Pension Forum Enlightening
LOCAL GOVERNMENT, SHASTA COUNTY
September 29th, 2009
Redding City Hall
I was invited to listen to a distinguished panel examining many facets of public employee pension plans in California. The panel included representation from Shasta County, City of Redding, CalPers, labor negotiators and a taxpayer advocacy group. The panel was provided 10 questions in advance regarding pension issues and were all given an opportunity to respond. The discussion lasted nearly 2 hours.
The first factoid that caught my attention was California is the only state that allows individual jurisdictions to negotiate retirement benefits for public employees. In all 49 other states public pensions rules are set by their legislatures. Over 2400 different entities from cities, counties, special districts, firefighters and police have negotiated individual pension packages for their public employees. This has created fierce competition among these entities that essentially bid up pension benefits to attract and retain qualified employees. CalPERS has devised many different pension plans to suit these various contracts negotiated between management and employees. Numerous different unions represent these various employee groups. That’s why police, firefighters and other public employees are well paid compared to their counterparts in other states.
Pension spiking was discussed and CalPERS typically audits an employees work history to make sure the final years pay was not spiked in order to maximize retirement benefits. Mike Warren’s pension was discussed and because the final year salary spike included a performance bonus, no violation of the law occurred. In the past, deferred vacation pay, sick pay, uniform allowances, educational funds, comp time and even marksmanship perks were added to final year salary so the employee could have their predetermined percentage of base pay spiked to increase their monthly pension benefit. These tricks are not available to rank and file employees but typically used by those in management positions.
The best solution to reign in retirement costs is delaying the age for retirement 5-7 years. As it stands, pension benefits encourage early retirement. This causes problems for actuaries that try to project future pension costs and also extends the time period health benefits must be paid by the employee or employer until the retiree qualifies for MediCare. Extending the retirement age would lower CalPers pension obligations by 50% according to the speaker representing California Foundation for Fiscal Responsibility.
Most agree a change in state law is needed so all pensions are changed at once eliminating the game of one-upmanship that got us to the current pension benefit levels. Changes would apply to new hires only. This will likely happen at the ballot box using the initiative process.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Was there any discussion of actuarial assumptions? In my village, where police and fire fighters can retire @ 75% of pay after 30 years, many leave the service in their mid 50’s. However, our actuarial assumption has maximum retirement age of 70. This results in the village contributing too little to the funds, and the officers and fire fighters drawing pensions longer than planned. I’m trying to get our staff to change the assumptions, but with little success.
When I left my job in the private sector to work for the State of California seven years ago, my colleagues thought I lost my mind. After all, I was taking a pay cut to start a new position and the new job didn’t have the “growth” potential that working in the private sector had. And besides, they were all going to get rich and retire ealry on their stock options. Fast forward two stock market crashes later and my same colleagues call me to ask if there are any openings where I’m working at the State. Mark my words, in a few years, when the economy improves and private industry hires again, us State workers will be laughed at for staying in our “low-paid” jobs.
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