Gov. Brown yesterday urged CalPERS to speed up a $1.2 billion rate increase needed because workers are living longer. Assembly Speaker John Perez said last week he wants to speed up a $4.5 billion CalSTRS rate hike plan, acting this year not next year as the governor suggested.
Pay now or pay more later, a kind of pension proverb uttered by frustrated CalSTRS officials in recent years, can be a spur to action now that the state, after years of deficits and deep cuts, is projected to have a $5.6 billion reserve at the end of next fiscal year.
The California Public Employees Retirement System and the California State Teachers Retirement System, hit by huge investment losses during the deep recession and stock market crash, have roughly 70 percent of the projected assets needed to cover pensions promised over the next 30 years.
Later this month the CalPERS board is scheduled to consider a staff recommendation to begin the longevity rate increase in 2016. Following current board policy, the increase would be phased in over the following five years to pay off the new cost over 20 years.
Brown said in his letter the delay is “unacceptable” and would add an estimated $3.7 billion to the state cost over two decades. He urged the CalPERS board to adopt the new longevity changes immediately and phase in the increased rates within three years.
“No one likes to pay more for pensions, but ignoring their true costs for two more years will only burden the system and cost more in the long run,” the governor said.
Since CalPERS last looked at life expectancy four years ago, Brown said, a “dramatic” change means “by 2028, men retiring at age 55 are projected to live an average of 2.1 years longer and women 1.6 years longer.”
For the state, the governor said “costs will increase $1.2 billion annually — about 32 percent greater than today. The unfunded liability will rise by $9 billion, increasing from $45 billion to $54 billion.”
State workers are about a third of CalPERS, which also covers most local governments and non-teaching school employees. A longevity rate increase would be the third in recent years, following a lower earnings forecast and a change of actuarial method.
The CalPERS staff recommendation in December for delaying the longevity increase said there is “concern that contribution increases may be too much for employers to bear” at a time when budgets are already strained.
The reference may primarily be to local governments, where personnel are the biggest part of the budget. The delay is intended to assist employers, giving them time to prepare by building the rate increase into projections a year before they take effect.
“The law grants CalPERS the authority to set rates and the board has adopted a policy that provides flexibility for employers to pay more to CalPERS if they desire,” CalPERS said in a statement yesterday.
“Staff’s final recommendations about our asset allocation and actuarial assumptions will be available next week and presented to the CalPERS board the following week during special board sessions on Feb. 18.”
When CalPERS lowered its annual earnings forecast from 7.75 to 7.5 percent two years ago, the main part of the rate increase was phased in over two years.
Unions pushed for a delay in the rate increase, presumably leaving more money for pay raises as the economy recovered. The state budget signed by Brown ignored the phase in and paid more than the rate set by CalPERS.
Assembly Speaker John Perez, right, and Assemblyman Rob Bonta
CalSTRS lacks the power to set rates, needing legislation instead. And for a half dozen years, the CalSTRS plea for a rate increase went unheeded by the Legislature as the state struggled with deep deficits.
The first sign of movement came two years ago when a legislative resolution asked CalSTRS to meet with stakeholders and present three alternatives for a long-range funding solution. A two-house legislative committee held a hearing last year.
Then the new state budget proposed by Brown last month called for talks with teachers, school districts and others to work out a rate-hike plan. A plan was not expected to be enacted until fiscal 2015-16 and then phased in over several years.
“If the Legislature can do it this year, fine,” Brown told reporters. “I think it’s going to take a little longer.”
Last week Speaker Perez, D-Los Angeles, held a news conference with Assemblyman Rob Bonta, D-Oakland, the retirement committee chairman, to announce a push to enact a CalSTRS rate-hike plan this year.
“Further delays only mean further costs and further exposure for the state’s general fund,” said Perez. He is termed out of the Legislature and running for state controller, an office that has a seat on the CalSTRS and CalPERS boards.
Bonta said the Assembly Public Employees, Retirement and Social Security Committee plans to hold a hearing on CalSTRS funding Feb. 19. He said later hearings will deal with the Proposition 98 school-funding guarantee and teacher vested rights.
The speaker said the contribution increase should be shared among the three current CalSTRS contributors. The state is contributing about 5 percent of pay, school districts and community colleges 8.25 percent of pay, and teachers 8 percent of pay.
Perez also said the plan should aim at 100 percent funding. Some think 80 percent is adequate. In past desperation, some suggested rate-hike scenarios simply aimed to extend the point at which CalSTRS runs out of money, now projected at about 30 years.
Last year the estimate of the rate hike needed to fully fund CalSTRS pensions already earned over the next 30 years was 15.1 percent of pay or about $4.5 billion a year, nearly doubling the $6 billion received from current rates.
Strong CalSTRS investment earnings last fiscal year (13.8 percent), nearly twice the 7.5 percent target, dropped the estimate of the immediate rate hike needed to project full funding to 14.2 percent or $4.2 billion a year.
A new actuarial report from Milliman scheduled to be presented to the CalSTRS board today looks at the “impact of further delay in funding.” A two-year delay increases the full-funding rate hike by at least 0.9 percent of pay or $15 billion over 30 years.
The nonpartisan Legislative Analyst’s Office estimated that if a plan to fully fund CalSTRS in 30 years began now, with 3 percent of pay added each year, a “ramp up” of rates over several years would have to reach more than $5 billion a year.
“In general, the most important action the state can take to minimize the long-term cost of addressing CalSTRS’ liabilities is to act quickly to increase funding to the system from some combination of state, district, and teacher sources,” the LAO said in a brief issued yesterday.
