Public vs. private pension study: the gap widens

A new study done for a pension reform group says retirement benefits for California public employees are often two or three times greater than benefits in the private sector, where pensions and retiree health coverage are dwindling.

The study also found that contrary to the usual justification for higher public employee retirement benefits (lower pay on the job) average wages for comparable work are similar or slightly higher for public employees than in the private sector.

The value of retiree health coverage provided for public employees and their spouses and dependents, a benefit seldom found in the private sector, can exceed the total value of some private-sector retirement benefits.

Other things said to boost public pensions: generous pension formulas, early retirement at 50 and 55, annual pension inflation increases, and if a pension recipient dies continuing to pay a quarter of the pension to a survivor, with a $2,000 lump sum.

The study was done by Capitol Matrix Consulting (Mike Genest, Brad Williams and Jay Peters) for the California Foundation for Fiscal Responsibility (Marcia Fritz) under a $150,000 grant from an undisclosed out-of-state source.

As struggling state and local governments spend more of their deficit-ridden budgets on rising retirement costs, whether public pensions and retiree health coverage are too generous is part of the political debate.

Reform advocates and labor defenders can each find studies reflecting their views. In an appendix, the new study lists several studies showing that state and local government employees are overpaid, and several studies showing they are underpaid.

The foundation led by Fritz has proposed cost-cutting pension reform initiatives in the past, but was unable to get the funding needed to place them on the ballot. Fritz said she is now focusing on pension research and education.

A spin-off group with a different tax status, California Pension Reform (Dan Pellissier), is working on a pension reform initiative for the ballot next year. One plan being considered would switch new hires to a 401(k)-style individual investment plan.

What the new study adds to the pension debate remains to be seen. The study doesn’t deal with the main issue, rising government costs, or a conventional measurement of adequacy: How much of the job salary is being replaced by retirement income.

When Gov. Brown, for example, proposed a pension cut for new hires during his previous term in 1982, he argued that it was possible for a state worker to retire at age 62 with combined CalPERS and Social Security income exceeding pay on the job.

The goal of the new study is to compare retirement benefits received by state, local and federal government workers with the employees of large California companies and two reforms proposed by the foundation.

The methodology is a “present value” calculation of future benefits. It’s widely used in business and economics for comparisons. But for those unfamiliar with the technique, the process used to match the benefits may not be easily understood.

Here’s a key sentence from the study: “Results in this chapter show employer-provided retirement benefits in terms of their present (lump sum) value at termination of service, expressed in today’s dollars.”

The study said the method puts pensions, 401(k)-style plan balances, and retiree health benefits on to a “common basis,” while also capturing the value of pension inflation adjustments, survivor benefits and temporary supplements.

Different assumptions about the “time value of money” and other factors would produce different results, the study said, so the focus should be on the relative value of benefits under the different programs, rather than the dollar amounts.

On the other hand, the study has reader-friendly graphs for each of the scenarios used in the comparisons. A common theme is the short stack of benefits for the private sector, with the exception of short-term employees.

The study said one of the difficulties in making comparisons is that “pensions are disappearing from the private sector.”

About 87 percent of state and local government employees in the Pacific region have access to pensions, compared to 20 percent of private sector employees, according to U.S. Bureau of Labor Statistics cited in the study.

Six large California-based companies were used for the private-sector comparison in the study. Only Chevron employees hired before 2008 continue to earn benefits under a traditional pension.

A “hybrid” plan combining a small pension with a tax-deferred 401(k) individual investment plan is offered Chevron employees hired after 2007, Safeway employees and Northrop Grumman employees hired before July 2008.

Only a 401(k) plan is offered to employees of Cisco, McKesson, Qualcomm and Northrop Grumman employees hired since June 2008. In the comparison with government plans, the study assumes the 401(k) plans earn 7.25 percent a year.

But as critics of 401(k) plans note, investment earnings are unpredictable, leaving the individual at risk if money falls short during retirement. A government pension is guaranteed income for life, leaving taxpayers with the risk if earnings fall short.

One of the comparisons in the study is with private-sector pensions in the 1990s, before the era of cuts and freezes. A federal survey then found that the average private pension replaced less than a third of the salary of a 30-year worker retiring at age 65.

The study said a similar state worker currently would receive “more than twice that level” under a California Public Employees Retirement System pension based on a common formula providing 2 percent of final pay for each year served at age 55.

