Another court setback for protectors of pensions

In another ruling allowing pension cuts, an appeals court last week overturned a state labor board ruling that a voter-approved San Diego pension reform was invalid because the city declined to bargain the issue with labor unions.

The initiative approved by 66 percent of San Diego voters in 2012 gave all new city hires, except police, a 401(k)-style individual investment retirement plan instead of a pension and imposed a five-year freeze on pay used to calculate pensions.

The state Public Employment Relations Board, whose post-election decision was overturned by a unanimous ruling of a three-member appellate panel, took the unprecedented step of trying to get a court to remove the San Diego initiative from the ballot before the vote.

Jan Goldsmith, former San Diego city attorney, told the San Diego Union-Tribune the city stood firm, would not be “bullied” by the labor board, and now the appellate ruling will “reverberate” across California.

“When governments fail to act on problems such as with pension liabilities, the people have a constitutional right to pursue a citizens’ initiative by obtaining signatures on a petition and presenting solutions directly to the voters, bypassing the legislative body,” Goldsmith said. “The court held that there is no requirement that citizens’ initiatives be negotiated with labor unions.”

The labor board ordered that city employees hired after the initiative passed, now about 3,000, be given retroactive pensions with 7 percent interest as a penalty, the Union-Tribune said. The estimated city cost was $20 million when there were only about 1,600 new hires.

Last week, the appellate court ruled the labor board erred when finding in 2015 that former San Diego Mayor Jerry Sanders and the city council committed an “unfair labor practice” by declining to “meet and confer” with labor unions before Proposition B was placed on the ballot.

Lacking the city council votes needed to place a pension reform on the ballot, Sanders and former City Councilman Carl DeMaio, the author of the reform, helped lead and support the initiative campaign.

The support of Sanders and other city officials for the the initiative’s development and campaign is “undisputed,” the court said. But the “meet and confer” obligation only applies to measures placed on the ballot by the governing body, not by citizens gathering voter signatures.

State law meet-and-confer obligations have “no application when a proposed charter amendment is placed on the ballot by citizen proponents through the initiative process,” the appellate court said.

DeMaio’s website said he “has been working with former San Jose Mayor Chuck Reed on a state-wide Pension Reform Initiative and this court victory only improves chances of reform statewide.”

Reed has said that San Jose, with an eye toward a 1984 Seal Beach court ruling requiring bargaining before placing a measure on the ballot, held extensive labor negotiations before the council placed his pension reform measure on the ballot.

But the state labor board agreed to hear a labor unfair practices complaint against Measure B, which was approved by 69 percent of San Jose voters in June 2012, the same election San Diego voters approved pension reform.

The board also agreed to hear a labor complaint about a pension reform approved by Pacific Grove voters in 2010. Courts overturned the Pacific Grove measure and a key part of the San Jose measure enabling the option of cutting pensions current workers earn in the future.

In each case, superior court judges cited what has become known as the “California rule.” 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 any savings.

The protection of the California rule emerged from judges who chose to cite the precedent of a series of rulings, a key one in 1955 in Long Beach. Different rulings were cited in an appeals court decision in a Marin County case last August that could overturn the California rule.

“While a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension,” Justice James Richman wrote in a unanimous ruling of the First District Court of Appeal.

“And the Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension. So long as the Legislature’s modifications do not deprive the employee of a ‘reasonable’ pension, there is no constitutional violation.”

The Marin ruling came in a union challenge to parts of a 2012 pension reform, described in the ruling as a response to reports of a funding “crisis” that would force cuts in local government services and layoffs if not corrected.

Most of the main cuts in the reform (such as longer retirement ages and a requirement to pay half of “normal” pension costs excluding debt from previous years) observe the California rule and are limited to new hires, who have no vested rights.

Exemptions for workers hired before the reform took effect on Jan. 1, 2013, are part of the reason the Public Employees Pension Reform Act is not expected to yield significant cost savings for decades, when most workers will be covered by the reform.

