Ruling challenges prevailing view of pension law

Three appeals court justices, citing the alarming view of critics that unaffordable public pensions are headed for the financial cliff, looked for a new way to allow a change in direction and found one.

In a ruling in a Marin County case last August that reformers called a “game changer,” the panel weakened the “California rule” protecting the pensions of current workers. Most cost-cutting reforms have been limited to new hires, which can take decades to yield savings.

One reason unions asked the state Supreme Court to review the new ruling last month is that another three-justice panel, also from the first district appeals court, made an opposite ruling in a San Francisco case last year.

“Not only does the court of appeal opinion conflict with sixty years’ worth of California Supreme Court precedent, it flies in the face of a decision by the same district court of appeal only a year ago,” said the union appeal, arguing that “unanimity of decision” is needed on “vested pension rights doctrine.”

The California rule stems from a state Supreme Court ruling in 1955 (Allen v. City of Long Beach) that the pension offered at hire becomes a vested right, protected by contract law, that can only be cut if offset by a comparable new benefit, erasing employer cost savings.

Pension cuts for current workers in the Marin and San Francisco cases were an attempt to curb employer pension costs that soared after heavy pension fund investment losses during the recession and financial crisis in 2008.

The ruling in the San Francisco case overturned most of a voter-approved cut in a supplemental COLA for pensions, citing the California rule that a pension cut must be offset by a new benefit. The state Supreme Court declined to hear an appeal.

The Marin ruling allows the county, with no offsetting new benefit, to impose “anti-spiking” state legislation enacted in 2012 that prevents current workers from continuing the previously authorized boosting of pensions with standby pay, call-back pay, and other things.

Some suggest the Marin ruling could lead to cuts in pensions current workers earned in the past, even though the ruling is “limited” and the case is about pensions earned in the future. Uncertainty about what could be cut is another reason unions want a high court review.

The California rule, adopted by courts in a dozen other states, is unusal for a number of reasons. Cuts in the pensions that will be earned by current workers in the future are allowed in the dwindling number of private-sector pensions.

Pensions are regarded as deferred salary. Government employers can cut salary, but under the California rule they cannot cut pension amounts current workers will earn in the future, unless there is a comparable new benefit.

“This interpretation is contrary to federal Contract Clause jurisprudence, which holds that prospective changes to a contract should not be considered unconstitutional impairments,” argues Amy Monahan, a legal scholar.

Her 64-page paper, “Statutes as Contracts? The ‘California Rule’ and Its Impact on Public Pension Reform,” is mentioned by reformers such as former San Jose Mayor Chuck Reed, who think cutting pensions not yet earned is the key to curbing runaway pension costs.

Monahan argues, according to an abstract of her article, that California courts have not explained the “basis” for the California rule and have “improperly infringed on legislative power” with “a rule that is inconsistent with both contract and economic theory.”

The state Supreme Court ruling in the 1955 Allen v. Long Beach case gives little or no explanation of why cuts in pensions not yet earned by time on the job should be offset by a comparable new benefit. The main part of the ruling is a single sentence:

“To be sustained as reasonable, alterations of employees’ pension rights must bear some material relation to the theory of a pension system and its successful operation, and changes in a pension plan which result in disadvantage to employees should be accompanied by comparable new advantages.”

Monahan said the court “merely stated the new rule” and as support cited two appellate court rulings that mention the theory of a pension system and note that certain detrimental changes were offset by new advantages.

“It is unclear why the Allen court chose to make these appellate court observations part of a new rule regarding pension modification,” Monahan said. “The Allen case is a bombshell.”

The Marin ruling does not argue that the standard-setting Allen ruling is invalid but, like the San Francisco ruling, follows the common law procedure of citing previous rulings, intended to ensure that similar facts yield similar outcomes.

Still, even though the Marin and San Francisco rulings cite dozens of previous rulings, often not the same ones, following their presumably logical legal paths takes them to opposite conclusions.

Justice Richman

Justice Richman


“There is no absolute requirement that elimination or reduction of an anticipated retirement benefit ‘must’ be counterbalanced by a ‘comparable new benefit,” said the Marin ruling written by Justice James Richman and concurred in by Justices J. Anthony Kline and Maria Miller.

“This diminution in the supplemental COLA cannot be sustained as reasonable because no comparable advantage was offered to pensioners or employees in return,” said the San Francisco ruling written by Justice Henry Needham and concurred in by Presiding Justice Barbara Jones and Justice Mark Simons.

Justice Needham

Justice Needham


The San Francisco ruling briefly notes that during the financial crisis the city pension fund plunged from 103 percent funded (market value) in 2008 to 72 percent a year later. A reform approved by 69 percent of voters in 2011 cut costs by limiting a supplemental COLA to years when the system was fully funded.