Retiree health care is provided for roughly two-thirds of state and local government employees. The study said the state and UC offer retirees coverage similar to active workers through age 64, followed by supplements at age 65 and over.

About 22 percent of private-sector workers were offered early retirement health coverage in 2008, down from 31 percent in 1997, according to Employee Benefit Research Institute figures cited by the study.

The decline may have been encouraged by an accounting rule change in the early 1990s. The study said companies have to charge expected post-retirement health benefits against earnings and disclose liabilities.

The state has not set aside money to pay for retiree health care promised current workers, an unfunded liability estimated to be $60 billion over the next 30 years. The state payment for retiree health next fiscal year is expected to be more than $1.5 billion.

The new study said teachers in the California State Teachers Retirement System earn less generous benefits than other California public employees. They do not receive Social Security, and many do not receive retiree health coverage.

But the study failed to note that a quarter of the teacher pension contribution (2 percent of pay from the total contribution of 8 percent of pay) was diverted into a Defined Benefit Supplement for a decade ending in January.

The supplement earns what the CalSTRS investment portfolio earns, with a guaranteed minimum based on the 30-year Treasury bond. Teachers also can invest the 6.2 percent of pay that would have gone to Social Security in tax-deferred plans.

A report to the CalSTRS board in June 2009 found that a teacher at age 63 after 34.5 years of service could retire with 103 percent of final pay, if they have the pension, the supplement and have put $100 a month into a tax-deferred investment plan.

The board was told the pension of the typical CalSTRS retiree is about 62 percent of final pay.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at https://calpensions.com/ Posted 5 May 11

43 Responses to “Public vs. private pension study: the gap widens”

  1. SkippingDog Says:

    Just have to love that “$150,000 grant from an undisclosed out-of-state source.”

    Wonder what else the Koch brothers and their buddies are supporting here in California.

  2. Tough Love Says:

    Quoting …”A new study done for a pension reform group says retirement benefits for California public employees are often two or three times greater than benefits in the private sector, where pensions and retiree health coverage are dwindling. The study also found that contrary to the usual justification for higher public employee retirement benefits (lower pay on the job) average wages for comparable work are similar or slightly higher for public employees than in the private sector.”

    An appropriate goal for Public Sector TOTAL COMPENSATION (cash pay + Pensions + Benefits) should be that it reasonably equal that of comparable Private Sector jobs. With Cash Pay alone being greater in the Public Sector, there is ZERO justification for ANY (yes ANY) pension accruals for FUTURE service that exceed that granted Private Sector workers by their employers.

    Private Sector employees rarely get more than 3-8% of pay towards their pensions (most it it via 401K Plans), while current Public Sector Plans require TAXPAYER contributions from 24% to 53% of cash pay (depending on the richness of the Plan …. with safety workers at the top end). This is DIRECTLY APPLES-TO_APPLES comparable with the 3-8% Private Sector workers get…. and is completely absurd.

    It is so beyond due to hard freeze these excessive Defined Benefit Plans and shift ALL CURRENT workers into 401K-style Plans.

  3. Tough Love Says:

    Skippy … does the source of the grant make Public sector Plans any less “rich” and “excessive” ?

  4. john moore Says:

    How does this study relate to a Ca. city that enacted a retroactive 3@50 Calpers Plan? Those cities are broke or in denial. If pension deficits for a retroactive defined benefit plan are systemically growing because of the size of the deficits and the actuarial investment rate(7.75%),what else do we need to know?Ed,such cities are in a class (doomed) different from other entities and need to be discussed as a separate problem.

  5. Dr. Mark H. Shapiro Says:

    Well, let’s see. The wealthy interests in this country have managed to destroy retirement security for the average private-sector working man and woman in this country. Now they are trying to finish the job by destroying retirement security for public-sector employees.

    We are devolving quickly into an oligarchy where a few percent of the population controls the majority of the wealth in this country.

  6. Charles Sainte Claire Says:

    Tough Love

    Where do you get 24 to 53% from? The State pays in about 19% for miscellaneous State employees. The paid in 18% in 1969. And the % was higher in 1980 than today.

  7. Tough Love Says:

    Dr. Shapiro … nice try at trying to divert the reader’s attention from the issue at hand …. EXCESSIVE Pensions.

    At least Corporate pigs are spending shareholders’ money.

