Over the weekend, the New York Times published a piece that follows a trend of vilifying public employees, in this case for their pensions. Being involved with California politics as I was, I can tell you that the wingnuts here find no greater joy than in demonizing state workers, all of which in their minds are greedy money-grubbers destroying the state from within. They have used this story about the city of Bell in the Los Angeles area, admittedly a story about thieves who ripped off their own citizens and the state pension fund, and spun it into a story about everyone who carries a government paycheck making $800,000 a year. They talk about police officers retiring at 50 with a “generous pension,” when that pension is on average $25,000 a year (when you eliminate Social Security, which most public employees don’t get). They talk about prison guards making “six-figure salaries,” and don’t tell you that includes overtime, because 30 years of right-wing “tough on crime” policies have led to massively overcrowded jails and beds in common areas like gyms or cafeterias, situations which require constant staffing by the guards.
In a way, people struggling in a down economy are searching for a reason why, and in public employees have found a convenient scapegoat. But Jonathan Cohn had a great piece about the real reason why this rankles the right – public employees have a balanced labor/management structure.
…conservatives are surely right when they say that unions and government accommodation of them are the main reason. Unions represent around 37 percent of public sector workers, compared to 7 percent of private sector workers. Note that one of the few exceptions to the public-private compensation differential seems to be unionized industrial laborers, like the auto workers–and that, during last year’s debate over what to do with the auto industry, we were having a very similar conversation about the relatively rich benefits that members of the United Auto Workers were getting.
But ask yourself the same question you should have been asking then: To what extent is the problem that the retirement benefits for unionized public sector workers have become too generous? And to what extent is the problem that retirement benefits for everybody else have become too stingy?
I would suggest it’s more the latter than the former. The promise of stable retirement–one not overly dependent on the ups and downs of the stock market–used to be part of the social contract. If you got an education and worked a steady job, then you got to live out the rest of your life comfortably. You might not be rich, but you wouldn’t be poor, either.
Unions, whatever their flaws, have delivered on that for their members. (In theory, retirement was supposed to rest on a “three-legged stool” of Social Security, pensions, and private benefits.) But unions have not been able to secure similar benefits for everybody else. That’s why the gap exists, although perhaps not for long.
Typically, public workers have deferred compensation increases in favor of long-term benefits. Their base salaries are smaller than what you can get in the private sector, while their benefit packages are larger. People want to pay for endless services with low taxes, so this is a way to keep public employees on the job under the current revenue stream, by pushing benefits out to the future. Small wonder that leads to a shaky long-term fiscal picture.
The point being, public workers have the small amount of leverage they have because they can collectively bargain. Other industries that have no such protections are getting screwed on a daily basis – but right-wing ideologues who want to extend that leverage for management across all businesses blame the greedy union bosses because they don’t want to see actual retirement security spread to the masses.




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Thanks so much for this article, David. While there is hue-and-cry about unions being too “muscular”, shall we say, in protecting workers, and resentment about the benefits public employees have (rather than using that as a rallying point for workers in all sectors), I suspect there is more. After all, the super-wealthy have been salivating for decades to grab the Social Security fund. It seems an outrage to them that We the Citizens have contributed to a fund designed to be used for our benefit only. That same outrage is also directed to public employee retirement funds. How dare we have such a thing!
Also, I’d like to point out that CalPERS and SS are firmly coordinated. “Cal PERS is a defined benefit plan and is coordinated with Social Security. . . . Employees who retire from PERS are eligible for benefits from the retirement system as well as Social Security benefits.” LINK.
Here in Florida, demonizing state workers used to be bloodsport that Republican politicians would engage in to rouse up the base. This was when state workers were still strong, at least in the sense of being able to expect cost of living raises each year which Republicans trumpeted as ‘rewarding incompetence’. Governor Martinez’s reference to ‘lardbricks’ is a good example.
When the Republicans used the phony issue of ‘term limits’ to break up the Porkchop Gang and take control of the legislature, the demonizing became less vocal and more, hardcore ideology.
AFSCME was never really a strong collective bargaining agent and standing up to Jeb Bush was not only a full time job, but nearly impossible.
After PeopleFirst and the conversion of many career service positions to ‘at will’, state workers were broken. They are now forced to accept whatever the legislature graciously consents to give them. There is always grumbling but nothing they can do.