The supplement adding up to 3.5 percent to the standard cost-of-living adjustment for retirees of up to 2 percent, depending on inflation, had been awarded when pension fund investments during the previous year exceeded expected earnings, then 7.5 percent.

Skimming off “excess” earnings is questionable management, because the excess is needed to offset years with earnings shortfalls or losses. But the San Francisco pension system, which requires voter approval of pension increases, historically has been well funded.

Employers were given a contribution “holiday” from 1996 to 2004, making no payments into the pension fund, another example of questionable management. Measure C in 2011 was supported by all 11 county supervisors and business and labor groups.

A retiree suit to overturn the measure was called “the epitome of greed” by the president of the police union. A superior court ruling upheld the measure, concluding full funding was assumed when voters approved the supplement in 1996, then later increased the supplement and made it permanent.

The appeals court panel found no evidence that full funding had been a condition for the supplement. Following the California rule on vested rights, the panel said the supplement can’t be cut for workers retiring after 1966, but “may” be cut for workers retiring before then.

Last July, the San Francisco retirement board, pointing to the permissive “may,” restored the full supplement for those retiring before 1966. City Controller Ben Rosenfield sued the board for defying the will of voters.

Rosenfield told the San Francisco Chronicle a full supplement for 8,300 workers who retired before November 1966 will cost the city $200 million over the next five years. A superior court enjoined the board action last week.

The Marin ruling, making the case for cost reduction, begins with a look at the “emergence of the unfunded pension liability crisis.” A number of national and state reports on the issue are mentioned in a “background” section.

“In the aftermath of the severe economic downturn of 2008-2009,” said the ruling, “public attention across the nation began to focus on the alarming state of unfunded public pension liabilities.”

(An annual Milliman actuaries report last week said the 100 largest U.S. public pension systems were on average only 70 percent funded as of June 30, with a debt or unfunded liability of $1.38 trillion.

(The giant California Public Employees Retirement System, which does not include the Marin and San Francisco systems, was an estimated 68 percent funded last June with an unfunded liability of $139 billion.)

The longest look in the Marin ruling background section is at a report by the Little Hoover Commission in 2011 warning that “aggressive reforms” are needed to prevent growing pension costs from reducing government services and forcing layoffs.

“To provide immediate savings of the scope needed, state and local governments must have the flexibility to alter future, unaccrued retirement benefits for current workers,” the commission said in its top recommendation.

The Marin ruling cites a number of past court rulings that allowed cuts in the pensions of current workers to give the pension system the flexibility to adjust to changing conditions and preserve “reasonable” pensions in the future.

The previous rulings allowed increases in pension contributions, changes in retirement ages, repeals of COLAs, changes in required service years — even reduction of pensions in 1938 from two-thirds to one-half of salary.

Some public pension lawyers are alarmed by a comment in the Marin ruling on a 1967 appeals court ruling (Santin v. Cranston): “Until retirement, an employee’s entitlement to a pension is subject to change short of actual destruction.”

The Marin ruling said the 1955 Allen v. Long Beach ruling that said pension cuts “should” have a comparable new benefit was changed to “must” in a 1983 state Supreme Court ruling. But all Supreme Court rulings since then say “should” have a new benefit.

“It thus appears unlikely that the Supreme Court’s use of ‘must’ in the 1983 (Allen v. Board of Administration) decision was intended to herald a fundamental doctrinal shift,” the Marin ruling said, citing two rulings that “should” is advisory not compulsory.

In addition, the Marin ruling said the legislative cut in “spiking” gives Marin County employees a new benefit. Employee contributions that helped pay for the “spiking” provisions will no longer be deducted from their paychecks.

“Put simply, the new benefit is an increase in the employee’s net monthly compensation,” said the Marin ruling. “Put even more simply, it is more cash in hand every month.”

A post on the Reason Foundation website by an Emory Law School professor who has studied the California rule, Alexander Volokh, reviews four related cases and suggests the Marin ruling may be reversed.

Volokh argues that some of the previous rulings showing flexibility in the California rule were based on “highly unusual historical circumstance” not present in the Marin case. He said an employee near retirement would only have “more cash in hand” for a short period.

Comparable new benefits were granted in some of the cases cited in the Marin ruling, Volokh said, and other cases refused to make an exception for fiscal emergencies, since they were the government’s own fault and could be remedied by tax increases.

“Anthing can happen on appeal, but it wouldn’t be surprising to see this decision reversed by the Supreme Court,” Volokh said. The Supreme Court has at least 60 days to accept or reject the union appeal for a review of the Marin ruling, received Sept. 28.