    Public Sector pigs are spending TAXPAYERS’ money.

  8. Dr. Mark H. Shapiro Says:

    The median state worker pension is about $26,000 per year – hardly excessive, and only about $5,500 of that comes from the taxpayer. The rest comes from earnings on CalPERS investments, and worker contributions.

    Sorry your 401-K isn’t working so well for you Tough Love.

  9. Tough Love Says:

    Charles,

    The level annual TOTAL Plan cost expressed as level %s of cash pay to fund over one’s career the pension of a 30 year employee retiring at age 55 for various formulas are as follows:

    2% per year of service w/o COLA – 29%
    2% per year of service with COLA – 39%
    3% per year of service w/o COLA – 44%
    3% per year of service with COLA – 58%

    Assuming the average employee contribution to be 5% of pay (although I know it can be higher for safety workers). Deducting this 5% from the lower and higher bounds above gives the 24-53% I used in my earlier comment.

    Clearly, the state is not funding the Plans sufficiently…… that’s one reason contributing to the unfunded liability. If your “miscellaneous” State employee formula is 2% with COLA, the full cost (again for the 30 year employee retiring at age 55) is 39% of pay…. with the employer’s (meaning TAXPAYER’S) share being the 39% reduced by whatever the employee is contributing.

  10. Tough Love Says:

    Dr. Shapiro ….. I would have thought that once one earns an MD or PHD (other than by mail-order ?) honesty is part of your make-up. Honesty not only includes accurate statements, but NOT misleading via the OMISSION of important facts.

    Yes, I have heard that the median worker pension is $26K, but that median includes short career workers, part time workers, and those who retire long ago with much lower salaries. Perhaps you intentionally left out that recent year retirees’ pension is $66K. Isn’t THAT the more relevant figure (but perhaps not one that supports your agenda) ?

    Now, as to you comment referring to the $26K that …”only about $5,500 of that comes from the taxpayer”

    Anyone with any financial background knows that there are ONLY 2 sources of contribution to Public Sector pension, the employee, and the employer (meaning the taxpayers). Time and again evidence shows that to fully fund the promised pension the employee contributes only $1-$2 for every $10 the Plan needs. A significant portion of Plan costs are indeed paid for by interest earnings on prior contributions, but those interest earnings are rightfully associated in proportion to the source of the contributions. Stated another way, 80-90% of the interest is associated with the TAXPAYERS contributions and had they not been forced to make such contributions (to fund the excessive Plans) a good portion of their contributions AS WELL AS THE INTEREST EARNED THEREON would have stayed in the taxpayers’ pockets. The correct picture is that of the 66K median pension for current retirees 80-90% or roughly $56K has been paid for by taxpayers.

  11. FLAK88 Says:

    The basic strategic/ political objective here is to get rid of defined benefit plans because Wall Street has never like them They like 401Ks because they yield much more money up front and the individual fees (Oh, those HEAVENLY individual fees !) are like an oil well that never goes dry. From what I’ve read, there is no disagreement in the actuarial community that demographics have created long term funding issues for the pension funds. I think it’s all together appropriate for some truly objective studies to be completed and acted upon, in order to LEGALLY ensure long term sustainability of the funds. However, the likes of the garbage referenced in this article does not even come close to what’s needed. I’m surprised that a column written by experts is giving credence to statistical work products that are so obviously politically motivated.

  12. Charles Sainte Claire Says:

    Tough Love

    Let me see if I have this straight. The State pays in 34% to my retirement because the taxpayer could have invested the money some where with earnings or interest. I only invest 5% because I could not have invested the money with earnings or interest. I would have put the money in a Mason jar and buried it in my backyard.

    By your reasoning if an employer and an employee each put in 5% of payroll into a 401K, the employer could have invested that money, but the employee would stuff it in his mattress. Since that money could have still been the employers he paying 75% for the retirement. Right?

    And by the way the money is no longer the employer’s in either case. Once the employer pays it it belongs to the employee. What the employer could have earned with it has no meaning. If he wanted to earn money with it he should have kept it.

    This is akin to saying that because the employer could have invested your salary instead of paying for your work he now is paying for your mortgage, car payment, credit card bills, utilities, food ad absurdium.

    If you are being paid wages and benefits, private or public, for your work the whole enchilada now belongs to you.

