4,820 CalPERS RETIREES RECEIVE ANNUAL PENSIONS IN EXCESS OF $100,000
Marcia Fritz, California Foundation for Fiscal Responsibility
April 29, 2009
[Publisher's Note: We are pleased to present this original commentary from Marcia Fritz. A certified public accountant, Fritz is the Vice Chairman of the California Foundation for Fiscal Responsibility - Flash]
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We have a lot to worry about these days.
We’re worried that we may lose our jobs, that we may lose our healthcare insurance and that we won’t have sufficient retirement savings. We realize that
without jobs we
make our mortgage payments;
we know that our homes have dropped in value resulting in little or no equity, so we can’t afford to stay in or sell our homes.
In California there is one lucky group that doesn’t have those worries:
state and local government retirees.
As of May, 2008, there were 4,820 CalPERS retirees receiving annual pensions in excess of $100,000.
That didn’t include government retirees in 80 other plans in California—judges, UC, STRS, charter cities, and 1937 Act counties.
About half of these retirees were public safety workers: cops, firefighters, prison guards.
The remaining half includes former city managers, assistant managers, county executives, district attorneys, engineers, finance officers, personnel directors, computer scientists, and physicists.
Since May 2008, more than 120 new retirees have joined the “$100,000 Club” – each month - every month. That’s been going on for the last 12 months – more than 1,500 have joined that well-paid retirement group ; this rate of increase will accelerate as droves of retired public safety workers who are now in the $90,000 to $100,000 range receive annual cost of living increases.
ACCESS AN ONLINE, SEARCHABLE DATABASE OF THE 4,820 CalPERS RETIREES RECEIVING ANNUAL PENSIONS IN EXCESS OF $100,000 HERE.
Led by labor unions, this group has profited tremendously.
When the dot com boom artificially inflated stock prices (giving pension funds surplus assets) those union representatives convinced former Senator Deborah Ortiz to carry SB 400 to give pension fund surpluses to government workers by increasing retirement benefits while lowering retirement ages.
When real estate values exploded, developers’ fees, property taxes and sales taxes increased and labor negotiators demanded that those higher revenues be spent on higher worker salaries.
The combination of generous formulas, lower retirement ages, and higher salaries (used in new formulas) means that career cops, among others, now receive pensions that exceed their final year’s wage, and for more years in retirement than they ever worked.
These guaranteed generous pensions come at a terrible price.
Even before the stock market crash, unsustainable pension and retiree health costs forced the City of Vallejo to declare bankruptcy. The state, cities, and counties were struggling to pay pension costs before the market crash.
Today they are ill equipped to take on any new spending as they brace for much higher pension plan contributions in 2010 - just when the market crash in pension funds will fully impact their budgets.
It’s ironic that we are seeing layoffs of active police and firefighters in order to pay benefits for retirees.
Have we lost our common sense?
What can we do to stop this increasingly unsustainable outflow of funds?
A 2nd tier of benefits must be provided to new government workers that scales their pensions back to reasonable levels for all new government workers .
Benefits should be uniform for miscellaneous workers and safety workers no matter if they work for a city, the state, or a special district.
Just like social security, the benefits should be portable, so when a worker transfers to another agency, his retirement benefit continues without a break in service.
But folks at the Capitol are loathe to even entertain this idea.
In an attempt to stop the coming train wreck, Governor Schwarzenegger created the Post Employment Benefit Commission in 2007 to study the problem and make recommendations to handle it.
That final report concluded, “With respect to funding these critical benefits, it is important to emphasize that each public agency in California faces different funding constraints, personnel needs, and organizational purposes.
A one-size-fits-all approach is neither appropriate nor practical.”
Tell that to the Social Security Administration, Federal Employee Retirement System, and almost all other states that have uniform benefits for all government workers.
Others ask, “If agencies have the ability to scale back benefits for new workers, why is legislation necessary to force everyone to adopt lower, uniform formulas?”
It is next to impossible to scale back benefits, even for new employees, because unions fight fiercely against these attempts.
When the Governor was forced to furlough workers to cut costs this year, he was compelled by unions to make pension contributions based on full salaries. Unions consider pensions inviolable.
Pete Wilson successfully rolled back pension formulas for new workers when he was governor, but that was years before unions rose to the power they enjoy today.
Some cities are going through their 2nd round of increases.
If nothing is done, eventually all government employers will have adopted the highest formula allowed.
History proves employers grant pension increases in bad times as well as good times.
We must stop this nonsense at the ballot box.
Marcia Fritz, a Certified Public Accountant, is Vice Chairman of California Foundation for Fiscal Responsibility. You can check out the foundation's website at www.californiaPensionReform.com.