Similar consolidated union suits against the Alameda, Contra Costa and Merced county pension systems have been briefed in appeals court but no date for oral arguments has been scheduled.

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 10 Oct 16

39 Responses to “Ruling challenges prevailing view of pension law”

  1. Hannah Katz Says:

    It would seem that a 401(k) plan with employer matches to employee contributions would be fair. That is what most workers in the private sector must deal with. Asking them to pay higher taxes and work until 70 so that government employees can retire at 50 with a very comfortable pension is not fair.

  2. john m. moore Says:

    Both Kern(1947) and Allen v. City of Long Beach stated the rule that if reductions were necessary to protect the integrity of the pension system to continue to pay reasonable pensions, reductions could be made w/o off -set. When in Allen the court said a reduction required an off -set, it was discussing the facts of Allen: In two separate sentences, one immediately following the off- cited off-set requirement, the court noted that the city was not claiming financial stress to its pension system. In the Marin appeal, the court set forth a foundation proving that the Ca. pension system was threatened with default, so it met the “-no off set needed” rule of Kern and Allen.

    Instead of reading secondary sources, read the two cases.

  3. S Moderation Douglas Says:

    Hannah Katz,

    According to the California Legislative Analysts Office:

    California Highway Patrol officers have an average retirement age of 53.
    For local police and public safety workers, the average retirement age is 55.
    State prison guards and firefighters hold on until age 60.
    And other state and local employees in the California Public Employees Retirement System — many city and special district office workers et al — have an average retirement age of 60 to 61.

    Guess what the average age for retirement of all American workers is:

    ” Gallup conducted several polls in the early 1990s and found that the average retirement age was 57 in both 1991 and 1993. From 2002 through 2012, the average hovered around 60. Over the past two years, the average age at which Americans report retiring has increased to 62.”

    It is just not true, on average, as some claim, that public workers “retire ten to fifteen years earlier than private workers.”

  4. SeeSaw Says:

    @HannaKatz, I worked in the public sector for 40 years and I don’t know any miscellaneous worker like myself who retired at 50. A retirement at that age will yield less than $5.000/yr in most cases.. Your taxes would not go down if the DB pension system were abolished–we are always going to pay taxes for public services. The individual entities and the bargaining groups have to work together to make things sustainable. You should be happy that there is a system for public-sector workers that makes it possible for them to be sustainable in retirement instead of them being clients of the social services system which we are all also going to support with our taxes.

  5. TB Says:

    More and more people are beginning to realize that Defined Benefit plans like public pensions are not sustainable, including the private sector which has more or less done away with them. Here is my solution to this looming crisis that is only going to get worse without any correction of course:

    https://drive.google.com/file/d/0B90sU3A85q46OE9BZHJFSWEzbGM/view?usp=drivesdk

    Please help spread the word…

  6. Tough Love Says:

    quoting ……

    “Volokh argues that some of the previous rulings showing flexibility in the California rule were based on “highly unusual historical circumstance” not present in the Marin case. He said an employee near retirement would only have “more cash in hand” for a short period.”

    Was Volokh as vocal when SB400 was passed and the age 49 Policeman could retire only one year later with a 50% increase in his pension ….FOR ONLY ONE YEAR OF HIGHER CONTRIBUTIONS ?

  7. Tough Love Says:

    quoting S Moderation Douglas……….

    “It is just not true, on average, as some claim, that public workers “retire ten to fifteen years earlier than private workers.””

    Those Public Sector workers you quoted are retiring with pensions that are TYPICALLY 3 to 4 times greater in value upon retirement than those of their Private Sector counterparts (4 to 6 times for Safety workers) and in most cases UNREDUCED for early retirement.

    In the Private Sector, many “retirements” are not voluntary and the workers have simply given up finding work after losing their prior job, even thought they would like to (and in most cases financially NEED TO) work. And with the age for “unreduced” Private Sector pensions typically being 65, almost ALL PRIVATE Sector workers who retire at younger ages (with such pensions) are impacted by very material reductions (typically 4% to 5% PER-YEAR-OF-AGE) in the otherwise calculated monthly payment.

    There is ZERO justification for Public Sector workers NOT TO be subject to the SAME early retirement reductions when THEY retire before age 65.