    And until I see the State paying in 34% of payroll into Calpers I will maintain that the State pays the current rate, about 19%. And they would not have to pay that much if they hadn’t taken a several years long “pension holiday” in the early 2000’s.

  13. Dr. Mark H. Shapiro Says:

    Charles has it right. Pensions are a form of deferred compensation. Part of the money invested comes from the taxpayers, and part from the employees. And it is true that the investment returns all accrue to the pensioners. But, through investment returns the taxpayer is able to offer a dollar of deferred compensation for a small fraction of what it costs him or her for direct compensation. This is a good deal for both the worker and for the taxpayer.

    For many years the taxpayer contribution to the pension dollar was about 12.5 cents. Currently, it’s about 21 cents. And as the pension funds recover from the losses incurred during the financial meltdown created by the private sector, the taxpayer contribution will again go down to less than 15 cents on the dollar.

    As far as pension sustainability is concerned CalPERS currently is paying out about $1 billion per year more than it is taking in. If nothing were to change it would take the fund about 240 years to go broke. But things are changing. Retirement formulas have been changed. Employees are contributing more and the retirement age is increasing. So all this noise about a pension crisis is just that — noise.

  14. Tough Love Says:

    Charles, You misunderstand. Assuming it’s the 2% formula (with COLA), the total Plan cost for the 30 year worker retiring at age 55 is a level 39% of pay. The 39% requirement incorporates the interest that will be earned during these 30 years. Whatever the split between employee and employer contributions (towards this 39%) all of the contributions earn interest.

    Nowhere did I say or assume your contributions don’t earn interest.

    And the State Hasn’t been paying it’s FULL share. That’s one of the reasons why we have an unfunded liability. Well that and (primarily) that these Plans are VERY generous (and therefore very expensive and difficult to fully fund).

  15. Tough Love Says:

    Gr. Shipiro, As a retired career Civil Servant you have a vested interest in stopping/delaying the pension reductions so desperately needed.

    The fact that your have written that … “In reality, defined benefit plans usually are less costly to the taxpayers; and, in most cases they offer a much better deal to retirees.” …. clearly shows how biased, uninformed, and/or uneducated you are on this issue. Arguably there is a place for each (DC and DB Plans), or better yet, a combination of the two (as in the retirement system for Federal employees), but this blanket comment is both inaccurate and absurd.

  16. SkippingDog Says:

    TL – The source of funding tells us that there may be a political agenda separate from any feigned concern about budgets and deficits.

    Although you may be a green eye-shade kind of person, many who are supporting the push against public employee pensions, benefits, and unions are in it for nothing more than as a way to diminish the base of the Democratic Party.

    I certainly understand their intentions, but let’s not hide them behind some BS about “fairness” or deficits.

  17. Tough Love Says:

    Skippy, Agreed, there I’m sure are those looking for reductions for purposes beyond fairness. I’m sure SOME would like a shift to 401ks just to get their hands on the additional fees.

    Perfect “fairness” can never happen, but too many elements (Unions, politicians, etc.) have gone overboard screwing the taxpayer.

    Personally, I’ve got more than I need, but I’ve worked with many many “middle-middle-class” folks who will suffer greatly in retirement while those with comparable cash pay in the public sector will be fine … their pensions and healthcare mostly paid for by Private sector taxpayers.

    I also shutter when I think of the financial mess we’re leaving our kids. It’s no solace that most of Europe is in worst shape.

  18. Keen Observer Says:

    The dishonesty re: budget implications is breathtaking. For CalSTRS, school districts pay 8.25% of employees’ salaries. If they went to a 401(k) with a 5% match, they’d have to begin to pay into Social Security, which is 6.2%. The total contribution would be 11.2%. How is that more affordable than 8.25%?

  19. Keen Observer Says:

    How is the tax-deferred 403(b) plan relevant to this discussion? Government employers don’t contribute. It’s only the employees who contribute. You might as well talk about people’s non-retirement savings or inheritances from Aunt Maude.

  20. Tough Love Says:

    Keen Observer, CalSTRS employee contribute 8% ad the state 8.25%, totaling 16.25% If all teachers retired at 55 after 30 years, and have the 2% (with COLA pension formula) that total would have to be 39% to fully fund their pension over their working career. The math is a bit complicated, but since some teacher have shorter careers and retire at different ages, in the aggregate the total contributed needs to be somewhat below the 39%.