The assault on state salaries is a fait accompli. Now the attack on pension benefits is beginning. DROP will be phased out. There was already a move to cut the health insurance subsidy for retirees which Crist vetoed. Unless Sink is elected, next year it will pass. For a typical retiree, this is a cut of $1600 a year.
The Republicans have the whip hand and they are not shy about using it.
Come on, Sink!
Yes, NYTimes Ron Lieber’s “Your Money” column this weekend began with the phrase “class war” and ended with a plea for unionized civil service workers to be “good citizens” and think about the poor overburdened taxpayers who will have to pay for their retirement benefits. Disgusting! We know union jobs and civil service have been a source of social/economic mobility for African-Americans and women of all colors; we also know that advocating a “race to the bottom” in pension benefits and job protections is a ploy of the right-wingers to impoverish us all! Funny that contracts only need to be honored when they concern CEO pay, bonuses and severance packages or fraudulent mortgage deals or ridiculous acquisitions and mergers….
Let me hasten to add that there is an exception to Social Security for the “Safety Employees.” See p. 2 of this document.
Apologies for the omission.
SS goes to everybody, rich and poor alike.
Was discussing this very issue this past weekend with some of my friends. They just don’t seem to understand that merely because unionized and state/federal workers have better benefits (and retirement) than their private sector colleagues does not make them the villain. It only shows that private sector jobs have been drained of any and all the benefits that used to make them more attractive than the public sector.
If anything we should be clamoring for private industry to do more to care for the retirement and long term benefits of their employees.
No, instead they’ll outsource millions of more jobs and say how uncompetitive we are. When will Congress actually act to protect the interests of their citizens instead of business?
what are the lifetime payouts members of congress treat themselves to ….
Thanks for catching that. I meant “only” in that the funds are to be used for the benefit of the enrollees (whether poor or wealthy) rather than for some other purpose.
Paul Krugman has an article out today that fits very nicely in this conversation. For example,
“And now that the campaign has reached fruition, we’re seeing what was actually in the firing line: services that everyone except the very rich need, services that government must provide or nobody will, like lighted streets, drivable roads and decent schooling for the public as a whole.
“So the end result of the long campaign against government is that we’ve taken a disastrously wrong turn. America is now on the unlit, unpaved road to nowhere.”
LINK.
and rich people take whether they need it or not- “for the good of the country”
Just another example cannibalism. Retirement funds/pensions people “bank” on for the golden years in the for profit have already been gutted. The “corporate shell,” deprives workers of deferred earned income under the color of law. Too many examples. Now the disgruntled taxpayer will go after the public service employees pensions? The wealth extracted over decades for energy has decimated America. The drunks keep on drinking, trillion$ wasted and lives lost to perpetuate monopolies which continue to “gut” America…
And in Arizona, the prisoners who escaped from a “private prison” are now suspected of killing a couple in New Mexico. Great outsourcing job by the Republicans of Arizona. I hope the family sues the crap out of the prison company.
Gotcha,
As Palli points out, whether they need it or not.
I was told it was set up that way so it couldn’t be considered a “welfare” program – for the good of the country.
What congress gets in retirement benefits:
http://www.senate.gov/reference/resources/pdf/RL30631.pdf
The fact that the public employment arena became (finally) the first significant employment avenue for educated minorities in our culture gives this onslaught that old racist overtone as well.
It is classic GOP pandering to their base of 40k a year millionaires who hope to one day reap the benefit of their 2 or so years in college and be wealthy enough to use the Bush tax cuts.
Pitiful really, the right demonizes those that are in the middle class so that others in the middle class become jealous of what, deferred benefits? benefits in lieu of pay? Oh noes! But yet again it’s dog eat dog in the middle class while the rich just soak everyone without a peep.
Why is it always the cry of “class warfare” when someone in the middle and working classes has the temerity to ask for more? When banks charge more fees and create more red tape to use your money, ho-hum. When jobs are shipped overseas, when whole corporations are moved to a PO Box in the Caribbean, it’s what can you do?
there always is the option of quitting that job, or are the florida public employees being held captive at their jobs.
One of the main problems is that many unions seem to actively tolerate or promote gaming of their pension system. This Bell example is a gross exaggeration, but you find police and fire departments throughout the country where this abuse takes place. Systems where the last 3 years salary, or highest salary is the basis for the pension benefits level combined with seniority rules…..leads to cops in MA in their last 3 years taking every possible overtime shift to inflate their pay. That is milking the taxpayer, plain and simple. It is well known within the police force,a nd the fire department, and supervisors schedule for this specific purpose.