The Marin ruling upheld “spiking” reforms that prevent county workers hired before the reform from boosting pensions with unused vacation and leave, bonuses, terminal pay, an other things.

The state Supreme Court has agreed to hear an appeal of the Marin ruling. But the high court will wait until an appeals court rules on three similar spiking ban suits consolidated from Alameda, Contra Costa, and Merced counties.

Another appellate panel, referring to the Marin ruling, unanimously upheld a reform ban on purchasing up to five years of additional service credit to boost pensions, known as “air time.” The Supreme Court agreed last week to hear an appeal by state firefighters and others.

Another pension protector, the California Public Employees Retirement System, had a setback in the Stockton bankruptcy. A federal judge ruled against two state laws sponsored by CalPERS that were intended to make it difficult for local governments to leave the state system.

One state law bars rejection of CalPERS contracts in bankruptcy. The other state law places a lien on the property of a local government that terminates its CalPERS contract in bankruptcy.

“CalPERS has bullied its way about in this case with an iron fist insisting that it and the municipal pensions it services are inviolable,” U.S. Bankruptcy Judge Christopher Klein wrote two years ago. “The bully may have an iron fist, but it also turns out to have a glass jaw.”

Stockton did not try to cut pensions, saying from the outset they are necessary to be competitive in the job market, particulary for police. San Bernardino officials cited similar reasons for not cutting pensions while in bankruptcy.

CalPERS did not appeal Judge Klein’s opinion. A spokesman, Brad Pacheco, said CalPERS regards the opinion that pensions can be cut in bankruptcy as “dicta,” a legal term meaning authoritative but not binding.

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 17 Apr 17

35 Responses to “Another court setback for protectors of pensions”

  1. spension Says:

    Except police. Says a lot. The DB pension hawks rarely mention the conservative unions, or the 1 trillion $ shortfall in military pension funding, because it isn’t really about the numbers. It is about punishing your political enemies.

  2. rstein171 Says:

    It’s unfortunate that future generations, unable to vote today, will bear the costs of many enacted pension programs, entitlements and boondoggle projects, requiring them to pay higher taxes and work later into their lives to pay for these promises. It’s the inmates running the pension Asylum that are loading up system with lucrative packages for themselves, to be paid for by taxpayers.

    The international business world is intelligent enough to know that DEFINED BENEFITS, neither capped nor precisely quantifiable in advance, financial disasters to any business, thus all businesses focus on the known, i.e., defined CONTRIBUTIONS alone.

    Stealing from the young who have no votes, but silently shoulder the costs and bear the burden of unfunded promises of these programs to enrich the old seems to describe the Governments expansion of entitlement benefits and other government services, along with the taxes young people will have to pay to support them, mostly to subsidize older Americans.

    The inmates know that debt for our future generations buys votes. Over the decades, the proven “concept’ practiced by voters is to defer as much financial responsibilities as possible from our current financial responsibilities to future generations, that have no votes on the subject. Simply stated, if we cannot afford it today, pass it off to the future generations to minimize any impact on our current lifestyles.

    Another insult to the taxpayers and future generations paying their pensions is that many of those early retirements collect their guaranteed pensions, and then take a second job.

    Virtually all elected officials are heavily financed by unions which are focused on entitlements for their current members. The unions, government, and other bureaucrats have been very successful in manipulating the system to enrich themselves. Thus, no changes can be expected in the foreseeable future for elected officials to ever abandon their source of votes.

    Even before those young folks can vote our Golden State schools are on track to force substantial budgetary cutbacks on core education spending, as public schools around California are bracing for a crisis driven by skyrocketing worker pension costs that are expected to force districts to divert billions of dollars.

  3. Peter Says:

    “DeMaio’s website said he “has been working with former San Jose Mayor Chuck Reed on a state-wide Pension Reform Initiative and this court victory only improves chances of reform statewide.”

