Public pension reform gaining traction

April 20, 2012

By DANIEL BLACKBURN

As a subject of general discussion, California’s skyrocketing public pension situation has come a long way in a very short time, one of the state’s leading authorities on the subject said Thursday.

Marcia Fritz, president of the California Foundation for Fiscal Responsibility (CFFP), told a gathering of business and property owners that despite the greater interest, public pensions and benefits in this state are proving particularly difficult to impact, even in an economic crisis. CFFP is a statewide organization advocating for public pension reform.

“The issue of public pensions has engaged the people of California like no other issue,” Fritz said at a meeting of the San Luis Obispo Property and Business Owners Association at Cafe Roma.

“This problem has been around for a long time, and we’ve barely scratched the surface.[Governor Brown] knows it, he gets it, and he has proposed a 12-point pension reform plan which he knows is critical for his tax proposal,” said Fritz. “If he can’t show that there has been movement by labor to make comprehensive cuts in California, the governor’s (proposed) tax increase will suffer.”

But she predicted Brown’s pension reform plan “will pass overwhelmingly. This will be good for fiscally stressed cities. A statewide pension reform will help a lot of cities.”

San Luis Obispo County is one of 248 California agencies (out of 1,600 public agencies) that has reformed their pension plans in recent years.

Further complicating the matter for voters here is the fact that California is the only state in the nation that allows pension benefits to be negotiated at the bargaining table. It’s also the only state with constitutionally-protected public pensions and benefits, which makes it exceedingly difficult to make progress in reform, said Fritz.

“Many of those in management who negotiate these contracts are also negotiating for themselves, and that is not right,” she told the group.

“It’s a cookie cutter system — [there are] 12 different formulas, three or four dozen optional plans — every time labor sits down with management, they just go through the Sears catalog of products and pick them, one by one, and the result is they have been getting their benefits enhanced regularly. And once those benefits are enhanced, our state constitution makes those a vested right.”

That means those pension levels and benefit packages “cannot be taken away” and never altered, changed, or lowered.

It’s a different situation in the rest of the states, authorities of which can appeal to federal courts for relief.

Fritz said that federal judges have “generally” been ruling in favor of managers of debt-ridden agencies, by first eliminating retirement health coverage, then cost of living increases for retirees.

“That’s what’s going on in other states,” she said, but existing constitutional protections mean California courts have no say in the matter, she noted.

Fritz believes that a better system of reporting of pension plans would be a step in the right direction.

“The system has been so abused, that the only way I can figure a fix is by putting the real costs before the public,” she said. “If people could go to [their local agencies’] website and see what’s really going on,” significant change might be possible.

And changing the constitution will not impact current plan holders.

“If we don’t enjoy a real upswing in the economy, it going to be really, really painful” for California agencies and, ultimately, taxpayers,” she said. Benefit enhancements already promised will have to be borne by taxpayers.

Fritz lauded county managers for their efforts in pension reform.

“I’m very impressed with what the county is doing,” she said. “ But the city of San Luis Obispo has not gone far enough. Their current plan has only achieved a 43 percent reduction in the goal, and that is not good enough. If certain factors do not come into play, [the city] will face serious financial problems.”

Unions in this state have regularly opposed any plan to require employees to pay half of their retirement costs while working. And that, she said, is contributing to public dissatisfaction with the way things are being done.

“Unions are going to hurt, because they know that people support the idea [of public pension reform], and if the unions fight it, they will not have any hope of tax increase. And people are inflamed. They do not like the $100,000-pension club — there are 22 from the city of San Luis Obispo, and that’s a lot, and it’s growing.”


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ratherbefishing

I work for a school district, classified position (non academic/educational). I’ll retire next year with 14 yrs and highest salary of 51K (14 yrs ago I began at $10.23/ hr). Formula is: 2% X yrs of service X highest salary. For me: 2% X 14 X 51000= $14280/ year. I’ve contributed 8% of my salary per year and after 5 yrs, the district began to contribute 6% to CALPERS. FWIW


slo Fact Finder

Not everyone is in a position to “game the system” like some of the higher paid school administrators

in your district. This is exactly the point of Dan’s article as several high paid district administrators not only recieve outrageous pay & benifits before and after they retire but they also are in a position in many cases to establish policies and/or negotiate with the local unions in a way that benefits them most after they leave their initial jobs. Talk about “conflicts of interests! Sorry you have been caught up as one of the hard working “little people” in a system that rewards a higher percentage of outgoing personnel with the top salaries and benefit packages, who many times, influence the establishment of their own retirement benefits….