    The Taxpayers have been suckered long enough by the insatiable greed of Public Sector Unions/workers….. and our taxpayer-betraying Elected Officials who (in exchange for Public Sector Union campaign contributions and election support) allowed this huge THEFT of Private Sector taxpayer wealth to happen

  8. S Moderation Douglas Says:

    The Reason Foundation

    Alexander Volokh
    February 19, 2014

    ” And if pension rules become more generous in the future, then those more generous terms are the ones that are protected. ”

    “In California, when a public employee begins work, he not only acquires a right to the pension accumulated so far—presumably zero on the first day, and increasing as he works longer—but also the right to continue to earn a pension on terms that are at least as generous as the ones then in effect, for as long as he works. And if pension rules become more generous in the future, then those more generous terms are the ones that are protected. Any changes to these rules must be reasonable, meaning that they “must bear some material relation to the theory of a pension system and its successful operation,” and any disadvantages to the employees “should be accompanied by comparable new advantages.” This is the “California rule.””

    AKA “The Tall Persons Rule”

    Hey, I like that “Tall persons RULE!”

  9. S Moderation Douglas Says:

    “In the Private Sector, many “retirements” are not voluntary and the workers have simply given up finding work after losing their prior job, even thought they would like to (and in most cases financially NEED TO) work.”

    For over twenty five years? In good times and bad?

    ” Gallup conducted several polls in the early 1990s and found that the average retirement age was 57 in both 1991 and 1993. From 2002 through 2012, the average hovered around 60. Over the past two years, the average age at which Americans report retiring has increased to 62.”

    Anecdotal evidence: I have one sister and brother in law in the IT field who retired in their late fifties with a home and vacation home both paid for. Another sister still working full time plus drawing SS at age 82.

    What would be interesting, if anyone knows where to find it, is empirical data showing the average retirement age by income group. My experience, and Sawz, as I recall, is that we worked with people who earned less than the average salary for all workers (about $55,000 in today’s dollars, in California). Most of the people we knew retired at age 65 or later.

    PS:
    You do know that Alexander Volokh is on your side, right?

    “These are all possibilities for treating pension benefits just like other aspects of compensation: as something earned over time and not guaranteed for the future. In addition to being more rational as a public-employee compensation policy, abandoning the California rule would also give governmental units in California, and wherever else the rule has been adopted, flexibility to deal with changing circumstances.

  10. S Moderation Douglas Says:

    “I was going to say something extremely rough to Tough Love, and I said to myself, I can’t do it, it’s inappropriate. It’s not nice.”

    “I’ll tell you maybe at the next debate, we’ll see,”

    LOL!!!

  11. Tough Love Says:

    What’s the matter S Moderation Douglas, can’t handle the TRUTH?

    Repeating from above:

    In the Private Sector, many “retirements” are not voluntary and the workers have simply given up finding work after losing their prior job, even thought they would like to (and in most cases financially NEED TO) work. And with the age for “unreduced” Private Sector pensions typically being 65, almost ALL PRIVATE Sector workers who retire at younger ages (with such pensions) are impacted by very material reductions (typically 4% to 5% PER-YEAR-OF-AGE) in the otherwise calculated monthly payment.

    There is ZERO justification for Public Sector workers NOT TO be subject to the SAME early retirement reductions when THEY retire before age 65.

    The Taxpayers have been suckered long enough by the insatiable greed of Public Sector Unions/workers….. and our taxpayer-betraying Elected Officials who (in exchange for Public Sector Union campaign contributions and election support) allowed this huge THEFT of Private Sector taxpayer wealth to happen

  12. S Moderation Douglas Says:

    Mebbe, mebbe not. Moderation can handle the truth. That’s what Moderation is all about.

    I am painfully aware, through family experience, that ‘many “retirements” are not voluntary’ in the private sector, . The question is, how many? Without that, your entire response is worse than worthless. Just another rant.

    If you think that is the reason the “average” retirement age has been consistently 60 or below for the last twenty five years, show me some sources.

    Moderation suspects that a retirement age that low is because there are still many residual pensions out there and, especially in the upper quintile of wealth and income earners, there are people with enough accumulated wealth to allow them a comfortable retirement at a much younger age. (And very few in this category are public workers.)

    https://www.google.com/url?sa=t&source=web&rct=j&url=http://hrsonline.isr.umich.edu/sitedocs/databook/HRS_Text_WEB_Ch3.pdf&ved=0ahUKEwj82vKgwdPPAhXH54MKHbVECyIQFggbMAA&usg=AFQjCNHNYz3T4peHyvqblFG3016uItYdwg&sig2=n_CSahP53LsKJx7jV3iNOg

    There are a lot of poor folks out there struggling through retirement. And a lot of very comfortable private retirees who have no need to envy public pensions. And to a large extent, those very low income retired taxpayers are NOT paying for the public pensions…. Who is?

