My fear has been from the start that if we do not fix this problem, the voters, as they have in the past, will pass the first and most draconian “reform” package that they get their hands on. The typical state worker and public employee is not the problem here. The typical state worker makes less than $40,000 per year and gets 2% at 60. Do the math and, even working for 35 years, such a worker would get no more than $28,000 per year in pensions. That is a healthy retirement, but not the type of pension we are fearing.
One problem with the PERS formula is that it is based on the final and/ or highest year of salary. So let us suppose we need to cut the budget in the short-term. One incentive is to give workers a golden parachute, spike their final salary, and suddenly instead of retiring on $120,000, they are retiring on $180,000. Moreover, they can add all sorts of vacation time, sick leave, and other pay categories to the final year salary as part of the pension calculation.
How damaging is that to PERS? Well, neither the employee nor the employer paid into PERS at that rate, and so the rest of the fund has to make up for that last year of salary. When a lot of people are spiking their final year of salary, that stresses the entire system.
The Assembly this year had a chance to pass a bill that at least would have reduced some of the abuses. The Bee reports, “Administrators in the city of Bell have been caught padding their salaries, leaving them eligible for pensions of up to $600,000 yearly. Former fire chiefs in Contra Costa County have been found to be earning pensions of up to $284,000 annually – far more than their final-year salary.”
As the Bee editorializes, “These sorts of golden retirement packages couldn’t be justified when times were good, and they certainly can’t be tolerated as public services are being slashed and employees, public and private, are facing pay cuts or layoffs.”
So, as the Bee reports, there was an Assembly Bill that could have dealt with some of this. “Lawmakers this year had a chance to pass a bill that would have halted or reduced pension spiking. In its original form, Assembly Bill 1987 would have banned the practice of adding unused sick time, accumulated vacation days and other pay categories to an employee’s final-year salary as part of a pension calculation.”
However, public employee unions objected, arguing that such changes needed to be determined through collective bargaining. I do not completely disagree with that either. But the result was the bill was watered down, Controller John Chiang has withdrawn support, and the Governor will now veto the bill that is now rendered useless.
Do the unions have a point? Yes. And if the unions had stepped up, we might not be here. However, my problem is that at some point the voters are going to approve something a whole lot worse.
Now, retiree Bob Allen wrote his own piece in the Bee , arguing that the public employees have been made scapegoats for the state’s current fiscal problems and the economy in general.
I agree. I have shown that, at the state level, public employees are not the cause of our fiscal problems. The cause is a reduction of revenue, not that we have paid too much for employees. That is not as true at the local level, however, where salaries make up 71% of all general fund spending and they have risen at rates far higher and faster than at the state level.
And so, yes, I understand Mr. Allen’s point, “Bell is not only extremely rare, but is not by any means indicative of the 99 percent of government workers who get up each day and go to work and attempt to provide the best services possible to their respective communities.”
He continues, “The overwhelming majority of government workers do not retire with massive pensions or earn astronomical salaries during their careers. The average pension for a state of California retiree is approximately $25,000 a year, half of all retirees receive $16,000 a year or less, and 78 percent receive $36,000 a year or less. Those retirees who make $100,000 or more are less than 2 percent (usually law enforcement, fire, etc.) of all retirees in the state of California and are usually retiring with more than 30 years of service.”
However, where I think Mr. Allen misses the point is that just because the typical retiree does not make a six digit salary, let alone pension, that does not mean we should not attempt to fix the problem at the top with the employees who are. Just because the typical state worker does not have their pension spiked, does not mean that pension spiking is not a serious problem.
Public employees at the state level did not cause this problem. Nor for that matter did they at the local level. But guess who is going to pay the price at the end, either through draconian reforms or if the city of Davis and half the cities in California end up going the route of Vallejo? The people that will pay the most for the excesses of those at the top are the average worker.
And that’s the part I really do not get. If the average working is not getting $100,000 per year in salary or pensions, why are they fighting so hard to prevent commonsense reforms? Why not stop pension spiking when it is only going to hurt the workers in the rank-and-file that you purport to support?
Nearly a year ago I met with a couple of union officials who told me I needed to stop my fight to curtail wages and benefits for the firefighters. They told me my efforts were aiding and abetting those who wish to kill the pension system. They argued that the union movement is based on solidarity and that all workers need to support each other, regardless.
I could not disagree more. By going down this path, they are only going to hurt themselves in the long run. The public will rise up at some point if these problems are not addressed. The real question is whether the unions would prefer the Fiona Mas, John Chiangs, and Jerry Browns of the world to re-write the rules, or if they would prefer Meg Whitman or Steven Grennhut to do it. To me the answer is obvious and it calls for a bit of strategic thinking and a bit of pragmatism.
—David M. Greenwald reporting