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Calpensions.com. Posted 6 Feb 14
Calpensions 
February 6, 2014 at 6:46 pm
The news that people are living longer is nothing new–so why the panic now? CalPERS had stated previously that the influx of Baby Boomers entering retirement ages was known and expected, and it is prepared for that influx. So why all this “surprise” about people living longer? Most annuitants have beneficiaries who are due to keep receiving benefits after the retiree is gone. Where are the actuaries in this scenario?
The Legislature should get busy and make plans to fund CalSTRS immediately! The DB plan for teachers has existed for 100 years. Fund it, so the haters can move on and begin to worry about the 20,000,000 people in this country who do not have jobs!
February 6, 2014 at 11:59 pm
Seesaw, What is the best plan to fund Calstrs? Please list out the best scenarios to fund.
February 7, 2014 at 2:07 am
I am not a financial analyst, Mawinda. I know that CalSTRS was founded by the State and it is supposed to be kept solvent with contributions from the Districts and the employees. If they meet hard times and additional funding is needed, it must be passed by the Legislature. I have no idea what pot it would go to. The Governor has said that there will be a surplus this year. He has just notified CalPERS that it needs to put its planned rate increases into effect right now–so why not the same type of advice to the Legislature for CalSTRS.
February 7, 2014 at 2:44 am
SeeSaw thinks you snap your fingers and money magically appears w/o any pain.
It’s a “zero-sum game” SeeSaw (Google it). For each incremental $1 CalSTIRS gets, either someone’s services get reduced or someone’s taxes gets raised.
Of course we know SeeSaw’s preference (the same as all Public Sector workers).. .Raise taxes… because for each $1 in incremental taxes THEY will pay, they’ll likely get $5 back in the form of financial support for their outsized pension & benefits.
Of course the BETTER answer is to neither reduce services nor raise taxes, but to significantly reduce the promised pensions. I’d bet that if we reduced those pensions to a level no greater than the pensions afforded the typical Private Sector Taxpayer, (with the SAME pay, retiring at the SAME age, and with the SAME years of service) the Plans would be pretty close to fully funded.
WHY should they get “more”, and a better deal than the Taxpayers who pay their way ?
February 7, 2014 at 3:20 am
Mawinda, Did you like SeeSaw’s “response” to your question?
About the closest she got to answering your question was…”it is supposed to be kept solvent with contributions from the Districts and the employees.”,…. which of course isn’t much of an answer.
SeeSaw is a clueless 70+ year old, 40-yr service, Public Sector retiree who tirelessly (and blindly) defends and supports Public Sector workers whether active, retired, not yet employed, (and likely, even those not yet born).
Clueless, but tireless.
February 7, 2014 at 4:42 am
Yes, TL, if there is no other way, I support increased taxes. It is what we do to be able to live in a free society. I think we should all be pitching in to help fund some public works programs for the 20,000,000 people that are out of work in this country. I don’t think anyone in this country should be hungry. My pension, which I earned and for which I am grateful, is modest–I just want it protected according to the rules under which it was enacted. I know that the CalSTRS pensions are going to be paid, so a solution on the funding must be determined pretty soon. I am certainly not clueless. I am a taxpayer who participates in funding all the things that taxes fund, and I purchase products and services that help keep the private sector afloat.
February 7, 2014 at 4:53 am
I believe that’s called “ad hominem”.
Not classy, yet not surprising.
February 7, 2014 at 4:55 am
Hi SeeSaw,
You have a group of propagandist taking advantage of an economic downturn, changes in accounting standards, a private sector employees that have no guarantees and have lost $2 Trillion in their collective 401K plans (since 2007) and no single voice to take action (class action lawsuit anyone? Yeah, like that gets you a nickel on the dollar) and you have PERS and STRS wisely fighting back with an economy in recovery.
If you are required to prefund all the medical and retirement benefits of an employee the day you hire him/her, you are going to be behind the 8-ball the whole time. But like any good pool player knows, it is not the shot you make, but where you leave yourself on the table after taking the shot you make. The “Toughlove” doom and gloom I hate the public employee we are broke and have no money to pay for anything except corporate profits and executive bonuses in private industry crowd; are preying upon the ignorance of the average person. Ignorance is not bad but we are required to educate ourselves if we want to continue to have a Representative Democracy or we will be fooled by these people and do their bidding.
Back to the pool playing analogy. PERS and STRS do need to combat the appearance that they are currently underfunded. I believe this is self-correcting to some extent just like an economic downturn. My home was worth 3-times what I paid for it awhile back, it was worth a lot less and now it is worth what I paid for it. Eventually it will be worth more than I paid again. PERS and STRS are investors and they are experiencing the same ups and downs as is everyone. So, having actuaries do the math, they have to reevaluate the life expectancy and mortality tables periodically and adjust for longevity gains or losses. However, on average, everybody dies eventually.
So the math looks something like this:
71 Million Baby Boomers (born between 1946 and 1964)
46 Million Gen-X
76 Million Gen-Y
Even with baby boomers living 10-15 years longer than the Traditionalist, they will begin to die off in mass about 5 years from now. The death rate will increase for about 15 years. Then, comes Gen-X. Guess what, the funds of PERS and STRS will be a cup that runneth over and spill out into the streets. By asking for more money now to pay for all the propaganda, some real, some blatantly false, PERS and STRS will be positioned to announce proudly, they are fully funded about a decade or two in advance of the 30 year timeline. Oh, and state/public employees/teachers are a representative sample of the population. In fact, probably slightly older because most people don’t start their careers at 18 or 20. They go to college first and start at 25 or 30. Did I mention that Jerry Brown is a really well educated and brilliant man compared to the guy who starred in the movie “Junior”?
But, if Toughlove and others can convince you that there is no money, that there never will be enough money, you will buy into the propaganda that we must cut, cut, cut, cut, but the question that needs to be asked, the question that is being answered in Wisconsin and other states is this: “what savings have there been or will there be?” The answer is that there are no savings by cutting pensions. But Wall Street and the investment bankers and broke’rs are finding a new income stream with all this nonsense. The same people who brought you the mortgage crisis and financial collapse of 2007/8. Hope you find this food for thought and keep asking, “Why?”