    Since the employee share is fixed at 8%, the employer (meaning taxpayer) share is the balancing item. Using the 39% (for discussion purposes … we know it should be a bit lower) the State is shorting the Plan by 39%-16.25%=22.75% of pay every year. Ultimately that will have to made up (with interest) assuming all benefits ultimately get paid as promised.

    However under a shift to the 401K Plan you described, even with the increase from 8.25% to 11.25 % immediately, the State (meaning taxpayers) will pay MUCH MUCH less in the long run. That’s because fixating on the 16.25% ignores that it really needs to be 39%.

    By the way, the shorting of the Plan of it’s full contribution is a MAJOR cause of the current funded ratio of only 71% (and that’s WITH the overly aggressive assumptions CalSTRS uses). With proper assumptions it’s likely between 50 and 60%.

  21. Keen Observer Says:

    Before capitalism attempted suicide in 2008, STRS was about 90% funded. You’re reading structural inadequacies into something that can either be interpreted as unique or cyclical.

    Marcia Fritz had a piece in the Sacramento Bee (I think it was The Bee) in which she presented cuts to pensions as a means to mitigate our current budget problems. That’s just no true. You choose whether the explanation is ignorance or duplicity – I can’t think of a third choice.

    As for the STRS Defined Benefit Supplement, it was probably a little bit wacky to divert a quarter of the defined benefit contribution, but it also allowed employees to contribute 8% of what they earned from extra duties (summer school, coaching stipends, teaching an extra class, National Board Certification). School districts did not contribute a dime to the Defined Benefit Supplement for these activities.

    You also tend to ignore that employees live for varying periods of time after they retire. Some will certainly live for 20 or 30 years, but they will be balanced out by those who don’t live long at all. It’s obvious that STRS and the taxpayers won;t be on the hook for every retired teacher for 30 years, though that’s what many anti-government employee partisans would lead us to believe.

  22. Keen Observer Says:

    Tough Love. Teachers don’t retire at 55 with 2%. The multiplier at 55 is 1.4. Recalculate.

  23. Tough Love Says:

    Keen Observer,

    The 39% in my above comment is the level annual % of pay to fully fund a 2% formula pension (with COLA) over a 30 year career with the retirement at age 55.

    Everything else being the same, if the 2% formula was 1.4%, the 39% would become 27.2%.

  24. Keen Observer Says:

    Are you completely ignoring investment earnings by CALSTRS? I mean, before the 2008 crash, they were 90% funded even with diverting 25% of the 8% teacher contribution to the Defined Benefit Supplement.

    And 27.2% is a hell of a lot smaller number than 39%. Facts before spreadsheets, please.

  25. Tough Love Says:

    Keen Observer, the percentage drops by so much because of the compounding effect of 30 years … this is not surprising.

    The 27.2 % (as well as the original 39%) assumed that salary increases as well as earning on each years contribution are 6%. Interestingly there is almost no change in these percentages if 5% or 7% is used.

  26. Keen Observer Says:

    How I wish salary increases were 6% per year! In my district, we haven’t received a salary increase in at least five years and the past two I’ve had lower pay due to furloughs. Same next year.

    The average teacher retires with a 62% benefit from STRS. If the average “final pay” is about $65,000, then the average pension for a new retiree is about $40,000 dollars – not the $52,000 figure anti-pension types bandy about. No Social Security from the job and decrease in benefits if Social Security benefits were earned from outside employment. Those pension dollars are spent at California businesses and taxed by the IRS and Franchise Tax Board. Who’s getting rich off of this?

  27. Tough Love Says:

    From what I have been reading lately, CalSTRS pensions are lower than most other group in CA. While no one may be getting rich in dollar terms, the Private Sector worker making the SAME pay, retiring at the SAME age and with the SAME years of service gets a MUCH MUCH smaller pension and would indeed consider the Civil Servant retiree “rich” relative to them.

    That’s the key problem with the current structure … at EVERY income level, Civil Servant pensions are 2, 4, even 6 times greater than their private sector counterparts, and with taxpayers’ contributions (together with interest thereon) paying for 80-90% of it.

    Doesn’t seem fair, does it ?

  28. Keen Observer Says:

    The private sector’s abdication of responsibility to its workforce does not logically lead to the public sector doing the same – no matter how much the Koch brothers would like to make it so.

