) need to be reduced in some way. It’s not just the employee portion, but the *employer* portion that was not paid during the “contribution holidays,” so if we’re to increase contributions from employees (which I agree with), we also need to understand that the employer portion needs to be made up as well. This is where the anti-union folks get their fodder, though. They don’t understand that “taxpayers” (employers) weren’t paying ANYTHING toward pension contributions during the glory days of the stock market bubble.

[EconProf]

Long ago a French economist named Bastiat warned us to guard against “what is seen compared to what is not seen” in public policy making. I think it applies especially to government pensions.
Rather than ask what is “fair” or unfair–very ambiguous and easily contested word–let us agree that what is really needed is honest and transparent accounting. If office-holders were held to the same accounting standards as the private sector, most of our pension woes would never have appeared.
A pension is simply part of overall compensation when one is hired. They are promised a package of goods that include pay, working conditions, various costly items like health care, paid vacations, etc., and a promise to make future cash payments upon retirement in the form of a pension. All except the last are easily accounted for and totaled up to tell all parties the cost of hiring this employee.
Honest accounting would require the employer, whether city council, school district, or state, to set aside the appropriate amount out of the current budget to pay this future obligation. The amount would depend upon many tricky assumptions about the future: investment returns, lifespans at promised age of retirement, formula defining how pension benefit relates to earnings, etc. Just because these are hard to quantify does not mean we should dodge them.
Politicians have gamed the system by ignoring the long-run costs, and making their short-term budgeting look good and get a boost at the next election. What is not seen is the long-run obligations taxpayers are building up which must eventually be faced. Unions have been more far-thinking than the politicians and the public, and have won these grandiose promises in part because they are more savvy about what is seen vs. what is not seen. The accounting rules that apply to the private sector need to apply equally to the public sector, and the money set aside accordingly.

[ctr70]

[quote=paramount]Let’s be clear about one thing, I don’t think anyone is saying gov’t workers shouldn’t get a fair salary and savings plan; it’s just that right now what they get is unfair to the rest of us who have to actually pay for their benefits.

For the most part, there is no reason gov’t workers shouldn’t receive benefits on par with those of us in the private sector.

They deserve:

A decent salary
A 401k Retirement account with 50% up to 6% match
A standard medical plan like the rest of us get: $20-$30 co-pays, 4k deductible, etc..

No Pensions
No lifetime medical benefits
Sign them up for social security[/quote]

Excellent post Paramount, totally agree. I’m totally in favor of Gov workers getting excellent pay, excellent benefits, 401k plans on par with the private sector, but NO tax payer supported pensions and NO healthcare for life. Just like in Greece, these have to go.

The Michael Lewis (author of “Liars Poker”) article/interview with Arnold and others a few weeks ago in Vanity Fair is required reading. It goes in depth about the bankruptcy of Vallejo CA and San Jose fiscal woes. And talks about how Arnold says he tried to get somewhere with pension reform but the state legislation wouldn’t have it (they probably get very nice pensions themselves). This is why I thought Meg Whitman was an interesting candidate (she doesn’t get or need a Gov pension so no conflicts of interest there, Gov Brown probably does get one). This article also had an example of a state prison psychiatrist that makes $850k a year on the Gov payroll.

I know a ex Fed Gov employee that gets a $8k/mo Gov pension for life. That is nuts! A working stiff in the private sector would have to accumulate say $2.5 million in capital in a safe investment (with principle not at stake) at say 4% to throw off that income per month! Or work their whole life to develop a free & clear rental property portfolio for a $8k annuity per month. Yet the tax payer is paying out thousands and thousands of these big ‘ol pensions!!

[UCGal]

[quote=ctr70]

I know a ex Fed Gov employee that gets a $8k/mo Gov pension for life. That is nuts! A working stiff in the private sector would have to accumulate say $2.5 million in capital in a safe investment (with principle not at stake) at say 4% to throw off that income per month! Or work their whole life to develop a free & clear rental property portfolio for a $8k annuity per month. Yet the tax payer is paying out thousands and thousands of these big ‘ol pensions!![/quote]
This is an apples/oranges comparison because you assume the principal is not touched.
My understanding of fixed annuities is that it is like life insurance paid out over your retirement years. Actuary tables are applied and the company selling them (usually life insurance company) is betting that you’ll die before the principal is gone. Your 2.5 Million assumes the estate has 2.5 million at the end.

Assuming your friend is 65 and male it’s not 2.5m, more like 1.3M assuming the online calculator I used is correct. And most annuities are purchased in advance of when the payouts start – for a lower initial cost.

http://www.immediateannuities.com/

[Author]

Posts