A Conservative Hero once said, “Hasta la vista baby!” Oh…that was his baby.
February 7, 2014 at 5:05 am
Toughlove, glad to see you bullying Seesaw. Good that everyone can see your true colors and the what you and Dan, Ed, David, and Marsha are just like you.
February 7, 2014 at 4:22 pm
Billie,You lack the training for much of what you say.
E.g.the Life expectancy for boomers (born at the MIDPOINT of the boomer generation) wil take us to about 2036 …22 years from now, not 15.
E.g., Where did you get THIS from…”If you are required to prefund all the medical and retirement benefits of an employee the day you hire him/her, you are going to be behind the 8-ball the whole time.”
The appropriate goal is to fully fund the promised retirement benefits over the working career of the employee.
E.g.Quoting…” The “Toughlove” doom and gloom I hate the public employee we are broke and have no money to pay for anything except corporate profits and executive bonuses in private industry crowd;”
No, the money you want to fund your excessive pensions & benefits is needed to fund education, service for the needy, infrastructure repair, parks, libraries and recreation (so our kids have a safe place to play). These are MUCH more worth causes than funding your over-stuffed pension
E.g. Quoting …” Then, comes Gen-X. Guess what, the funds of PERS and STRS will be a cup that runneth over and spill out into the streets.”
Your delirious. Under the quite small probability that the Plans survive in their current form to that time, there will be little if any assets remaining… and Gen X is screwed (mainly by the public sector workers that preceded them and would not compromise)
February 7, 2014 at 6:11 pm
A California state electrician three years ago was contributing $220 a month toward his pension. He now is contributing $440.
That is a public sector worker who compromised. It was not mandated. It was bargained by the unions and approved by the members. The average cost of pension reform in contributions alone is about $2,500 per year per worker.
That and other reforms have already saved billions and will save billions more in the future. PEPRA enacted 12 of the reforms recommended by the Little Hoover Commission. The only major reform they did NOT pass was the reduction of accrual for future service , which would have been tied up in the courts for years anyway.
So, if by “public sector workers would not compromise”, you actually mean “they wouldn’t give me EVERYTHING I wanted”, you might have a point.
Instead, you have no credibility.
February 7, 2014 at 6:24 pm
Sdouglas47,
Yesterday you said…”The glass is at least half full.”
That’s also an accurate description of the state of CalPERS funding for PAST Service accruals … when valued with the more appropriate methodology and assumptions that the Gov’t REQUIRES of Private Sector Plan valuations.
And while that quote has some positive connotations in many areas, when it comes to pension funding, it generally means that the “death spiral” has begun.
February 7, 2014 at 7:30 pm
And, back on the subject: “public sector workers would not compromise”
What is you definition of compromise?
February 7, 2014 at 7:42 pm
Sdouglas47, No, That a “token” with the appearance of compromise.
When their pensions are 2x-4x greater in value at retirement (4x-6x for safety workers) than those of comparable Private Sector workers, and their own pension contribution (INCLUDING investment earnings, and after recent contribution increases) still accumulate to a sum at retirement rarely more than sufficient to buy only 10-20% of that VERY VERY rich pension, that’s NOT real compromise……….that’s a “token” aimed at appeasing (and fooling) those whose seek REAL reform.
And yes …”The only major reform they did NOT pass was the reduction of accrual for future service”
And that’s because THAT was the ONLY reform proposal with REAL material financial consequences.
Taxpayers are STILL being financially “mugged” by the huge and ongoing costs of these grossly excessive pensions & benefits.
February 7, 2014 at 8:10 pm
See Saw, Taxes that can go up first are a 100% tax rate(deducted form retiree checks) on all gov t pensions over the maximum social security paid out to current retirees per year, or the current average pension which is around $26000/year. Obvioulsy, the average pension recipient would not be impacted at all. We can look at those numbers and we where are at to see if any other fine tuning is needed. If that generates too much money, the proposal can be modified.
February 7, 2014 at 9:05 pm
Freeze all their pay. All government workers. Today. Let inflation take care of the problem. Over the next ten years, you will save billions on salaries and billions more on the the pensions based on those salaries.
It’s legal. It will reduce total compensation in real dollars.
Win/win. Give it ten years and there won’t even be any more government workers.
Problem solved.
February 8, 2014 at 12:29 am
Sdouglas47,
Lets look at one REAL-LIFE example … the incremental value of a California Police Officer’s pension over the one year before retirement after 30 years of service at age 55 and see how that increase in value compares to that officer’s pension contribution … remembering that if it isn’t coming from the officer, it’s coming from Taxpayers.
Then we can consider whether the recent increases in contribution from the workers constitutes real “compromise”….. in the contert of just how VERY generous, and hence how VERY costly these pensions truly are.
Assumptions….
(1) pensionable compensation at age 54 with 29 years of service is $100,000
(2) pensionable compensation at age 55 with 30 years of service is $103,000
(3) pension formula is 3% per year of service with 2.5% COLA increases annually thereafter
(4) investment return on assets backing the officer’s retirement = 5.5% (consistent with Moodys current assumptions)
(5) Police Officer’s pension contribution is 10% of pay
Calculations:
(A) Officer’s pension contribution is 10% of $103,000 = $10,300
(B) Value of pension after 29 years at age 54:
(i) Annual pension annuity = $100,000 x.03 x 29 = $87,000
(ii) Lump sum “value” = $87,000 x Life annuity factor calculated with 5.5% interest and assuming 2.5% annual COLA increases = $87,000 x 18.76 = $1,632,120
(C) Value of pension after 30 years at age 55:
(i) Annual pension annuity = $103,000 x.03 x 30 = $92,700
(ii) Lump sum “value” = $92,700 x Life annuity factor calculated with 5.5% interest and assuming 2.5% annual COLA increases = $87,000 x 18.36 = $1,701.972
(D) Incremental value of a California Police Officer’s pension over the one year before retirement =$1,701.972-$1,632,120 = $69.852
———————————————————————-
Summary:
The Officer contributes $10,300 towards his pension, while that pension increases in value over that same year by $69,852 ………. almost 7 times what he contributed.