    Earlier in this discussion, you wrote, “At least Corporate pigs are spending shareholders’ money.” I’m not sure how you can say that in the wake of AIG, Lehman Brothers, Bear Stearns, Countrywide, Washington Mutual, General Motors and many other companies that were bailed out with taxpayer dollars because the cost of not taking action would have been far worse.

    The ideological justification for crazy high compensation at the tops of private sector pyramids has always been reward for risk, yet at least some of those dollars could have been used to fund decent pensions for the loyal employees of these companies. And how true is this commonly accepted rationale if those corporate leaders can run their companies into the ground without consequence to their own compensation (like taking it back)? Taxpayers and shareholders are left to suffer, and in many cases the shareholders are public pension funds.

    I had a lot of options in life. As a graduate of one of the top five universities, I could easily have gone to law school or headed for the corporate ladder. These options would have paid far better than teaching, but money wasn’t as important to me as how I spent my days. Selling sugared fizzy water wouldn’t fulfill me. Managing the intellectual development of teenagers who will become first generation college students – that’s better.

    What I’ve said doesn’t mean that money isn’t important to me. It is. I just didn’t care about earning as much as possible each year. I was willing to earn less in the short run knowing that I’d have a pension over the long haul.

    If you destroy pensions for educators, you’ll force the next generation of people like me to sell sugared fizzy water or become financial engineers, and that would be a shame. You need people like me in society’s classrooms, because success in the future doesn’t just happen – it requires extensive preparation.

  29. Tough Love Says:

    Keen Observer, Virtually all Private sector workers realize that if they are to have a secure retirement they will need to save (from earnings) 25-50% of the cost of that retirement, the balance coming from SS and pensions/401Ks.

    I don’t know about you personally, but the mindset of many (if not most) Civil Servants is that taxpayers should fund 100% of their retirement.

    Although most don’t understand it, just one (of many) simple differences between Public and Private pensions is HUGE (in cost), the inclusion of COLA increases in virtually ALL Public Sector Plans, but virtually non-existent on Private Sector Plans. At he age of the typical Public Sector Retiree (55-60), the inclusion of a COLA provision increases the Plans value (and hence cost) by 1/3. Hence the typical full career COLA-adjusted pension of about 2/3 of final pay is equivalent to a non-COLA pension of 2/3x 4/3=8/9 of final pay. This is apples-to-apples-comparable to the typical Private sector pension RARELY exceeding 1/3 of pay.

    There are many OTHER “advantages” … richer formulas, earlier retirement ages, more vacations, “Cadillac” health health care, etc.

    So PLEASE, stop trying to portray Civil Servant pensions as anything but excessive by any reasonable measure. When combined with cash pay, now relatively close in the Public and Private Sectors, TOTAL COMPENSATION (cash pay + Pensions + Benefits) is significantly higher than that of comparable Private Sector jobs.

    This is unnecessary, unjustified, unsustainable, and grossly unfair to taxpayers who pay for the vast bulk of it.

  30. Keen Observer Says:

    I’m not sure why you aren’t organizing private sector employees instead of attempting to impoverish teachers, the majority of whom do not retire before 60 (and if they do, they do it with an unfavorable formula). Perhaps you should be picketing because of the low cost of manufactured goods and exporting of production to other countries. Or does the private sector get a pass and just get to do whatever it wants, regardless of its impact on the tax base?

    Your main contention appears to be that the public is funding teacher pensions. Let’s examine this. Teachers are college educated, so I’m sure that you will agree that they are a group that would not settle for Social Security as their only retirement plan. That said, the 8.25% that school districts pay in (plus 2% by the state plus another 2% for COLAs) is not substantially more than if they had to pay Social Security( 6.2%) plus perhaps another 5% for a defined contribution plan.

    If a teacher teaches for 25-35 years, his or her contributions from the early years have a long time, if invested properly, to grow within the pension plan. There are the vicissitudes of the market, as we’ve learned, and that market risk is clearly at the root of your concerns, but the taxpayer hasn’t had to put up a dime yet to cover a shortfall.

    Obviously, it is appropriate to consider whether contributions to pension funds need to be increased, at least in the short-run, but assuming the economy recovers, who knows whether the CalSTRS funding level might not look significantly better when the three-year average doesn’t include two crash years? After all, CalSTRS may make a nice profit on some of the distressed assets it bought after the crash.