    “Forty-five percent of the state’s income tax money comes from the top 1 percent of filers – those with adjusted gross income of at least $501,000. That’s about 150,000 taxpayers with an average adjusted gross income of $1.6 million. And damn few of those are public sector workers.

    Comparing the “average” public sector to the “average” private sector retirement is useless and misleading.

  13. john m. moore Says:

    I hope the Ca. Supreme court grants a hearing in the Marin case. If it upholds the decision, it will clarify that pensions may be modified for current employees and should tip off the limits for modification. If it reverses the decision and declares that a city/county may never reduce pensions w/o comparable off-sets that would leave pension reformers with two immediate options.

    Both options require replacement of council and BOS with a majority of real reformers. The first option is to declare a financial emergency under the police powers and freeze and reduce salaries until the agency is solvent on both a cash and accrual accounting basis. Or,exercising the second option, the city or county could file a “good” chapter nine in bankruptcy, reject the defined benefit plan and modify pension debt and put the agency into the social security system.

    The worst attempt at reform would be to file a “bad” chapter 9 in bankruptcy, one that does not reject the defined benefit plan.

    Presently there is not a single govt. agency in Ca. where voters are attempting to elect legislators who will exercise the two options. None.

  14. Tough Love Says:

    Quotiing S Moderation Douglas ….

    “There are a lot of poor folks out there struggling through retirement. And a lot of very comfortable private retirees who have no need to envy public pensions. And to a large extent, those very low income retired taxpayers are NOT paying for the public pensions…. Who is?”

    Who? It’s Middle Class Taxpaying Private Sector workers …… with (on average) near equal cash pay in comparable jobs but with pensions and benefits a very small fraction of that promised Public Sector workers.

    It’s WAY past time to END that advantage, and for the future service of all CURRENT workers.

  15. S Moderation Douglas Says:

    Your thinking is too simplistic. These pensions are not just for the advantage of the workers. There are advantages for the employer as well (yeah, that’s right. The “employer”. The taxpayer. ) And for society as a whole. Your opinion of the generosity of these pensions was exaggerated to begin with, even more so since the spate of reforms since 2008, and earlier.

    We need more pensions, not less. Especially for those lower income private sector workers.

    Your “Middle Class Taxpaying Private Sector workers …… “are paying for a public system much more egalitarian than the private sector, with, in the public sector, the highest paid essentially subsidizing the lower level workers/retirees.

    And no, your private workers do not have “(on average) near equal cash pay in comparable jobs”, Never did. Argue that with Bender and Heywood. With Munnell. With Keefe. With Biggs. Don’t ask Richwine. He doesn’t work here anymore.

  16. S Moderation Douglas Says:

    Allegretto and Keefe found in a 2010 study found that the wages received by California public employees, both state and local, are paid about 7% lower, on average, than wages received by comparable private sector workers. Unlike the Biggs study, this one did not exclude safety workers or other local workers.

    There were actually four studies about this time finding that the compensation that California state and local workers receive is less than or equal to that of comparable private workers.

    What did Biggs say in a 2011 study? His argument was with the value of pensions and benefits, not the lower wages.

    ” While these studies measure wage differences more or less properly, none of them considers the full benefit premium enjoyed by public workers.”

    Quoting Tough Love…
    ” with (on average) near equal cash pay in comparable jobs”

    Sorry Love, not true. Keep throwing it against the wall. It won’t stick.

    Biggs still said in 2014 that non safety state workers earn, on average, twelve percent less in wages than similarly educated private-sector workers.

    NOT… “near equal cash pay”

    Not even close.

    Not now.

    Not then…

    “Out of Balance? Comparing Public and Private Sector Compensation over 20 Years”
    Bender and Heywood, 2010

  17. Tough Love Says:

    Quoting S Moderation Douglas …..

    “These pensions are not just for the advantage of the workers. There are advantages for the employer as well (yeah, that’s right. The “employer”. The taxpayer. ) And for society as a whole.”

    Oh yeah, I’m sure that Private Sector Taxpayers are just THRILLED with the current structure, under which THEY are responsible for contributing 5 to 10 TIMES towards Public Sector pensions what they get from their own employers.

    You are CLEARLY delusional.
    ————————-

    Whatever “we” as a Society need, Public Sector workers are certainly NOT entitled to MORE (near equal pay, with MUCH greater pensions, and MUCH better benefits) than comparably situated Private Sector workers …… on the Taxpayers’ dime.

  18. Tough Love Says:

    S Moderation Douglas,

    STILL quoting studies form Rutgers Professor Keefe ?

    Pasting my last reply to you where you also brought up Professor Keefe:
    ——————————————————-

    When I saw the reference to University Professor Jeffrey Keefe I didn’t need to read more ……….

