The generous -- and unsustainable -- level of public employee pensions in California is finally getting some long-overdue attention on two fronts: Cities, counties and other government entities feel the pinch now but expect serious pain for 2010-11 because of pension funds' huge investment losses. Stanislaus County will pay more than $36 million in pension costs in 2009-10 and the amount could double the following year. The city of Modesto is bracing for a multimillion-dollar increase in its obligations to the California Public Employees' Retirement System next year. A statewide group advocating pension reform has posted on the Internet lists of PERS (Public Employees' Retirement System) and CalSTRS (State Teachers' Retirement System) retirees receiving more than $100,000 a year and is pressing county retirement associations for the same information.
The point behind making the information public is not to single out individuals so much as to identify the practices that have made some of these pensions so high. These include "spiking" -- adding accumulated vacation time and other benefits to the final year's salary used to determine pension amounts. Furthermore, many of those receiving the highest pensions were in positions to negotiate the labor contracts that have contributed to pension bloating. Under typical "me-too" clauses, the executives benefit from the same provisions they negotiate for others. There's no incentive for restraint. Finally, many agencies pay all or part of employees' retirement contributions as well as the employers' portion. All that is taxpayer money, though not readily visible when salaries are released. California's generous pension plans date to the late 1990s, when state legislators and other elected officials naively bought the argument that because the investment returns were so high, these perks could be provided at no cost.
That might have been true for that moment, but it's abundantly clear that those overly-generous defined-benefit pensions cannot be sustained. Agencies should not and cannot renege on the benefits they have guaranteed current workers and retirees, but they must immediately start negotiating more realistic pensions for future employees, at ages more consistent with those in the private sector and with current life expectancies.
Modesto Bee Opinion May 7, 2009
A group pushing public pension reform has compiled a database of government retirees who receive $100,000 or more a year from the California Public Employee Retirement System. There are more than 4,800 names on the list — an indicator of the generous pensions provided by local and state government. According to the data compiled so far, the highest-paid public employee retiree in the state is Bruce Malkenhorst, the former city administrator, clerk, finance director and treasurer of Vernon, a small industrial city near Los Angeles. He earns $499,674.84 a year, or $41,639 a month in pensions.
Here in our area, California State University, Stanislaus, has the most retirees earning six figures — seven. The city of Modesto has six; Manteca, four; and Turlock, one. The database is only for CalPERS, so it does not include Stanislaus County retirees, who have a local retirement fund. Firefighters and police officers dominate the $100,000-and-over list, which is no surprise. Public safety personnel have the richest retirement formulas in most jurisdictions. If they work for 30 years, police and firefighters can retire in their early 50s with 90 percent of their last year's salary, which is usually their highest. Managers also dominate the $100,000-club list. These are the people who are supposed to represent the public when employee benefits are negotiated. But when government managers sit down with union leaders to dicker over compensation, they are negotiating for themselves as well. If rank-and- file workers get a wage or benefit boost, nonunion managers usually get a commensurate hike and pension improvement.
With the economy in decline and public employees being laid off, these pension disclosures are likely to stir anger. But it's important to direct that anger at the right people. Our elected leaders — governors, legislators, county supervisors, city councils, and local fire and water district board members — are to blame. They approved these lucrative pensions.
The CalPERS board also bears a responsibility. Over the years, the board has consistently failed to warn legislators of the risk involved in benefit increases. Legally, it would be difficult, if not impossible, to roll back benefits already earned. But the Legislature and local governments can change formulas for new hires and should do so. Retirement age should be raised to 55 and higher. Pensions ought to be calculated based on the average of an employee's last three or five years on the job, as is common in the private sector. The current benefits are not sustainable. Former Assemblyman Keith Richland summarized the situation with this comment: "If we don't do something soon, there may be several government entities that go bankrupt, and those that don't are going to die from a thousand cuts in services."
The database is available at www.californiapensionreform.com/CalPERS.
No comments:
Post a Comment