February 8, 2014 at 2:48 am
Please spare us the TL math in the future. Otherwise known as GIGO
That officer and his employer have been contributing a combined 25% to 35% of his salary for 29 years. It’s called “total compensation”. That trust has been earning an average 8% all those years. (consistent with Moody’s record of past returns) If he retires this year, the earnings in the last year have been closer to 12%.
Add that return on investment for the final year to the $10,300 of the officers contribution and the $20,000 employer contribution.
Please don’t show your work. TL math gives us all a headache.
Here’s a simpler concept. My electrician is now paying $2,640 MORE per year than he was before. His pension formula has not changed, so the cost to the taxpayer has not gone up, but the taxpayer pays $2,640 LESS than they would have.
Multiply that by over 200,000 state workers and you have over $500 million per year that can be spent on roads and schools instead of pensions.
Motherhood and apple pie. Paid for by overpaid union thugs….voluntarily. You’re welcome.
My glass is still half full. Yours is just sour grapes anyway.
February 8, 2014 at 2:40 pm
SDouglas47.
Employer contribution = Taxpayer contribution.
In fact, unless the Officer’s “Gross Cash Pay” is NO HIGHER than those in Private Sector jobs with similar risks, skills, education and experience ……….. which I suspect it is ……….. the officer’s contribution is also really just more Taxpayer contribution (because it’s been inflated for him to make that contribution).
And I was being generous (LOW BALLING) the pension because I’d bet the”pensionable compensation” of recent 30-yr service age 55 California Police retirees is well over $100K.
How may 55 year old age 55 Private Sector workers (with 30-yrs service) are sitting on a pension (80-90% paid-for not by THEM, but by their employer) worth close to $2 Million?
I’d venture to say less than 5%, yet 100% of CA Police Officers get such pensions……. essentially by governmental decree.
What a gigantic Taxpayer ripoff !
February 8, 2014 at 3:43 pm
Interest follows principal.
February 8, 2014 at 5:34 pm
Retirees with 30 years service at age 55 or under–probably about one-half of one percent. In my 40 years of continuous service at one public agency, there were none–two years after my own retirement, there was one.
February 8, 2014 at 5:38 pm
PEPRA ended the 3% at 50 pension formula for all new hires after January 1, 2013, TL. You can stop obsessing over your taxes and begin to enjoy the fact that you still wake up every day.
February 8, 2014 at 5:43 pm
Corporations have pretty much killed the private pension. Now it appears they are working to weaken and kill off 401(k) and DC plans as well, see Wash Post article http://xrl.us/bqkfo5
This change from monthly to annual 401(k) contributions is really nasty. In effect the company is stealing a year’s worth of interest off of the employee. Anyone who leaves to another employer mid-year pays dearly. Congress really should regulate this insidious practice.
February 8, 2014 at 6:32 pm
” well over $100K.”
You do know what GIGO means, right?
Stretch a little here, fudge a little there, pretend your preconceived notions are “fact”, then work your magic math. I feel another headache coming on.
California police officers made, on average, $97,640, including overtime, incentive pay and payouts upon retirement during 2011, according to a Bee analysis of new data from the state controller’s office.
http://www.sacbee.com/2011/03/03/3446569/see-average-police-firefighter.html
February 9, 2014 at 3:55 am
SDouglas47, Yes I do, I the first thing that came to mind was the connection between your brain and mouth (Garbage in Garbage out).
February 9, 2014 at 4:06 am
SDouglas47, I’m sure you’ll love this Forbes article (pay particular attention to the LAST paragraph). It’s getting harder and harder for you guy to BS the Taxpayers.
http://www.forbes.com/sites/realspin/2014/02/07/hundreds-of-california-government-employees-are-paid-over-400000year/?utm_source=emailcampaign806&utm_medium=phpList&utm_content=HTMLemail&utm_campaign=Hundreds+of+California+Government+Employees+Are+Paid+Over+$400,000+Per+Year
It’s getting harder and harder for you guy to BS the Taxpayers.
February 9, 2014 at 5:12 am
TL, with over 400 municipalities operating in CA and many of the CM’s of those agencies making $400,000+ this is nothing new. The employees profiled in the article earned heavy overtime with their respective entities. Such is the responsibility of the officials in those entities. Overtime does not count toward pension credit with CalPERS. CalPERS already had a cap on pension amounts, prior to PEPRA, and anything above those amounts for certain retiring managers, was negotiated by those managers, with their elected officials–no unions involved. The State’s new pension reform law, PEPRA of 2013, caps pensionable income–so nobody is going to collect over $400,000 in pensions amounts. Anything extra is between the employing entities and their retiring managers. Nothing to see here.
February 9, 2014 at 5:17 am
Quoting SDouglas47…….. “Interest follows principal.”
I agree 100% …………….”Interest follows principal.” It’s a basic principle of financial economics.
Most Public Sector Unions/workers argue the opposite, that interest (actually investment earnings) is an independent 3-rd source that magically appears to pay for a major share of Public Sector pensions ……. in addition to the ONLY 2 REAL sources … Employee contributions and Taxpayer contributions.