In the private sector, this gaming of the system made most companies that had similar systems very open to competition….think Southwest Airlines vs. Delta and American…
If unions would do more to control that they do all they can to control costs within the framework of the contracts, focus more on meritocracy and less on seniority, then there would be far fewer stories of abuse,a nd a much better public image.
How can we possibly lower private sector wages to Asian levels if they are required to support a public sector at above Asian levels?
And local governments are largely supported by property taxes. Why would our bankers want to pay high taxes on all that property they now own?
It just doesn’t make sense! /s
I’m a public sector professional worker, with two masters degrees ($65K in student loans finally paid off). We recently took at 5% paycut, no raises or cola’s of course. We are expected to work through dinner when we go to night time citizens meetings and pay the costs of transportation, too. I will never reach the top of my pay grade because I don’t see any raises for a very, very long time. That will affect my eventual pension, which at the maximum would be $19K/year with pay raises. Without pay raises, probably $14K/year.
And I am one of the really lucky ones because I wasn’t laid off. My agency has reduced staff by 27% in the last two years. There is no hot water in my building anymore. The overhead lights are off, we are only allowed to use desk lamps. There are no envelopes because we don’t send mail to save postage (only email now). There are no color printers either. We have been told to produce black & white graphics.
And we will go through more pay cuts and RIFs next year, too. Every single person is hunkered down.
Know why Karl Rove, after initially opposing Joe Lieberman’s push for a separate Department of Homeland Security, did a 180 to back its creation?
So he could use it as a tool to bust the Federal employees’ unions. (Fortunately, it didn’t work out the way he’d hoped it would.)
This story epitomizes why I am not a party person. I am self employed, but fing the GOP, the chamber of commerce, and most everyone on the ‘right’ serves multi national corporate interests which are anathema to my own.
I’m pure Main st…
But lo, when I begin the hang with the left… I see stories like these.
In these times, it’s not about HATE for public employees. It’s about their place in the economic food chain. I don’t have the benefits of the women who clean the state house!!
It’s just plain wrong. Until and unless the parties begin to serve the vast MIDDLE of the country – we are doomed.
I have no interest in giving a pension to the lady who empties the trash at the state office building.
that does not make me Charles Krauthammer.
California teachers cannot collect SS. I have a friend whose husband died after paying 40 years into social security, and she can collect none because she has her STRS.
Meanwhile, twerps like Joe Scarborough this ayem on msnbc spin about enforcing the laws on the books.
Yeah, with what dollars to pay for the public employees to do the work? We’d better turn it all over to the private prisons, eh, Senator McCain?
Oh, wait….
State by State pension underfunding
http://www.npr.org/templates/story/story.php?storyId=123815636
Jane has a fresh cross-post up: Sign the Petition to President Obama: End the War on Marijuana
Any proof?
Or is this so self evident it doesn’t need any?
There are abuses in the public sector, and some public employees definitely do “game” and/or “milk” the system. I quite agree, and I could provide real life examples with names. But, so what? Go after the situations, like Bell CA, where there’s notable abuse, by all means.
But Republicans act like it’s only and soley in the Public Sector or with unionized jobs that such abuses occur. Bull hockey!
I’ve worked in both the private and public sector, and I could also provide a long list of names of private sector employees who are lazy, incompetents who “game” and “milk” the system, too. IMO, the vast majority of CEOs at the tops of major corporations are the biggest blood suckers out, and they have so gamed and milked the system that this country is reeling from the raping and pillaging.
Go after waste and abuse wherever it exists, but it’s class warfare brought to you by your coporate overlords – who have abused the system the most – to pit the real workers against one another.
People love to whine and cry about public employees. I can remember my parents doing it going back to the 1950s. Whenever I’ve been employed in the public sector, I’ve mostly experienced a lot of dedicated, hard working individuals who really have a mission to serve and do good work.
There are “bad apples” everywhere.
Bullshit. I live in Florida, if you quit ANY job now you should have your head examined because you cannot expect to find another. Even in good economic times “my way or the highway” forces wages down. But you inadvertently have touched upon the reason unions raise wages: because they allow workers to escape the “work or starve” (or, in your words, “work or quit”) dynamic that forces wages down to their lowest possible level.