    This will be about the 4th year in a row that DeMaio and crew have proclaimed an imminent initiative. Glad to see he is teaming up with Reed, who’s Measure B was repealed by the council and voters in San Jose after just two short years because of the disaster it wrought upon San Jose.

  4. jskdn Says:

    The demonstrated propensity of politicians shift costs onto future generations is why defined contribution benefits are necessary in government. Paid in the present, defined contributions set up the necessary political tension to keep benefits fair, as they require the corresponding removal of other people’s money in the present.

  5. Jim Reilley Says:

    These cases have limited scope; one deals with spiking and add-ons to core pensions (core=pension based on base salary). The other deals with just the “meet & confer” obligation but not the issue of cutting pensions constitutionally.

    Neither addresses the core issue for reformers; can you cut future pensions for base salary? Not likely. Both the composition of the CA Supreme Court and the fact it’s a State-only issue that cant be appealed to any Federal Courts negate a successful outcome on that biggest of issues.

    They will uphold Marin, San Diego, and uphold other cases that nibble at the edges of cutting pensions for current workers but not cutting pensions based on base salary; core pensions and the essence of the “California Rule.”

    The best hope has/is/always will be to get a full cutoff for future workers ASAP.

  6. Tough Love Says:

    jskdn, Well said !

  7. spension Says:

    The defined contributions (DC) system is mainly a slush fund for investment banks and bankers to charge high fees for poor performance. The DB systems are far, far more efficient. When well managed, they are just fine… like in the Netherlands, or Washington State, or South Dakota, etc.

    The police (like in San Diego) demand DB, the military demands DB… until they forsake them completely, the whole DB-bashing effort with BS about burdening future generations of debt is empty, cynical politics. The military and police are just politically strong-arming regular people with their political representatives.

    Why is it perfectly fine to burden future generations with (currently) >$ 1 trillion of military pension debt? Pro-military bashers of non-military DB systems never answer that question, nor do the pro-police bashers of non-police DB systems.

    But the fact is DB systems are just fine when well managed. The biggest impetus that led DB systems in the US to getting out of hand were: 1)Military retirement at age 37, which makes all other public employees want the same, 2)Huge DB pensions for police like 3%/year of service at age 50.

    Modest DB pensions like 1.5% per year of service at age 65 are just fine with reasonable contributions. It was military and police pensions… lots of generals and admirals get >$200,000 a year pensions, but you won’t find their names on a “Transparent Military” website, because… well… it is all about politics.

  8. john moore Says:

    I am not aware of a single legislative body that is willing to reduce pensions as necessary to keep the system from systemic decline. The cases headed for the supreme court (Marin, Alameda et al)represent modest declines compared to the perilous conditions of the pension systems in each agency. San Diego was unusual because it had a City Atty. who supported pension reform, and that is critical, a one of a kind sort of thing.
    To expect a state-wide initiative to resolve the pension crisis is irrational, each city, county or agency should save its agency by electing true pension reformers, then firing administrators and lawyers who have and continue to game the system.

  9. Tough Love Says:

    Spension ,

    More BS, Excepting small long-closed Public Sector Plans (there is one such Plan in NJ) with VERY high funding ratios due to VERY odd situations, even the highest funded State and Local plans ….Washington State, South Dakota, etc. are (at best) marginally funded. When valued using the SAME assumptions & methodology REQUIRED of Private Sector Plans even these “best”-funded Plans have funding ratios in the 70%’s.

    Several of the Scandinavian countries DO indeed have well-funded Plans BECAUSE they discount Plan liabilities using VERY low interest rates and because they taxes their citizen through the roof to pay for it. But unlike in the USA, that’s “fair”, because ALL of their citizens get the SAME high level of pensions ….. NOT just the new royalty in the USA (the Public Sector workers).