And since “Interest follows principal”, the interest earned is proportionately associated with the source of the original Principal (whether from the employee or from the Taxpayers)
So, with 80-90% of total real $$$ cost of these pension promises coming from the Taxpayers, 80-90% of the total investment earnings is also associated with Taxpayers pension contributions ………………….. earnings that, in the absence of the need to fund these absurdly generous pensions, would have stayed in the Taxpayers’ pockets, perhaps to help fund their much smaller retirements.
———————————-
I’ll bet you’re sorry you brought that up. Now go back to your Union and fess-up that you blew that one……….and that you will try harder in the future to be a better lap-dog and more fully understand the lies they want you to spread.
February 9, 2014 at 6:57 am
QuotingSeeSaw…”The State’s new pension reform law, PEPRA of 2013, caps pensionable income–so nobody is going to collect over $400,000 in pensions amounts.”
Oh gee … aren’t the Taxpayers lucky …no pensions OVER $400,000 annually !.
February 9, 2014 at 7:40 am
” I’d bet the”pensionable compensation” of recent 30-yr service age 55 California Police retirees is well over $100K.”
You would lose. There are *some* over that amount, but they are not typical.
Garbage in.
So, change the subject? OK
……………………………
There are some city and county employees who make a lot of money.
There are some propagandists who pen intentionally misleading articles implying worse. One of those writers would be Mark Bucher, of the California Public Policy Center.
Technically correct:
” Hundreds Of California Government Employees Are Paid Over $400,000 A Year”
Implying, I assume, that this is their normal annual salary. (“are paid”)
In many of the cases listed, however, it is clear that they normally make much less. They are not paid $400,000 *a year*, they are paid $400,000 for *one* year…the year they retire. Much of that $400,000 is from cashing in unused vacation.
Misleading.
Intentionally.
You may disagree with the policy of workers to amass that much vacation time, but don’t try to confuse it with normal annual salary. For California State employees, there is a maximum vacation accrual of 600 hours, and cashing in vacation does NOT increase pensions. Pensions are calculated on base salary only, no vacation or overtime.
I know it is different for some local governments, at least for those hired before PEPRA.
The article was intentionally misleading and the last paragraph was the *opinion* of the ” President of the California Public Policy Center.”
……………………….
Here’s a different *opinion*:
http://ourfuture.org/20120813/discover-the-network-out-to-crush-our-public-workers
…………..
And here’s a fact. The average California policeman does NOT make “well over $100,000 a year.
February 9, 2014 at 7:59 am
Interest follows principal.
I contribute 10% of my salary towards retirement.
The state contributes another 10%.
I know it ALL starts out as “taxpayer money”, but once it is sent to CalPERS, it is MY principal, therefore MY interest.
The majority share of pensions comes from return on investment.
February 9, 2014 at 8:09 am
“Oh gee … aren’t the Taxpayers lucky …no pensions OVER $400,000 annually !.”
Snide, obviously, but you know the actual limit is the same as the limit for Social Security, approximately $113,000.
You’re not so much clever as puerile.
February 9, 2014 at 4:10 pm
SDouglas47, Did you miss that the …”Average pay for police captains across the state was $163,558″
Police retirees include many officers beyond the Police Office level.and with the associated higher wages. And you pick on such a detail and think that counters my point that PUBLIC Sector pensions are grossly excessive?
Would I be “changing the subject” if I simply switched to the Firefighters with average salaries of over $118,000 annually?
The pensions of ALL Public Sector workers are grossly excessive. and VERY material reductions are justified for all CURRENT workers.
———————————————-
And California (meaning the Taxpayers) may be contributing 10% of pay toward your pension….but (assuming you are under the 3%@50 pension formula) to fully fund your pension over your working career requires 40%-50% of pay annually, not 10%.
You don’t deserve a pension that requires such high Taxpayer contributions … no Public Sector worker does.
You deserve a pension EQUAL to the pension typically granted the Private Sector worker with comparable job risks, skills, education, knowledge, and experience … which is never more than 50% of what Public Sector workers get today, and often closer to 25%.
Got a problem with …,. “EQUAL” ?
February 9, 2014 at 5:00 pm
SDouglas 47, my vacation hour-accumulation was capped at 400 and no adding on to last year’s salary for the pension calculation–that’s the way it was and is for CalPERS members whether they are local or state governments.
February 9, 2014 at 5:14 pm
On Mark Bucher: He is quoted in one article as saying, “We cannot afford to spend thousands of dollars on people not to work”.
I wonder what age Mr. Bucher expects people to attain before they cannot work for a living anymore. I was age 72 at the time of my retirement–it was late, but I had to work long enough to get a pension amount that would sustain me if I didn’t go to work, for pay, anymore. In the meantime, there were younger workers waiting to get a foot in the door. Mr. Bucher doesn’t seem to understand that we must work and earn before we get the pension–the pension is the cashing in of deferred compensation earned during the years of working. .
Mr. Bucher, is the worst kind of propagandist–he is right up TL’s alley!
February 9, 2014 at 6:36 pm
Please don’t start working TL math on the “average pay” of $163,558.
That is NOT “pensionable compensation”. It includes ” overtime, incentive pay and payouts upon retirement during 2011.”
Much of which is normally not included in pension computation.
……………………….
” (assuming you are under the 3%@50 pension formula)”
Once again, you *assume* too much.
………………………..
I have no problem with the concept of “equal”.
Equal total compensation. Comparing pensions alone while disregarding total compensation is misleading.
………………………
” You deserve a pension EQUAL to the pension typically granted the Private Sector worker”
I do not “deserve” a pension at all. I do not “deserve” equal total compensation.
Public agencies must compete in the labor market. If they do not offer competitive pay and benefits, they cannot attract and retain qualified employees. “Deserve” is not a factor.
……………
From parenting 101:
Q. Why does he get more than me? It’s not fair.
A. You’re never going to get the same thing as other people, it’s never going to be equal.
It’s not going to happen, ever, in you’re life, so you must learn that now.