    I suppose very long tenure (and likely funding/grants from sources [Public Sector Unions?] supporting pre-determined study results) is what has stopped Rutgers from terminating this fellow.

    In fact, one of your favorite references, Andrew Biggs, has enumerated MANY of the VERY material flaws in Keefe’s work. While many, the one flaw that ALONE should disqualify ANY credibility as well as continued employment as a university professor, is his insistence that in calculating the annual pension-cost-element of Public Sector “Total Compensation” (wages + pensions + benefits), Mr. Keefe insists that what the gov’t entity ACTUALLY CONTRIBUTES in that year is the correct figure ….. no matter that virtually every other economist believes that the correct figure is an estimate of the present value of the pension benefits ACCRUED IN THAT YEAR (using assumptions consistent with the strength of the guarantee that those accrued pension benefits will indeed be paid).

    Point ….. in several years, NJ (Rutger University’s home State) contributed nothing (yes nothing) towards its Public Sector pensions, all while NJ’s workers accrued another year of (undeniably) very valuable pension benefits.

    Not a problem under Keefe’s logic…. there was NO COST. Really ? Only in academia would someone with such off-the-wall ideas keep their job.

  19. S Moderation Douglas Says:

    Reading comprehension is our friend. You were talking about nearly equal …wages…

    TL… ” with (on average) near equal cash pay in comparable jobs”

    Biggs:

    ” While these studies measure wage differences more or less properly, none of them considers the full benefit premium enjoyed by public workers.”

    Wages are not nearly equal, even according to Biggs.

    LOL!!!

    Read my longgggg article above.

    Say goodnight, Gracie.

  20. CalPERSon Says:

    ” the Marin ruling said the legislative cut in “spiking” gives Marin County employees a new benefit. Employee contributions that helped pay for the “spiking” provisions will no longer be deducted from their paychecks.”

    I still laugh at the Judge’s twisted logic. Someone steals your car worth $20,000. In court the judge says, hey, you lost your car but the thief gave you a benefit because you don’t have to pay for future gasoline or oil changes — your loss is only $19k not $20k. What, what, what?

  21. Tough Love Says:

    CalP{ERSon,

    When there is a financial problem and money must be “saved”, replacing something (i.e., to “save” money) with something else of equal value … is ludicrous.

    And it CERTAINLY doesn’t work that way in the Private Sector.

    Why do you believe that only YOU …Public Sector workers …. are so “special”, and deserving of a better deal than the Taxpayers (85% of whom working in the PRIVATE Sector) who pay your way ?

  22. S Moderation Douglas Says:

    Did CalP{ERSon [sic] say he or she was a Public Sector worker, or is that another of your assumptions?

    If, in fact, CalPERSon is a public worker, odds are, he or she is taller and more attractive than the average private sector worker, therefore would be deserving of a better deal. You just can’t ignore the statistics.

  23. Tough Love Says:

    S Moderation Douglas,

    I believe it was obvious. “CALPERSon” sounds like an abbreviation for “CalPERS Person” ….. you know another one of those (like you) unjustly sucking away at the taxpayers’ teat.

    Yup, he/she might be taller ….. and if so, perhaps should have followed in your footsteps as a light-bulb-changer. Extra height being a definite “plus”.

  24. S Moderation Douglas Says:

    And more attractive. You keep forgetting that part.

    For how long did you believe I worked on trains, just because Mr. Fellner mentioned something about an engineer?

    Seems anyone who disagrees with you at all is assumed to be suckling at that teat.

  25. Tough Love Says:

    S Moderation Douglas,

    Because ALL of CA’s PUBLIC Sector DB pensions (AND benefits) are unnecessary, unjust, unfair to Taxpayers, grossly excessive, and clearly unaffordable, YES, any CA Public Sector worker retired post SB400 (AND most before) are indeed unjustly ….suckling at the taxpayers’ teat.

    You are NOT “special” and deserving of a better deal ….on the Taxpayers’ dime.

  26. S Moderation Douglas Says:

    Hyperbole, thy name is Tough Love.

  27. spension Says:

    Oh gosh, the race to the bottom went quickly this time.

    Very few commitments are as persistent and unbreakable as that to public DB pensions… the increases in DB pensions (like 3%@50, or various spikings) were enacted without due thought for the seriousness and impact on taxpayers.

    On the private sector side, elimination of DB plans has mainly been due to the avarice of executives, who have swallowed rank-and-file pension funds and turned them into personal golden parachutes, as documented by a Pulitzer-winning Wall Street Journal author:
    http://www.retirementheist.com

    Comparisons to the private sector are therefore unreliable.