  10. John Moore Says:

    BTW, the Marin appellate decision did not over-rule the California Rule, it held that the Rule has always allowed reasonable reductions of pensions. That is what the two Long Beach cases said, but bloggers on this site took one line out of context, hence, the confusion.
    As for the Pacific Grove decision, the City Atty. “simply threw the case” before a judge in a closed hearing trial, by failing to point out that the Pacific Grove charter expressly prohibited vested pension rights. The city atty. even consented to allow the decision to apply to “new hires,” although the plaintiff’s had not even requested that relief in it’s complaint, or in its trial brief. In the San Diego decision, the city atty. fought for the reform and won. The Marin decision is further proof that the Pacific Grove case was fixed . I have documented the whole mess in a Jan.15, 2015 issue of Union Watch)The Fall of Pacific Grove.

  11. Tough Love Says:

    Quoting spension ………….

    “Modest DB pensions like 1.5% per year of service at age 65 are just fine with reasonable contributions.”

    What you are describing is the level of pension benefits typical of Private Sector Final Average Salary DB Plans of 20+ years ago. Most of these Plan have been “frozen” with ZERO additional accruals and replaced with FAR LESS GENEROUS Cash Balance Plans or 401K Plans with a 3%-of-pay employer “match”.

    While I WOULD call your above-described DB benefits “generous”, I WOULD NOT call them overly generous …… but ONLY if looked at in a vacuum, i.e., WITHOUT comparison to what Private Sector workers typically get from their employers towards THEIR retirements.

    The Plan you described would require (using reasonable and appropriate valuation assumptions & methodology) a level annual TOTAL contribution of 20%-25% of pay to fully fund the Plan’s promised benefits over the working careers of the employees. Surely, with that formula, I can’t see the workers contributing more than 5% of pay, which leaves the Taxpayer “responsible” for the balance of 15% to 20% of pay.

    When we look at it in this light ….. by comparison to the 3% of pay 401K employer contributions typical in Private Sector Plans …….. I would strongly disagree that such Plans are “just fine”. They would remain grossly excessive, because unless Public Sector workers can demonstrably show that they are paid less in cash wages (than their Private Sector counterparts), there is ZERO justification for ANY (yes ANY) greater Public Sector pensions or benefits.

  12. Tough Love Says:

    There are no effective “solutions” to the pension tsunami bearing down on us that do not MATERIALLY decrease the pension accrual rate for the future service of all CURRENT Public Sector workers.

    Meaning EVERYTHING that goes into the pension calculation, not just tinkering around the edges.

  13. spension Says:

    “What you are describing is the level of pension benefits typical of Private Sector Final Average Salary DB Plans of 20+ years ago. Most of these Plan have been “frozen” with ZERO additional accruals and replaced with FAR LESS GENEROUS Cash Balance Plans or 401K Plans with a 3%-of-pay employer “match”.”

    Because the private sector DB pension plans, mostly, have been systematically looted by private sector executives, as documented by Pulitzer Prize winning Wall Street Journal reporter Ellen E. Schultz in:

    http://www.retirementheist.com

    Every check the military pension system, Tough Love? >$200,000 per year for the brass? Should be limited to the Social Security Maximum, currently $127,200. The military DB system allows retirement at age 37 and is >$1 trillion in debt. Don’t here you complaining about that public pension system, however.

  14. CalPERSon Says:

    spension: “Modest DB pensions like 1.5% per year of service at age 65 are just fine with reasonable contributions.”

    … and Tough Love gets it wrong again. The comparison with the private sector shows how unreasonably low private sector retirements plans are. The 401(k) system has been a complete failure. It leads to over-reliance on Social Security as a primary income source and it causes increased consumption of government assistance. 1.5% at 65 should be a federal minimum requirement for both private and public systems.

  15. Tough Love Says:

    CalPERSon,

    I won’t argue that 401K Plans have (for many) not worked out well …. primarily due to a lack of significant long term contributions well in excess of employer contributions.