CA gov’t workers can only collect Soc Sec if they pay into it. In some gov’t agencies the workers choose to pay into both CalPers and Soc Sec, and in some agencies, they only pay into CalPers. Same goes for the county and local level pension systems.
CA teachers don’t pay into Soc Sec, as you indicate, and therefore, they are not eligibile to collect Soc Sec unless they work in another job where they contribute to Soc Sec.
What you may not realize is that the person emptying the trash – which is a lot of harder physical labor than you choose to give credit for – is personally paying into the state pension system, him/herself. Most gov’t pensions work like Soc Sec does, in that the workers contribute a percentage of their salary to the pension system, itself. So the pension is partially self-funded.
Depending a variety of factors, some additional tax dollars may be contributed to the pension system per employee based on some kind of fiduciary calculation.
If you are self-employed, then you have options to set up and contribute to differenty types of retirement plans. In essence, most state and local gov’t employees are just chipping into a group system.
Making an effort to understand how these pension systems work is a big step to getting off the angry frame of mind that somehow the not-gov’t-employed citizens are being madly ripped off by gov’t employees. It’s not that simple, and generally, the non-gov’t-employed citizens are getting good value from all the things that gov’t employees do.
In 1980 there was a class war. Only the wealthy showed up, and they’ve been trickling down on us ever since.
Don’t see much emphasis on merit in corporations: ENRON, BP, Leman Brothers, etc…or wait maybe those millionaire wannabe candidates see it coming and want a safe political job and are willing to be 2% of their golden parachute net worth buying TV time to get it.
It is very helpful to realize that most gov’t employees are making $25K or less per year from gov’t pensions of any kind, as a prior post indicates.
That has been my anecdotal experience.
What we hear in the news is all the sensational stuff, like these creeps in Bell, CA, who definitely ripped off their community. Thankfully, crap like that happens rarely (but should definitely be dealt with).
The average gov’t employee simply does not make that much to get huge pensions upon retirement. I cannot answer to the claim made by a prior post about safety workers (PD and fire) in MA “gaming” the system to get OT in order to drive up their pensions. It’s possible, but where I work, OT pay is not “counted” towards your pension amount; pensions are only factored on regular pay.
Again: it helps to really investigate how the pensions are set up and how they get paid out. My experience is that most gov’t pension systems are a little tricky to figure out; one is advised to take a lot of classes to be clear on how they work.
And citizens are advised that a lot of gossip and rumors fly around that are usually not true or, at least, are quite inaccurate.
You can “game the system” since many plans work taking the last few years of your income as a way of determining the pension, but you would really have to work your ass off those last few years to make a huge change, is it really “gaming” then or hard work? If it didn’t work that way would you have folks just coasting by until retirement?
Public worker base salaries are smaller than what you can get in the private sector? What who can get? I have no idea what that means, unless this was written three years ago.
I am still a union member.I was federal Civil Service, which means I did not pay into SS-which changed sometime in the 80s for all new hires. But it also means that if I collect SS then I have to take away an equal amount from my annunity.
I know how you feel. My comments (as an actuary under the State Actuary) to the Commonwealth of Mass back in 74 on the extreme cost to come from early retirement to employees not associated with police and fire, and from final salary games in police and fire, was ignore with one state legislator stating we never worried about cost before in granting pensions so it was unfair to worry about cost in the bill at hand. I quit the job the following year.
Now 36 years later a part of the problem is a bit better – the no show relatives of legislator hires seem to be gone, the unions cleaned up, but those pensions still sit out there – the union prefers firing folks to changes in benefits. The real estate tax can not be increase as the old folks can’t pay more, and there is no other funding source beyond state aid and state permission for a local sales tax (hard to get either). And the towns are firing folks with some towns choosing to go with no police or fire rather than end public education (it has not happen yet but wait 90 days).
Public unions are a good – the people hard working and competent – but it has gotten out of hand.
Meanwhile we followed the Federal Reagan/Bush approach to hiring contractors that are more costly than new employees so as to avoid union demands (nowhere near as bad as in the Federal/Military world where 30% savings are possible via replacing contractors with lower cost Federal employees and military recruits – despite Federal Salaries now being 25% high that private industry for the same job).
The California Bell City rip-off was by management hired by a poor city – sounds like corporate America ideas applied to local government. Not a union problem.