The only time you look in your neighbors’ bowl is to see if he has enough. You don’t look in his bowl to see if you have as much as them.
February 9, 2014 at 8:27 pm
In 2011
Fire captain, Redwood City, base pay $116,856 OT $30,000 total compensation $237,288
In Fresno, fire captain base pay $88,404.43 typical OT $15,000 to $20,000 typical total compensation, (range $128,000 to $154,000)
Is that fair? Should they be *equal*?
………………………………………
In Redwood City, an Equipment mechanic makes $75,000 a year. $116,000 total compensation.
In Fresno, an Equipment mechanic makes $64,000 a year. $80,000 total compensation.
For the state of California, an equipment mechanic makes $55,000 base pay, total compensation $85,000 (No matter what city or area of the state he works in)
Is that fair? Should they be *equal*?
………………………………………
I have to go out and repair a gate post that came down in the weather, to keep kids and pets safe from my pool.
Is that fair?
I chose to buy a house with a pool. I found out there is virtually no difference in price for existing homes with or without a pool. To help pay for the cost of maintaining the pool, I drive a twenty year old truck instead of a new one. It’s a choice I made, like earning a lower salary in order to get a reasonable pension. Please don’t hate me.
AFK
February 9, 2014 at 8:49 pm
SDouglas47, Your Bowl is filled too high ONLY because of the corrupt relationship between the Public Sector Unions and our self-serving elected officials, whose favorable votes on your pay, pensions, and benefits have been “BOUGHT” with Union campaign contributions and election support.
Taxpayers will shed no tears (nor add no funds) when your Pension Plan’s assets run dry.
February 9, 2014 at 10:36 pm
Those $400,000+ per year people are not in unions, TL. You are the one who needs a clue!
February 10, 2014 at 3:57 pm
Quoting SDouglas47…. “It’s a choice I made, like earning a lower salary in order to get a reasonable pension. Please don’t hate me.”
Baloney………
(a) you make MORE, not less in “cash pay” than most Private Sector workers with the SAME job risks, skills, education, knowledge, and experience ….. which alone eliminates ANY justification for greater pensions or benefits
(b) your pension, being multiples greater than that of virtually ALL Private Sector workers (earning the SAME pay, the SAME years of service, and retiring at the SAME age) is WAY more than “reasonable” under any comparative metric to the Taxpayers who pay for almost all of it
(c) no one “hates you”, but Taxpayers can (and should) strongly advocate for a change to the current structure of materially overcompensating you …..and that change should apply to all CURRENT (not just new) workers.
February 10, 2014 at 8:17 pm
” After controlling for observable skills and a detailed list of personal characteristics, state workers in California earn about 10.2 percent less in wages than private-sector workers. ”
http://www.heritage.org/research/reports/2011/03/are-california-public-employees-overpaid
February 10, 2014 at 10:44 pm
Sdouglas47, Was it intentional that you omitted the balance of that paragraph ?
Here’s the FULL sentence…
“After controlling for observable skills and a detailed list of personal characteristics, state workers in California earn about 10.2 percent less in wages than private-sector workers. Local workers see a much smaller, statistically insignificant penalty of 0.6 percent. Combining state and local workers together yields a significant penalty of 3.7 percent (not shown in the table).”
And how about THIS from the conclusion of that SAME study?
“…properly accounting for retiree health benefits and defined-benefit pension plans generates a public compensation premium of around 15 percent. The additional job security granted to public-sector employees is equivalent to an approximately 15 percent increase in public compensation, meaning that the total public-sector pay premium in California may be as high as 30 percent.”
February 11, 2014 at 1:34 am
Tough Love Says: “And how about THIS from the conclusion of that SAME study?
“…properly accounting for retiree health benefits and defined-benefit pension plans generates a public compensation premium of around 15 percent. The additional job security granted to public-sector employees is equivalent to an approximately 15 percent increase in public compensation, meaning that the total public-sector pay premium in California may be as high as 30 percent.””
That sounds about right (15-30%).
February 11, 2014 at 2:54 am
Captain, There’s one additional weighty Public Sector pension benefit I never see mentioned and I wonder if any of these studies factor in it’s added value (which I believe to be quite substantial).
Specifically……
Most workers (these days) have half a dozen jobs during a career, and even if each position had the identical Defined Benefit (DB) pension (of the”traditional” type that Public Sector workers get) the sum of the 6 separate pensions would be considerably less (possibly even HALF) of what it would be if the entire career had remained with one employer in one DB Pension Plan. A good example might be an engineer or an accountant, or even an attorney.
In the Public Sector ONLY, the workers can move from Department to Department (often to completely new agencies) yet remain in the same DB Plan throughout their career. The ability to remain in ONE Plan has huge benefits because under a final-average-salary-pension, regardless of these jobs movement ALL of the service years use the final pay from the FINAL job as the “pensionable compensation” in calculating the pension.
The “advantages” available ONLY to Public Sector workers are many and VERY costly and unjust to Taxpayers.
February 11, 2014 at 3:28 pm
“Your comment is awaiting moderation.”
Three of them, apparently, since yesterday afternoon. Which is somewhat confusing, since my comments are typically the epitome of moderation.
I’ll try to make this brief, in case the logjam breaks and there is a glut of posts.
30% of compensation is an extraordinary claim. And extraordinary claims require extraordinary evidence.
Specifically, I mentioned before the claim that job security is an extra 15% benefit for public employees. That is based on the fact that the job turnover rate for the private sector is three times that for the public sector. (20% vs 6%)
As I stated before, this is another example of apples/oranges. Even comparing private sector jobs, long term employees are less likely to be laid off than new hires. Engineers are less likely than landscape laborers. Skilled tradesmen are less likely to be let go than assembly line workers. Simply comparing public sector turnover to that in large private sector companies (6% turnover rate) eliminates the advantage.