    But, for a moment, try to forget that you are a Public Sector worker/retiree riding this gravy train, but one of the 80% of all workers nationwide that works in the Private Sector, most of whom get little more than their employer’s 6.4% of pay into Social Security (on their behalf) plus a 3%-of-pay employer “match” into a 401K Plan.

    I’d bet that you would feel that it’s the Private Sector (where 80% of all workers reside) and where employers freely compete for talent unencumbered by Political influence on compensation, that is the PROPER determinant of “market rate” compensation…… NOT the Public Sector.

    IS that thought process unreasonable?

    If it’s not, why should Public Sector workers get more? What justifies it ……… simply because they “need” it to retire comfortable?

    Really? Really?

  16. spension Says:

    Tough Love says… “If it’s not, why should Public Sector workers get more? What justifies it ……… simply because they “need” it to retire comfortable?”

    Perhaps you can ask the Admirals and Generals who get >$200K a year from the US government this question, particularly when the military pension fund is >$1 trillion in debt.

  17. Tough Love Says:

    Spension,

    Still more of the same ….. never an answer and always diverting attention away from the need to address the ludicrously generous pensions & benefits granted ALL Public Sector workers.

    *************************************

    FYI, there are exactly 10 current 4 star generals (only about 230 in America’s entire history). But yes, after a full career they do get about a $210K-$220K annual pension.

    But drop their rank to 2 stars and the Pension is about $150K, and to 1 star and it’s close to $125 K …………… just about what the hundreds of thousands of full career CA Safety-worker pensions will average in just a few years.

    Which has a bigger impact … perhaps by a multiple in the 10,000’s?

  18. spension Says:

    The $1 trillion in unfunded US military debt dwarfs that of any single US state. You can retire at 37 with a DB pension in the US military. But that is one DB system you never criticize, TL. Your silence screams out the truth.

  19. Tough Love Says:

    spension,

    Because the Federal Gov’t can print money ALL “Federal” debt (including unfunded pensions) is in a whole different category that State and Local pensions ….. as many State & Local workers will begin to realize in but a few years.

    *****************************

    And I have not forgotten …………. that you self-created 2 statements (details below) that i did not say, and you attributed them to me.

    I am still calling you out as a LIAR for doing that.

    Either admit that you did that and we can move on or I will continue to call you out as a LIAR.

    OR

    Simply proof me wrong by posting a link to the exact Site/Date/Time where I made those 2 statements.
    ****************************************
    ***************************************

    Readers… see link below with my post calling spension out as a liar:

    https://calpensions.com/2017/01/09/another-ruling-says-pension-set-at-hire-can-be-cut/

    Re-pasting:

    Tough Love Says:
    January 10, 2017 at 11:48 pm

    Two very specific quotes from spension … both lies:

    (1) When/where stated …..

    October 31, 2016 at 9:02 in this link …..
    https://calpensions.com/2016/10/24/how-pensions-pass-the-buck-to-future-generations/

    What spension stated ….

    “As you’ve said many times, the executives deserve to lift every dollar of their worker’s pension funds if they want, because, well capitalism.”

    (2) When/where stated …..

    January 9, 2017 at 12:20 am in this link …..
    https://calpensions.com/2017/01/02/calpers-reports-make-debt-cost-difficult-to-see/

    What was stated ……

    “Tough Love clearly said leaders of the private sector like Milken, Madoff, Boesky, Enron etc were better than police officers and prosecutors.”
    ————————————–
    Did I make the statement that spension quoted in his/her comment in THIS blog article, posted just above and time-stamped January 10, 2017 at 12:45 pm? Yes, and to have everything in one place for easy reference, I am pasting it here (in between the asterisks):
    ****************************
    “Tough Love Says:
    January 6, 2014 at 5:22 pm

    Quoting Spension…..”Milken, Madoff, Boesky, Enron, etc show the level of ethics in your chosen profession, Tough Love. Why would anyone trust a single financial assertion by anyone in the private sector?”