    I suppose, Tough Love, that I simply don’t accept your premise, and I’m the guy who teaches students that their evidence must be accurate and powerfully support their arguments. You have a conclusion, and I see that you’re working hard to make the facts fit it, but I don’t see how they do. If teachers all have bachelors and masters degrees, what private sector groups would provide an apt comparison? Teacher salaries go up for the first ten years in the profession, but then they’re flat, topping off at about $65-75,000. I assume that college graduates go into the private sector because they’ll make more money than that, not less.

    Cadillac health plans? Nice talking point. Mine’s a Toyota at best.

  31. Tough Love Says:

    Keen Observer, Quoting …”I’m not sure why you aren’t organizing private sector employees instead of attempting to impoverish teachers”

    Organizing to do what …FORCE corporate employers to triple or quadruple our pensions to the level of yours ?

    Unlike the Public Sector (which feels is has taxpayers as captives) corporations have global competition, and competition limits prices, profits, and hence pensions and benefits. Granted corporate CEO’s and such are pigs, but does that justify ALL Civil Servants be pigs by forcing the REST of the middle class to subsidize better compensation for them?

    You are back at the diversion tactics … the issue is why (with relatively equal cash pay) should Public Sector be granted (primarily at taxpayer expense) pensions 2, 4, even 6 times greater than those of comparably paid Private sector workers.

    And you said …”That said, the 8.25% that school districts pay in (plus 2% by the state plus another 2% for COLAs) is not substantially more than if they had to pay Social Security( 6.2%) plus perhaps another 5% for a defined contribution plan.”

    Did I head 2% for COLAS ? The COLA element of Public Sector pensions is 1/4 the total pension cost. With that cost (for teachers) roughly a level annual 30% of pay to taxpayers, the cost of the COLA provision is roughly7.5% of pay not 2%…. If only 2% is going in for this, it’s just another of the way taxpayers have been hoodwinked into granting such benefits which will rear their ugly head later on with massive shortfalls.

    You also said ..”Obviously, it is appropriate to consider whether contributions to pension funds need to be increased, at least in the short-run, but assuming the economy recovers, who knows whether the CalSTRS funding level might not look significantly better”

    This also begs the question … even if funding improves …. why should Civil Servant total compensation be greater than their Private sector counterparts?

    Most of the contributions to Public sector Plans came from taxpayers. If these assets were to yield extraordinary returns, it would be more appropriate for those who made the contributions (the taxpayers) to benefit from these gains than to continue to provide unnecessary and excessive compensation to Public sector employees.

    FYI … you’re working much harder than I to support YOUR OWN pre-determined conclusion.

  32. Keen Observer Says:

    Tough Love,

    The pension contributions came from taxpayers IN THEIR CAPACITY AS EMPLOYERS. You completely ignore this. Like all employers, government must pay either Social Security or a pension. How do you figure that any earnings from these required contributions should be returned to the taxpayers? That’s nuts.

  33. Tough Love Says:

    You still won’t address the fundamental question … why should Civil Servant total compensation be greater than their Private sector counterparts?

  34. roger Says:

    Cops are getting $100K from retirement. Thats THE PROBLEM!!!

  35. Stevefromsacto Says:

    If a public employee union conducted or sponsored a “study” on public sector pension benefits, it would be dismissed out of hand as slanted. But when an organization like Californians for Fiscal Responsibility, created by right-wing ideologues who seek to drastically reduce or eliminate public employee benefits, produces a “study”, you treat it as gospel. Careful, your bias is showing.

  36. todd thompson Says:

    Face it – we (The tax payers) are NOT going to continue to pay for OUR public servants lavish retirement plans – it’s ALL tax payer dollars – NO public servant has ever been or will ever be a TAX payer. If any government worker, local, state or federal THINKS that they are a tax payer – they are wrong! The money they pay each year in taxes is just giving us back some of what we gave them to start with – it’s a complete sham. They should just get a flat salary each month and they should all be in the same exact retirement plan as the rest of us – if they want to save their money great – but to think we will give each of them retirement for life when they want to retire at 50 or 55 is crazy – and to bind the states to fund their savings accounts – (ie pension funds) should be illegal – it’s like a 5 year old telling his/her parents how much allowance to pay and continue to demand more –

  37. stevefromsacto Says:

    “NO public servant has ever been or will ever be a TAX payer.”

    Hard to top that for insanity.