SewerHeightsRez

The main gist of this article is pure fantasy as true, meaningful public pension reform will as a practical matter never happen. The public sector will shut up and suck their thumbs for awhile, maybe even act sympathetic to taxpayers being fleeced (they aren’t stupid) but they know that nothing of substance will happen and this will soon pass. First all please understand that even if meaningful reform occurred tomorrow morning it would still take 50 to 60 years to flush today’s herd of bloated employees through their gold plated pension palaces and into their jewel encrusted caskets. Secondly and more important, meaningful pension reform can never happen under the current state constitution. Best case scenario for tax payers is you might see the end of spiking, retired annuitants, air time, and retro bennie bumps, but even that is highly unlikely. Highly unlikely. My advice to anyone under the age of 35 is to become a public employee unless you are a doctor, a lawyer, or highly successful business owner.


NorCoMod

I remember the Trib Viewpoint article about 3 years ago by Ann McMahon (rest her soul) complaining about the outcry over bloated public employee pensions and salarys. She accused the private sector (a minority in this county) of using public employees as a scapegoat for the economic malais affecting the U.S. If I recall, she opined that we wished to “balance the state budget on the backs of public employees”.

Looking back now, that’s exactly where much of the balancing needs to be done. And I don’t want to wait 30+ years until the second tier employees become the principle work force. We need to adjust the existing pensions, whether by finding a way to declare the state insolvent (which I think it is), or some other means. And yes we will be swallowed with lawsuits. So be it, what’s right is right.

Lastly the blame for this mess belongs squarely on all of our shoulders. We elected and relected legislators that created this mess by sleeping with the public employee’s unions. They also bed hop regularly with the private employees unions, as seen by the structure of this state’s prevailing wage laws and Project Labor Agreements. We were all sold down the river 30+ years ago.

I love California and don’t intend to move my business to another state as what happens here is simply a preview of what’s coming to the rest of the country. Unless they wake up.


Polititian Not

I think i’ll apply to Atascadero for a janitors job.I’m 50 now so in 10 years I should be able to retire at say 7 dimes per month?It’s a beautiful thing.Whick Onion do I need to join?


Mike

The govt should get out of the pension business completely. If a 401k is good enough for me then a 401k is good enough for any govt employee. Allow a reasonable match on employee contributions and be done with it. Also govt employees should be required to participate in socialist insecurity. If I am getting screwed by ss then govt employees should be getting screwed too.


slomike

A 401k is not good enough for you or anyone. it was sold to people to make them think they didn’t need pensions. Everything was fine until folks actually saw how little would result. Found they had been “trickled’ on. Now they want to pull pensioners out of their lifeboats. Might happen. All a part of being in the 99%.


hijinks

If a 401k is good enough for you, it must be b ecause you’re a very rich man. Most people have no clue how to manage their 401ks and can’t contribute enough to them to ever hope to live on them in retirement. That’s assuming the Wall Street goons don’t just take your money away.


Everyone should have a defined benefit pension. Period. That’s the only way most people can hope to remain solvent in retirement. Every other developed nation has a system of some sort offering such. We are the primitives who allow ourselves to be shoved around by the Big Moneyed Interests and told lies about 401ks being OK (remember, originally they were set up as SUPPLEMENTS


hijinks

(got cut off) as SUPPLEMENTS to defined benefit pensions and were never intended to constitute the totality of a pension). Dumb Americans have been sold a bill of goods by the 1%.


I like the way Hightower puts it: “The 1% think they’re the top dogs, and we’re just so many fire hydrants.”


TheBeachBum

We are on track in the United States to pay more money to 20 million public sector retirees at an average pension of $65,000 ($1.3 trillion per year). than we will be paying in social security. It will cost less to cover all 80 million private sector retirees, at an average social security benefit of $15,000 per year (about $1.2 trillion per year), than what we are wasting on the privileged public sector employees. Providing a level of retirement security to government workers that only the wealthiest 1% can enjoy in the private sector is not “protecting the middle class”, it is economic enslavement by government unions over the taxpayer.


slo Fact Finder

These facts do not bode well for our children and grand children to be responsible for in the not to distant future!


TheBeachBum

The point isn’t to punish public sector employees, it’s to stop punishing the taxpayers. Your extravagant salaries and pension benefits are eating up so much of the overall tax-base that government’s chief purpose becomes to reward public employees. Meeting these unsustainable costs comes at the expense of the rest of the state. Parks are closing, classroom size is increasing and public services are in steep decline. The only public sector entity that isn’t suffering are the employees both current and retired.


Public employee compensation should be no better, and no worse, than what is available to other employees in the community.


slo Fact Finder

Way to go SLOPBOA you guys really put on an informative event which really “Let the Genie out of the bottle” in terms of the reall underlying issues about public pensions and related benefits.