    Oh please ……. no matter how bad some wall street actors are, they don’t hold a candle to the art of thievery mastered by the Public Sector Union/politician cabal.”
    ********************************
    It appears that spension believes that he/she can take that (rather benign “opinion”) and twist it into something false and derogatory, QUOTING me as the author or HIS/HER self-created statements.
    ——————————————-
    spension,

    You clearly have no ethics or moral compass.

    To be clear. I am calling you out as a liar. While I strongly advocate for Public Sector pension reform, I did not (nor would I ever) make such statements.

    If you can, prove me wrong by posting a clear link Site/Date/Time to those statements. Go right ahead, or crawl under a rock where other parasites reside.

    I will continue to post this comment until you admit that your above comments were false and that you lied by making them.

  20. S Moderation Douglas Says:

    TL to CalPERSon…

    “But, for a moment, try to forget that you are a Public Sector worker/retiree riding this gravy train, but one of the 80% of all workers nationwide that works in the Private Sector, most of whom get little more than their employer’s 6.4% of pay into Social Security (on their behalf) plus a 3%-of-pay employer “match” into a 401K Plan.

    I’d bet that you would feel that it’s the Private Sector (where 80% of all workers reside) and where employers freely compete for talent unencumbered by Political influence on compensation, that is the PROPER determinant of “market rate” compensation…… NOT the Public Sector.

    IS that thought process unreasonable?

    If it’s not, why should Public Sector workers get more? What justifies it ……… simply because they “need” it to retire comfortable?

    Really? Really?”
    ……………………………………….

    Really?

    2011 Center for Retirement Research at Boston College study found what several other studies have found:

    Public employees in the lowest one-third of the pay scale are paid more than their private sector counterparts.

    Those in the middle one-third are paid about the same.

    And those in the top one-third are paid about 20 percent less than their private sector counterparts.

    On nationwide data, even AEI found similar results…
    Lower 40% public workers paid more.

    Middle 50% paid about the same.

    Top 10% of public workers paid twenty percent less.

    The main reason for the AEI discrepancy was the use of a lower discount rate to determine pension value.

    Also, if you really believe that in the Private Sector “employers freely compete for talent unencumbered by Political influence on compensation,…”

    I have a bridge in New Jersey I can sell you.

    Really!

  21. Tough Love Says:

    The Center for Retirement Research at Boston College is a left-wing mouthpiece for the Public Sector Unions.

  22. spension Says:

    TL – nothing stops the Federal Government from printing money for any debt it chooses to address… the Federal Government has done so many times for investment banks, like, in 2008.

    The Federal Government can choose to bail out local jurisdictions pension debts by printing money if it wants. I’m not saying it should do so, but I am point out that there is no distinction between the military pension debt of $1 trillion and the public pension debt in all the states and local jurisdiction.

    The Federal Government, through a bill passed by both houses of Congress and signed by the President, and take on whatever debt that pleases it, and has done so many times in US history.

  23. S Moderation Douglas Says:

    Quoting, Never in doubt…

    “The Center for Retirement Research at Boston College is a left-wing mouthpiece for the Public Sector Unions.”

    And yet… A. Munnell book…

    “STATE AND LOCAL PENSIONS: WHAT NOW?”

    (Center for Retirement Research at Boston College, 2012)

    Reviews…

    Andrew Biggs, Resident Scholar, American Enterprise Institute…
    “Pensions for state and local employees generate ferocious debates among both the general public and pension experts, with serious repercussions for public sector pay and government budgets.  Munnell explores this controversy with clarity and fairness, providing a critical resource for citizens who wish to understand public pensions and the policymakers who must manage them.”

    Gina Raimondo, Treasurer, State of Rhode Island…

    “Munnell offers a thoughtful examination of the challenges facing state and local governments as they strive to provide retirement security for their employees.  Her work represents a giant leap forward by establishing a comprehensive framework for leaders looking to tackle these critical issues.”

    Fair and balanced.