  38. todd thompson Says:

    They do NOT pay income tax – – they just give us back some of the TAX dollars we gave them – paying taxes using money that was tax dollars to begin with and calling it taxes – is well – you figure it out genius

    How does it increase the collected revenue?

  39. stevefromsacto Says:

    And of course these people don’t earn the money we give them, eh, Todd?

    They don’t pick up the trash, teach our children, fix our roads, and perform hundreds of other PUBLIC SERVICES? You are telling us that the taxpayers just GIVE their money to public employees and get nothing in return?

    Oh, I forgot. When your privatization fairy shows up, the public employees will all disappear and you will get all these services from the private sector AT NO COST to you and the other taxpayers.

    Yeah, compared to that kind of thinking, I am a genius.

  40. Cortland Smythe Says:

    Yes— let’s give the super rich tax breaks and ruin the pensions of the working man….lol—— ya gotta luv the tea baggers !

  41. music Says:

    Innovative entrepreneurs’ genius (99% perspiration and 1% inspiration) merits a chance at terrific financial yields, which free market proponents insist fuels competition necessary for capitalism. Adam Smith also said that the free flow of information (transparency in markets) is necessary for capitalism to work.

    What provides this transparency? The Securities and Exchange Commission, funded by the taxpayers, does. Taxes, as we see in most first world countries, have always been a symptom of smoothly functioning societies and economies. I do not begrudge an inventive genius their just rewards for the money earned by their patents. If their contribution results in an improved standard of living for the rest of us, why not give them what they want?

    In what kind of society do such innovative geniuses as Thomas Edison or Bill Gates flourish? Afghanistan and Somalia? Third world countries like Afghanistan and Somalia do not collect taxes from their citizens. Capitalism can’t get a foothold there because corruption is rampant. What keeps corruption at bay here? Judges and regulatory agencies, paid for by taxes, curtail corruption. Perhaps people in third world countries will organize themselves to put an end to their oppressors, if they could ever think of anything beyond surviving day to day. They have no sustainable (tax-funded) infrastructure to help them do this, however. There is no police protection for the universities’ or other’s research and development facilities, for instance.

    How does a sane person measure happiness? There is a fairly stable level of monetary compensation beyond which happiness isn’t much affected. Subsidies to the largest corporations and the very rich are much higher now than during the 1950’s and ’60’s, an era of more progressive taxation. Yet back then, our economy and infrastructure were the envy of the world. Our overall standard of living was certainly higher. Do the large corporations and very rich need to continue receiving taxpayer subsidies and paying taxes at the low rates they now enjoy? Do they need to possess trillions of dollars in profits in order to be satisfied? Of course not.

    People like Tough Love don’t appreciate the perspiration involved in maintaining civil society and infrastructure. If a society without parks, recreation, police, teachers, schools, health clinics, libraries, fire departments, justice systems, taxation, and transportation departments, to name a few, is what you want, perhaps Afghanistan is the place for you. Try teaching in any classroom in the U.S. for a month and you will get an idea of how hard this work is. The private sector has never proven to do a better job at this than the public sector. I challenge anyone in the private sector to come into a classroom for a month (not just an afternoon, a day, or even a week) and try conducting a language arts program for English-speaking students or students whose parents only speak other languages besides English. Compare the level of perspiration involved in that setting with any of the research and development work leading to the development of patents in the industrialized world and you will be surprised at how similar they are. There is also a degree of inspiration which must be present, or you don’t see results in your students. Abraham Maslow’s psychological of the hierarchy of human needs (Harvard, I think) is worth consulting in this regard.

    Or perhaps people like Tough Love want us to become Somalia, etc. Perhaps this is their ultimate goal. At least we know them for what they are. Perhaps they are not quite human.

  42. Todd B Thompson Says:

    Every day in the news we seem to hear about a new corrupt public servant –– legal or no,t morally right or not and the idea that they are Not entitled to more just does not seem to enter into the process.
    It seems to me we need a Non – Government entity to justify ANY new spending of the Tax Payer’s money.
    Very complex issue with many moving parts – but non tax payers ( anyone who works for the government) should not have control of the purse strings –In My opinion

  43. Tessetheabbi Says:

    Check out the Congressional Budget Office statistics on this issue. I am a teacher, however, I don’t agree with rationals presented for the defense of public sector pensions. For all but those with doctoral degrees, public sector pensions are better than those employed privately according to the CBO.

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