It’s refreshing to be able to discuss this frequently misunderstood and often surpressed issue in an “open unbiased forum”..Keep up the good work you guys have been doing for the past seven or more years is bringing out the unpopular truths about government overspending and bloated public sector payrolls & retirement plans. Hopefully, the City of SLO will eventually “Get It” and begin to turn that massive cruise ship around to a new course commensurate with the pay and comparable retirement programs currently seen in the “private sector”.


This recession is far from over here along the Central California Coast. Perhaps this fact should be made even more clear to the City of SLO Council Members before it’s to late to enjoy both the life style and economic benefits of living in good old “Happy Town, USA”


slo Fact Finder

Nice post!


SewerHeightsRez

Putting a $100,000 per year pension in perspective, in reverse:


Assuming you work 30 years in the private sector, retire at the age of 62, live on your retirement savings which earn a 4% return during retirement and die at the age of 82. In order to achieve a 100k yearly retirement income you would need to start with $1,350,000. In order to start with $1.35M you would need to save $20k per year for 30 years at an average return of 5%. In order to save $20k after tax you’d need to make $25k. The value of that pension is $25,000 in yearly salary. Please name one private sector job which from day one provides employer-contributed $20k per year after tax.


Now let’s say you are a public safety employee retiring 10 years earlier, at age 52, and living another 30 years. The private sector tax paying slave would need to start with $1,750,000 which would require earning $30k per year in order to save $25k per year. Please name one private sector job which requires no experience or education and from day one provides employer contributions of $25k per year after tax.


None of the above scenarios include the value of lifetime medical benefits (CALSTRS only).


We have allowed an entire generation of public employees, through unions and corrupt managers, admin. and pols, to turn democracy into kleptocracy.


BeenThereDoneThat

WOW!!!! That was an excellent breakdown. Now let the whining of the Gov. entitled begin. Sewer you just opened a whole can of worms. I LOVE IT!!!!


hijinks

Pensions are fully taxable. Your facts throughout argument are just plain wrong.


First of all, who makes a $100,000 pension? The average CalPers pension is $23,000, and that’s AVERAGE, meaning half are lower. Many state retireees don’t get social security, either. Their pension is it.


Second, the pension doesn’t come “from the state.” It comes from CalPers, which is pretty fully funded to meet its obligations — by a combination of employee and employer contributions. This is no different f rom the private sector you like so much — same sources, same deal. The “state” is not on the hook if CalPers miscalculates and doesn’t collect enough money to meet its obligations.


Finally, your complaint you can’t earn enough on investments shows gross ignorance of why a huge system like CalPers is exactly what’s needed. They have experts managing their investments. Historic rates of return have been 8% or more; now they’ve revised that to 7.25%. You don’t know how to get that sort of return, and neither does anybody else writing these anti-publid-employee screeds. What we should do is allow ALL CA residents to buy into a public pension system like CalPers, and open the door to a healthy retirement to all, instead of using public employees as your fire hydrant.


TheBeachBum

“First of all, who makes a $100,000 pension?”


a.) 12,199 CALPers retirees alone… ( http://www.fixpensionsfirst.com/calpers-database/ )


b.) Then there’s thousands more Teachers (CALTers) . “The number of educators receiving $100,000-plus annual pensions jumped 650 percent from 2005 to 2011, going from 700 to 5,400, according to a Bee review of data from the California State Teachers’ Retirement System.”


c.) and thousands more in local governments that do not participate in CALPers & CALTers.


“The average CalPers pension is $23,000…” – Sure, if you include part-time employees, short careers, elderly widows collecting 50 percent survivor benefits, and retirees who quit the workforce a decade ago with benefit formulas often 30 percent lower than today’s employees. This smokescreen is a classic case of lying with statistics.


“Second, the pension doesn’t come “from the state.” It comes from CalPers, which is pretty fully funded to meet its obligations” – Pension consultant Girard Miller told California’s Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities. That comes to about $22,000 for every single working adult in the state of California.


“Finally…a huge system like CalPers is exactly what’s needed. They have experts managing their investments. …” – CALPers and its strategists have led pension management down many garden paths.Taxpayers will pay for CALPpers miscues. CALPers lost $67 billion in stock market investments in the two-year period 2008-2009. Two of CALPers’ worst investments were in Enron and Worldcom.


I know of no other pension plan on the planet where the employer (i.e., the taxpayers of California) is obligated to make up for investment losses when those responsible for making those investment decisions on behalf of the pension plan make bad decisions.


According to data released by the U.S. Census Bureau, public employees in California were among the best paid in the nation in 2010.