    Never in doubt, did you read the part where, in nationwide data, about forty percent (generally the lowest educated, lowest paid public workers), earn more than those in the private sector? The other sixty percent are either “roughly equal” or underpaid by as much as twenty percent. This from the American Enterprise Institute, not a “left-wing mouthpiece for the Public Sector Unions.”

    Sixty percent… Not lazy, not crooks, neither eating at the public trough nor suckling at the public teat. Just doing their jobs. And collecting our pensions.

  24. Tough Love Says:

    Spension,

    So, should the Federal Gov’r first jack-up the Public Sector pensions of ALL States’ Public Sector workers to the ludicrous level promised those in CA…. just to make it Even-Steven for all Public Sector workers ? After all, why should Public Sector workers in States where their pensions are only DOUBLE those of Private Sector workers get less than States whose pensions are 4 times those granted Private Sector workers ?

    Better yet …… fair is fair …..how about the gov’t give EACH Private Sector taxpayer a $ amount equal to the average amount granted Public Sector workers to bail out their pensions ? Sounds fair.

    Can the country afford it, perhaps adding $25 trillion to our national debt to do so?

  25. spension Says:

    TL, I did *not* say that the Federal Gov should deficit spend to pay off local and state public pension debt.

    I pointed out that deficit spending to pay off the $1 trillion in unfunded US Military pension debt is EXACTLY THE SAME as deficit spending to pay off local and state public pension debt.

    To be consistent, anyone logical should either oppose both or support both.

    Plenty of >$200,000/year pensions+benefits in the Military. You missed a lot of them in your earlier post… you neglected PX support, health care, golfing on base, etc. The Federal Government *already has* jacked up military pension and post-retirement benefits.

    For anyone wounded in battle and disabled, good pension and health care is a *MUST*. But >$200,000 a year for deskjockey generals is *no different* than similar pay to city administrators etc.

    The pay portion for *everyone* on a public pension should be limited to the social security contribution limit. Of course, FICA is regressive, and if all income above the contribution limit were subject to FICA, I might recommend differently.

  26. Tough Love Says:

    Spension,

    I have never given much though to Military pensions. In fact I can think of only one retired colleague who actually gets one after 20 years in the Army Reserve.

    But people in combat who are consistently placed-in live-threatening situations are a different breed and likely deserve something special. But of course MOST in the Military never see combat. Perhaps “pensions” should be lower and incremental pay for combat-assignments raised.

    What the Military pension formula? Is the “formula” the same for all ranks ?.

    I do know it has the odd structure that w/o 20 years of service you get nothing …a BIG negative. On the other side, I believe you can retire after 20 years at any age (w/o an actuarial reduction for collecting at a very young age) …. a BIG positive.

    But what the formula? Let compare it’s “richness” to those typically granted Public and Private Sector workers.

  27. S Moderation Douglas Says:

    2.5 percent at any age, ergo fifty percent at twenty years, one hundred percent at forty. Fully indexed for inflation, family healthcare for life, fifty five percent spousal continuance (paid for by 6.5 percent premium deducted from pension.) Also full Social Security (no WEP)

  28. S Moderation Douglas Says:

    Heritage Foundation…

    Military Pensions: How Scandalous?

    http://www.heritage.org/defense/report/military-pensions-how-scandalous

  29. Tough Love Says:

    Per SMD’s description, clearly the Military pension “formula” is quite “rich” (the 2.5% per-year-of-service factor and the young/unreduced age to collect), but the final payout depend on the “pensionable compensation”. E.g. if it’s less than what Private Sector workers typically get for similar (non-combat, of course) work it could still be fair …. meaning resulting in ” Total Compensation” reasonably comparable to PRIVATE Sector taxpayers.

    State & Local Public Sector “Total Compensation” is HIGHER (than the Private Sector) in all but a few highly professional occupations………….. and therefore need to be materially reduced for the future service of all CURRENT workers.