    DC plans have essentially no protection against seizures (analogous to those executed by the private sector leaders on private sector DB plans) by private sector contributors, as detailed in the Penn Specialty Chemical case…
    http://www.nytimes.com/2014/02/02/business/a-long-fight-to-get-what-was-theirs-in-a-401-k.html

    Boring, modest-benefit DB plans are the best solution by far… with the economy due to the reduction of longevity risk, protections in the public sphere of seizure by private sector sharks, etc… modest-benefit DB plans are the best. There are hundreds both private and public in the US that do persist, outside the harsh light of politicization.

    But TL does point out something accurate: California DB plan benefits did get escalated to a level that is not sustainable. The root cause in my opinion was ignorance and innumeracy. TL thinks that the root cause was criminal extortion by public unions. I don’t agree that public unions are criminal, but by being ignorant and innumerate, public unions did open themselves up to the appearance of criminality.

  28. Tough Love Says:

    spension,

    All very interesting, but the bottom line is that unless Public Sector workers demonstrably earn less in WAGES (with no less hours worked per week, and with he SAME measurable work-product-output … i.e., not time spent BSing at the water cooler or surfing the web), there is ZERO justification for ANY greater Public Sector pensions or benefits, which RIGHT NOW are TYPICALLY 3 to 4 times (4 to 6 times for safety workers) greater in value upon retirement than those of comparable Private Sector workers who retire at the SAME age, with the SAME pay, and the SAME years of service..

    And DB pensions simply CANNOT function effectively in the PUBLIC Sector because politicians CANNOT resist the lure of Public Sector Union campaign contributions (and election support) and in exchange for such, betray the Taxpayers by granting these grossly excessive pensions and benefts.

  29. S Moderation Douglas Says:

    How come…

    ” 23% advantage” is carved in granite and hermetically sealed in your brainpan, immutable despite eight years of the most volatile economic changes in our lifetime, but when it comes to simple wage comparisons, Biggs is inept. Never mind that his wage figures agree with all the other major studies?

    We didn’t have a water cooler. Boss said we could have coffee if we brought our own coffee… And our own pot.
    Of course, we usually had to bring our own toilet paper too, so we were used to that.

    Taxpayers, what could YOU do with an extra 23%?

  30. Tough Love Says:

    No, Biggs isn’t inept. The inept are Study authors that YOU like to refer to ….such as Rutgers Professor Jeffery Keefe.

    Biggs has pointed out the MAJOR failings in his methodology …that you choose to ignore because they doesn’t support your biased agenda.

    Keefe’s studies include, as the “cost” of Public Sector pensions, what the gov’t entity ACTUALLY CONTRIBUTES in that year.

    Economist disputes that, stating that the correct “cost” is the present value of that year’s pension accrual. It’s VERY simple to PROVE the point. NJ and some other Public Sector Plan sponsors have in some years contributed absolutely NOTHING.

    Is the true “cost” of the additional year’s pension accruals nothing? Of course not, and only in academia would someone with such off-the-wall ideas keep their job.
    ————————————-

    And most of the other authors that you refer to add NOTHING for Public Sector Retiree healthcare costs in their calculation of Public Sector “Total Compensation”…. likely again because Gov’t entities typically do not prefund retiree healthcare costs.

    The promise of retiree healthcare is VERY expensive, with several researchers suggesting it to “cost” a level annual 10% of pay.

  31. spension Says:

    TL said “there is ZERO justification for ANY greater Public Sector pensions or benefits,”

    The justification is that the private sector pension environment was corruptly driven to toward the bottom by private sector executives, as documented by a Pulitzer-winning Wall Street Journal reporter:
    http://www.retirementheist.com

    There is ample justification for avoiding the corrupt DC system, even if the private sector uses them, because there are proven to be corrupt. First, the fees are outrageously high, with self-interested advisors steering retirees into bad investments that pay mostly the advisor. Second, the employer can seize the funds, just like Penn Specialty Chemical did.
    http://www.nytimes.com/2014/02/02/business/a-long-fight-to-get-what-was-theirs-in-a-401-k.html?_r=0

    Boring, modest DB plans, like exist in the states of Washington, Wisconsin, and South Dakota are the best, and are quite efficient, because of the lower cost brought about by the reduction of longevity risk.

  32. Tough Love Says:

    Quoting spension ….

    “”TL said “there is ZERO justification for ANY greater Public Sector pensions or benefits,”

    The justification is that the private sector pension environment was corruptly driven to toward the bottom by private sector executives”.
    ———————————————

    I would argue that … to a large extent …. reasonable financial necessity, driven to a large extent by global competition and steadily declining interest rates (since the early 1980s) is the “reason” for the demise of Private Sector DB pensions.