BeenThereDoneThat

Wow here we are again back at the fact that pensions are breaking the back of California. Of course for me or anyone else to say as such, we are just union haters.


JonnyB

“Unions are going to hurt, because they know that people support the idea [of public pension reform], and if the unions fight it, they will not have any hope of tax increase. And people are inflamed. They do not like the $100,000-pension club — there are 22 in this county, and that’s a lot, and it’s growing.”


Here are the monthly and annual breakdowns by district:


Atascadero Unified


James L. Stecher $10,536.56 – $126,438.72


Coast Unified


Denis M. Declercq $8,966.09 – $107,593.08


Lucia Mar Unified


Sidney C. Richison $10,585.38 – $127,024.56


Sharon R. Roemer $8,369.13 – $100,429.56


Paso Robles Joint Unified


John D. Morse $9,456.80 – $113,481.60


Edwin A. Railsback $8,936.68 – $107,240.16


Patrick J. Sayne $9,031.52 – $108,378.24


Pleasant Valley Joint Union Elementary


C.L. Cartwright $9,946.72 – $119,360.64


Julie A. Cavaliere $11,151.11 – $133,813.32


Patrick Fitzgerald $8,793.95 – $105,527.40


Howard Hamilton $11,863.84 – $142,366.08


James R. Voss $9,103.52 – $109,242.24


San Luis Coastal Unified


Nancy E. Howland $10,238.79 – $122,865.48


Mary A. Matakovich $12,276.04 – $147,312.48


Edward Valentine $19,675.61 – $236,107.32


Peter J. Zotovich $10,132.79 – $121,593.48


San Luis Obispo County Community College District


Lewis L. Bedell $8,467.35 – $101,608.20


Susan M. Dressler $10,908.86 – $130,906.32


William L. Fairbanks $10,221.28 – $122,655.36


Randall D. Gold $8,897.40 – $106,768.80


Warren E. Hansen $8,539.60 – $102,475.20


Allan R. Marshall $8,908.43 – $106,901.16


Mary N. Parker $9,961.02 – $119,532.24


San Luis Obispo County Office of Education


John D. Barnhart $11,577.86 – $138,934.32


Jeanne E. Dukes $8,632.46 – $103,589.52


Templeton Unified School District


Richard G. Duke $8,573.15 – $102,877.80

http://calcoastnews.com/2011/06/retired-educators-receive-more-than-100000-annually/


HOW MANY ARE UNION MEMBERS VERSUS ADMINISTRATORS?


JonnyB

Atascadero

James L. Stecher


ADMINISTRATOR (Sup)


Coast Unified


Denis M. Declercq


ADMINISTRATOR (Principal)


Lucia Mar Unified


Sidney C. Richison


Sharon R. Roemer


BOTH ADMINISTRATORS (Asst Sups)


Paso Robles Joint Unified


John D. Morse


ADMINISTRATOR (ASST SUP)


ANYONE GETTING A PATTERN HERE?


flytrap

Is there also a pattern to the party affiliation of the politicians that granted all of these generous benefits?


JonnyB

Nope, Check out the 1999 bill that allowed Cops/safety employees to go from 2% per year to 3% per year.


TheBeachBum

According to the Legislative Analyst’s Office (a state department staffed by state employees)… In 1999, retirement costs comprised about 1.7 percent of the state general fund budget ($1 billion out of $57.3 billion) last year, retirement costs comprised about 6 percent of the state general fund budget ($5 billion out of $86 billion). The average pension benefit for all CalPERS retirees (including those w/ less than 25 years in the system) is around $25,000 a year. That’s not even close to the private sector average, but still not the real problem.


It’s the public employees who retired in 2008-09 with 25 years or more of service who will receive between $53,000 and $66,000 a year (double the current average). This amount will grow exponentially over the years to come as the percentage of retirees whose benefits were spiked from 2% to 2.7-3% in the late 90’s increases.


That’s the problem.


It’s the tens of thousands of public safety workers (Police, Firemen, Prison Guards, along with… lifeguards, motor-vehicle examiners, emergency dispatchers, livestock inspectors, funeral home inspectors, fingerprint analysts, litigation specialists, weights-and-measures specialists, photo-electronics technicians) entering the retirement pool at 3% @ 50.


That’s the problem.


It’s the percentage of public workers receiving pension benefits topping $100,000 a year (19,100+ in 2011) that is projected to keep growing (78,000+ in just 4 years), in part because of increased benefits adopted in the past 15 years.


That’s the problem.


It will be impossible, even if the California economy was strong, to service such future pension obligations.


That’s the problem.


danika

It was quite an informative meeting. I came away with a better understanding and have more questions.