  30. Tough Love Says:

    Yikes SMD,

    Your linked Heritage Article was written 32 years ago.

  31. spension Says:

    Thanks SMD. My view… expressed many times here… is that it has been the military pension system that has driven, in California, the pension system for safety employees, many of whom are military veterans. And then the safety employees drive everyone else, producing an upward spiral.

    Notice that the San Diego pension reform left intact the police defined benefit… that is the influence at work.

    So we have a system that is headed toward DB, and very solid DB, for police, fire, and military… and really atrocious DC, where investment banks skim fees like mad… for everyone else.

    That is not the country of *my* forefathers, where the whole question of a standing army was controversial. Admittedly, the US is now the global superpower and it was not back then… and back then the whole Bonus issue after WW1 was handled very badly… General MacArthur was not admired in my household.

    But the military has gotten out of hand with its pensions, just as California public systems have. A solution must apply to *both*, or else… the pressure will never decrease on the public system through the safety employees.

    And DB is easily the most effective and efficient… fees are much smaller (by %) than in DC, and there is the total elimination of longevity risk. If military and safety ruin DB systems for everyone, then it is like ruining the lives of Americans… that is not what the military and safety are supposed to be for, they are supposed to protect, serve, and keep us from destruction of our lives.

  32. S Moderation Douglas Says:

    Yikes, they are persistent devils.

    http://www.heritage.org/social-security/report/triple-dipping-thousands-veterans-receive-more-100000-benefits-every-year
    ………………………………………………………
    ” Like the rising costs of Social Security, Medicare, and Medicaid, the cost of military health care, retirement, and education benefits threatens to absorb every defense dollar if left unchecked.”

    http://www.heritage.org/defense/report/time-meet-the-challenge-updating-the-military-retirement-system

  33. Tough Love Says:

    The insatiable greed and arrogance of Public Sector Unions/Workers has no bounds …

    http://www.eastbaytimes.com/2017/04/18/editorial-onerous-bill-would-fiscally-drown-cities-and-counties/

    ********************************

    Getting rid of the California Rule should be just Step 1.

    ALL of these pensions should be FROZEN !

  34. CalPERSon Says:

    TL to me: “I’d bet that you would feel that it’s the Private Sector (where 80% of all workers reside) and where employers freely compete for talent unencumbered by Political influence on compensation, that is the PROPER determinant of “market rate” compensation…… NOT the Public Sector. IS that thought process unreasonable?”

    It is completely unreasonable in the modern world. Corporations today are relatively short-term entities, driven by quarterly profit targets, employees come and go, and there’s a lot of market volatility. The days of working for one company for 30 years to get a gold watch are long gone.

    Since corporations are no longer long-term stable entities, it’s completely unreasonable to think they will exist 20 or 30 years from now to pay an employee’s pension.

    That’s why there should be a national portable pension system that follows the worker from job to job with mandatory pay-ins from both employee and employer. When it comes to pensions, we should make the private sector more like the public sector, not the other way around.

  35. Tough Love Says:

    Quoting CalPERSon ….

    “Since corporations are no longer long-term stable entities, it’s completely unreasonable to think they will exist 20 or 30 years from now to pay an employee’s pension.”

    In the first part of that statement you said ……. “corporations are no longer long-term stable entities”.

    But above, in your full comment you very clearly were talking about long term service of their EMPLOYEES, NOT the corporation itself. One does not lead to the other. That convenient SWITCH comes with no basis, rationale, or justification.

    *********************************

    Quoting ….

    “That’s why there should be a national portable pension system that follows the worker from job to job with mandatory pay-ins from both employee and employer. When it comes to pensions, we should make the private sector more like the public sector, not the other way around.”

    I agree, with the formula constructed such that EVERYONE is on the same formula (both public and Private) accompanied by a hard freeze on all current Public Sector pensions and all current Private Sector DB and DC Plans.

    That’s called fair.

    I’m all in. Are you?

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