This discrepancy, as well as Richwine’s calculations on health care and the “proper” valuation of pension contributions are analyzed in this paper:
http://slge.org/publications/comparing-compensation-state-local-versus-private-sector-workers
Conclusion: public and private sector TOTAL compensation are *roughly equal*
February 11, 2014 at 7:06 pm
S Moderation Douglas….
Quoting from the Washington Post
” Public workers quit less often and are fired less often.But there are other issues. The rate at which state and local workers voluntarily quit is very low. Some economists argue that this confirms that they are overpaid and that private workers leave for better pay.
Public workers are also fired at much lower rates. By estimating the income loss before fired workers find new jobs, some economists argue that this is a benefit worth as much as 15 percent of their pay.”
February 11, 2014 at 11:09 pm
” Some economists argue that this confirms that they are overpaid and that private workers leave for better pay.”
” By estimating the income loss before fired workers find new jobs, some economists argue that this is a benefit worth as much as 15 percent of their pay.”
Of course. Biggs and Richwine had similar arguments. They are probably the ones the Post referred to as “some economists” Again, they were comparing government workers with the ENTIRE cohort of private sector workers.
Smaller businesses usually have much less rigorous hiring practices than governments OR large corporations. For labor or unskilled jobs they can hire on their best judgment and get rid of problem workers as the need arises. Larger companies can weed out many problems in the hiring process.
Private sector workers are on average younger and less educated or experienced. They would be expected to be fired or laid off at a higher rate. And would be more open to quit if they see another job that looks more interesting or lucrative. Again, if you compare public sector workers to those in large companies, the fire rate and the quit rate are probably similar. The overall turnover rate certainly is.
Economists obviously can disagree. Dr. Munnell came up with the same results I did, but with somewhat different reasoning. Some of the largest turnover rates in private industry are in construction and in entertainment, fields that don’t exist in government. Paraphrasing the Bureau of Labor Statistics, “private and public sector turnover rates cannot be directly compared.”
I have seen some of the calculations to derive the 15% benefit due to income loss in unemployment. They use principles from Adam Smith. They use graphical charts. They even use algorithms. But it is all based on the turnover rates from cohorts that are not directly comparable.
Apples and oranges.
GIGO
Or, as we like to call it, TL math.
February 12, 2014 at 12:29 am
S Moderation Douglas…
I’m VERY well versed (trained and experienced) in pension MATH.
Whatever I say (or for that matter, whatever any well-informed intelligent commentator who strongly advocates for MATERIAL pension reform says) frightens the moochers such as yourself.
February 12, 2014 at 2:32 am
S Moderation Douglas Says:
“Private sector workers are on average younger and less educated or experienced. They would be expected to be fired or laid off at a higher rate. And would be more open to quit if they see another job that looks more interesting or lucrative. Again, if you compare public sector workers to those in large companies, the fire rate and the quit rate are probably similar. The overall turnover rate certainly is.”
– Can you back-up any of those claims? IMO public sector workers, on average, are less educated but paid more with more paid leave, and much greater benefits. With that said, my argument is really about excessive pension benefits, healthcare benefits (current employees and retirees), excessive paid leave, and all the pensionable perks that are added to both “Base Pay” and Pensionable income calculations.
Someone on this sight keeps referring to “Base Pay” to state their case while ignoring all the add-on compensation. And excessive paid leave increases compensation in the form overtime pay which is paid at 1.5 times Base Pay plus add-on pay – even if the employee doesn’t actually work more than their scheduled hours. While the overtime cost isn’t Persable under the CalPERS plan it is abused. Why is/are a “uniform allowance”, “car allowance”, “bonus pay”, “educational incentive pay” considered pensiobale income?
If you need 60-70% of your working income during retirement to maintain your standard of living, why are taxpayers providing public employee union members with pensions that replace 90-100% of their income. Why are TAXPAYERS paying for this when the public employee union members can retire at 50-55 (10-15 years earlier then private sector employees ?), while aso providing lifetime family medical (which begins at age 50-55), and also cost of living increases?
Can you justify taxpayers paying for uniform allowances and car allowances during an employees working career and allowing those perks to be counted as pensionable income? If the employee retire’s with a 90 percent pension formula that would mean he/she would essentially receive a clothing, car allowance, or maybe both for every year during their retirement. Is that what the pension system is really about?
CalPERS is CROOKED!
February 12, 2014 at 3:21 am
You need to get it through your head, Captain: CalPERS is a gatekeeper–it follows the orders of the State and the member entities; it doesn’t make its own rules. Miscellaneous workers retire at the average age of 60 with 20 years service credit, so you don’t have to worry about them getting 90 to 100% of their income. Research I read many years ago said that a retiree needs 60 to 80% of pre-retirement income to maintain the same lifestyle. I am proof –taxes and medical insurance premiums take 70% of my gross pension check.
February 12, 2014 at 3:59 am
SeeSaw Says:
“You need to get it through your head, Captain: CalPERS is a gatekeeper–it follows the orders of the State and the member entities; it doesn’t make its own rules.”
Wake-up, Seesaw. CalPERS is CORRUPT!
February 12, 2014 at 5:40 pm
That is your opinion–not fact.
The actions of past Board members/staff is irrelevant–they were individuals acting on behalf of their own personal interests–such-type people exist in most entities, public and private. CalPERS situation has been addressed and action taken; still in progress.
CalPERS is not corrupt–it is the lifeblood for over 500,000 retirees in CA; and it is the future lifeblood for over one million current and future public sector workers, in CA.
February 14, 2014 at 10:00 pm
Tough Love Says:
“Captain, There’s one additional weighty Public Sector pension benefit I never see mentioned and I wonder if any of these studies factor in it’s added value (which I believe to be quite substantial).