    But regardless of the reason, it is the Private Sector (where 85% of all workers reside) where employers must compete for talented workers and where employees are free to accept or decline compensation offered by an employer (or to seek employment elsewhere) that defines “market rate compensation”, NOT that found in the Public Sector where material compensation-distortions are injected into the mix due to the COLLUSION between the Public Sector Union and our self-interested Elected Officials whose favorable votes (on Public Sector pay, pensions, and benefits) are BOUGHT with Public Sector Union campaign contributions and election support.

    I stand by what I previously stated (and including my COMPLETE statement above)…

    “Unless Public Sector workers demonstrably earn less in WAGES (with no less hours worked per week, and with he SAME measurable work-product-output … i.e., not time spent BSing at the water cooler or surfing the web), there is ZERO justification for ANY greater Public Sector pensions or benefits, which RIGHT NOW are TYPICALLY 3 to 4 times (4 to 6 times for safety workers) greater in value upon retirement than those of comparable Private Sector workers who retire at the SAME age, with the SAME pay, and the SAME years of service.”
    ————————————————–

    The 2 State Public Sector pension systems with the highest funded ratios are Wisc. and SD, and both are very near 100% using the extremely liberal valuation assumptions and methodology used ONLY by American PUBLIC Sector Plans. If these State’s Plans were valued using the assumptions and methodology REQUIRED by the US Gov’t of PRIVATE Sector Plans, BOTH State’s Plans would see their funding ratio drop to a level below 70%.

    That is considered quite POOR, and being below 80% would trigger the first of 2 sets of Treasury Department restrictions.

    Yes, the Wisc, and SD Public Sector DB Plans are the BEST-funded of all Public Sector Sate Plans…. and also in POOR (not “fine”) shape.

  33. Steve Says:

    I see that we have the usual bleating suspects, Tough Love and John Moore, on here posting their hopes that pensions for public workers get cut, public worker wages get cut, yada, yada.

    Telling that at the bottom of Ed’s long column is the money part–ie, the part that matters. “Anything can happen on appeal, but it wouldn’t be surprising to see this decision reversed by the Supreme Court,” Volokh said” And, btw, this guy is no fan of public pensions or court rulings upholding same.

  34. john m. moore Says:

    Steve. Since 2008, I have worked for pension reform. One of my greatest fears is that when the bubble bursts, those government workers at the bottom(up to the 70% level) will get hurt much worse than the millionaires at the top. That is the way PERS is set up.

    Every raise creates a corresponding pension liability about three times the size of the salary increase. That is caused by several reasons, the assumed rate of return, spiking, smoothing of losses, etc. Every govt. worker salary increase accelerates the growth of the unfunded pension deficit, a form of pension suicide.

  35. spension Says:

    TL Said “I would argue that … to a large extent …. reasonable financial necessity, driven to a large extent by global competition and steadily declining interest rates (since the early 1980s) is the “reason” for the demise of Private Sector DB pensions.”

    US Executive salaries lead the work by a lot…
    http://www.aflcio.org/Corporate-Watch/Paywatch-Archive/CEO-Pay-and-You/CEO-to-Worker-Pay-Gap-in-the-United-States/Pay-Gaps-in-the-World

    Compensation to average workers in the US does *not* lead the world.

    Global competition amply allows for reasonable post-retirement benefits… it is the avarice of American executives, and that alone, which has driven rank-and-file compensation in the US private sector toward the bottom.

  36. Tough Love Says:

    spension,

    I wouldn’t disagree that the …”avarice of American executives” (call it greed) …. is contributory, but Global Competition and the decades-long decline in interest rates is overwhelmingly a greater contributing factor in the decline of Private Sector DB pensions (which were considerably more generous than current DC employer contributions, but still FAR less generous than PUBLIC Sector DB Plans).

  37. spension Says:

    TL… well, Germany, France, the Netherlands.. they somehow manage to provide reasonable health and retirement benefits, but they compete globally quite well.

    I bet California pays public safety workers higher pensions than those places, but I don’t think California schoolteachers get better pensions than in those countries. And health benefits… well, I know lots of Europeans who go back home for healthcare, although they live here… quite a few Americans travel their to pay directly for healthcare too.

    At the high end, where money is no object, the US has the best healthcare… but for the regular person, Europe (and Canada) are now better and cheaper.

  38. Tough Love Says:

    spension,

    US resident travel abroad to save on uninsured healthcare expenses is to Asia and South America …. not to Europe.

  39. spension Says:

    I know quite a few people who travel to Europe for healthcare. They don’t trust Asia or South America.

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