Specifically……
Most workers (these days) have half a dozen jobs during a career, and even if each position had the identical Defined Benefit (DB) pension (of the”traditional” type that Public Sector workers get) the sum of the 6 separate pensions would be considerably less (possibly even HALF) of what it would be if the entire career had remained with one employer in one DB Pension Plan. A good example might be an engineer or an accountant, or even an attorney.
In the Public Sector ONLY, the workers can move from Department to Department (often to completely new agencies) yet remain in the same DB Plan throughout their career. The ability to remain in ONE Plan has huge benefits because under a final-average-salary-pension, regardless of these jobs movement ALL of the service years use the final pay from the FINAL job as the “pensionable compensation” in calculating the pension.
The “advantages” available ONLY to Public Sector workers are many and VERY costly and unjust to Taxpayers.”
Great observation, TL. My guess is private sector employees working for companies offering pensions (assuming they left one company offering pensions to work for another offering same) would first have to meet the vesting period at each company while also having those compensation numbers averaged over five years (or whatever the vesting period is). In your scenario (changing jogs six times – and for the sake of argument over a thirty year career), the private sector employees first five years of the career would pay a much smaller benefit (dollar amount) than the last five years of the career. While the public employee union members portable pension plan allows the employee to receive every year paid at the highest 12 months compensation TIMES the pension formula TIMES years of service.
It’s clear the Public Employee Unions members pension would be much greater than the private sector employee’s pension even if all other variables were the same. Just one more item to add to a very long list of excessive pension perks.
February 15, 2014 at 12:05 am
” Most workers (these days) have half a dozen jobs during a career, ”
Right. Most GOVERNMENT workers have a dozen jobs during a career. Fewer than fifteen percent of government retirees have thirty years or more service. The average length of service for *retirees* is twenty years. (Non-retirees, those who work for the government, but not long enough to vest, typically outnumber those who eventually retire )
What do you think those “public sector” workers do during the remainder of their career? They are “private sector” workers; “taxpayers”. If the average length of service is twenty years, it would seem than many, if not most, “public sector” workers actually spend MORE time in the private sector than the public.
We have met the enemy, and he is us.
February 15, 2014 at 6:04 am
Quoting…”What do you think those “public sector” workers do during the remainder of their career?”
It seems that MANY “double-dip” via a 2-nd Public Sector job.
February 16, 2014 at 3:00 am
A retired person may work anywhere they want to work, as long as they are not working full time for an employer who is in the same plan as the one the worker just left. People do that all over the country–working for a living, after retirement, is not limited to those from the private-sector. A public-sector retiree who is “double-dipping” at an agency, that he/she has retired from, is getting salary only–no benefits. And, the employer is getting an employee who is more skilled and experienced than a new worker and can, therefore, provide the public with better service. (That said, I would like to see young people get foots in the doors–I would prefer that employees who return to the same agency, are only doing so because their particular expertise is not otherwise available.) I know retirees, younger than I, who, in addition to drawing their public sector pensions, work multiple part-time jobs, in the private sector, so that they can make ends meet. The average CalPERS retirement amount is $26,000/yr.
February 16, 2014 at 5:33 am
Back to that “average” pension again Seesaw.
Should I paste (for the10-th? time) how utterly misleading that “average” is?
February 16, 2014 at 4:37 pm
Its math TL.
February 16, 2014 at 8:57 pm
Seesaw, No,when it’s coming from a Public Sector Union/worker, the INTENTION is to mislead and minimize the very high cost and grossly excessive, unnecessary, and unaffordable generosity of Public Sector pensions.
February 17, 2014 at 5:15 am
What BS!
February 17, 2014 at 3:40 pm
Seesaw,
BS ?
That “average” pension you frequently put in from of readers is misleading because it includes:
(a) Part time workers with much smaller pensions averaged in,
(b) Short career workers with much smaller pensions averaged in,
(c) Those who retired LONG AGO with lower pay and with lower pension formulas
(d) the 50%-share beneficiaries of deceased retirees
The relevant figure (which is almost 3 times greater than your $26K) for easy comparison with the pensions of Private Sector workers, is how much full-career, full-time, very recent retirees are getting.
But presenting THAT wouldn’t support your goal of minimizing these grossly excessive pension, ALWAYS (when considering BOTH the rich formulas AND the rich provisions not found in Private Sector Plans) multiples greater in value at retirement than those of Private Sector workers retiring with the SAME pay, at the SAME age, and with the SAME years of service.
——————————
Thank you forgiving me another opportunity to show how Public Sector Unions/workers, mislead, distort/twist facts, omit material information and outright lie.
February 17, 2014 at 9:39 pm
Outright lie? Oh-my! I naturally am an honest person. All I do is quote facts! You know how to figure an average don’t you, TL? It doesn’t matter what the respective pensions are–five years or less; part-time; long-time, etc. All those figures make up the bottom line that flows our of CalPERS each year. CalPERS pays over 500,000 retirees about 12 billion dollars a year. That is all that matters in those books. The average is what it is. You don’t need to talk about excessive pensions to me–I don’t have an excessive pension. Some people have much larger pensions that I, but as long as any, respective, pension was earned according to the rules, I have nothing to say about it, and neither should you. It is up to each individual public entity to make sure it knows what it needs to pay its bills and it needs to organize itself so that it stays solvent. Period–end of story!
February 17, 2014 at 10:55 pm
Seesaw, My sentence under the dashes wasn’t directed at you, but a general one about the mindset and actions of “Public Sector Unions/workers”. The “audience” is this blog’s readers, not just you.
As to your own repeated reference to the low “average” CalPERS pension, I consider that in the category of misleading, even if it is a “mathematical average”.