City Manager Robert Rizzo approved more than $1.5 million for himself, plus 28 weeks of vacation and sick leave – - Police Chief Randy Adams made $457,000 and Assistant City Manager Angela Spaccia made $376,000 a year, but when the benefits package is added, Assistant City Manager Angela Spaccia’s $376,288 salary more than doubles, to $845,960 and Police Chief Randy Adams’ pay jumps from $457,000 to $770,046 annually. There is also a director of administrative services making $422,700 yearly, a director of general services making $421,402 yearly, a business development coordinator making $295,627 yearly, and a police captain earning $238,075 a year. All in a mainly working-class city where the Bell median household incomes average is only 70% of the Los Angeles County average of $57,152.
Florida state employees are held captive by a 14% unemployment rate and the tender mercies of Republican obstructionism on unemployment benefits should they lose their jobs through no fault of their own.
The Division of Labor and Unemployment Compensation was dismantled for no real reason other than the general distaste that Republicans have for the concept. Outsourcers, who received lucrative contracts to perform the identical functions that the state had done more cheaply, were permitted to pick up former state employees, if they chose, and people ultimately lost their jobs. Free market at work? The quality of the work was poor and the cost was prohibitively expensive which didn’t stop the Republican legislature from funding it. Those state workers who were deemed ‘essential’ ended up taking up the slack for the poor quality contract work. There was one thing the outsourcers did well. That was to explain why the contract was over-budget and why they needed extensions of time and money.
If you haven’t worked for the state, spiel about who state workers are and what they do is just that, spiel.
I don’t argue there aren’t abuses among state workers. I’ve seen some myself. But, by and large, they are hard-working and care about what happens to this country. They routinely leave their state jobs to deploy to Iraq and Afghanistan and return to work without a complaint. Many of these same soldiers are the police and firefighters of whom you are disdainful.
Look around. We’re headed down a rat-hole. Maybe a little less free enterprise is a good thing.
I agree – but I also think union power is a must have in society. It just needs a bit of moderation.
If you feel that way because you think you’re superior to the “lady who empties the trash at the state office building” then yes, it does make you Charles Krauthammer.
Otherwise, to be blunt, your comment sounds like sour grapes. “I wish I had what she has” becomes “if I can’t have it, no one should, especially not some floor-cleaning POS” pretty quickly. And it’s pure bile. Save it for the incompetent PRIVATE sector employees who get 8-figure payoffs after being failures at their jobs and then your corrupt government covers their losses.
Well my pension from the FedGov was based on my last 3 years, but any overtime was not included, if it had been I would be getting one hell of a lot more than I am.
But as for police and fire pensions. These guys have risked their lives for ungrateful peole for their entire career. And then some people resent the fact that they use the rules to get a few more $$. Just how insane is that?
Or, as I like to say, the Republican Revolution taught us that government is the only solution to all the problems we created by treating government as the problem.
And don’t forget that no one pays Social Security tax on incomes over $106,800/year. So, even Social Security protects the wealthy and super-wealthy who are not required to pay the same into the system as the rest of us. We the “small people”, as usual, get to subsidize them that way, too.
Thanks for the clarification, Loo Hoo. I am not that familiar with STRS and the arrangement between STRS and Social Security.
Found this document. The STRS-Social Security arrangement is a bit complicated, I’ll say.
It’s worth noting that public employees are excluded from the National Labor Relations Act, and so have not had to deal with Republican animosity when the Repubs controlled the NLRB (1981-1992 and 2001-2008) or Congress (1994-2006).
This has cut both ways for public workers. States like Virginia and North Carolina maintain legal prohibitions to the unionization of public workers, while states like New York and California are more friendly to the unions.
The US needs a lower standard of living in the financial sense. We will probably all get to share in that. Hopefully some of us will have a higher standard of living in the non financial and moral senses.
Understand that the free market often has more profit if the free market causes your early death. Understand that debt slavery, aspartame, high fructose corn syrup, ad infinitum is the free market prospering from the naive and corruptible.
Oh, this is great! Krugman has an article on his blog specific to what we are discussing here. Try not to miss it.
Sure but it depends on where you work and whether there are upper level positions that you can work in during your last 3 years before retiring.
This, to me, is another situation that is over-hyped, as a lot of gov’t workers simply don’t have the opportunities to get into some higher paid position for their last 3 years of work in order to jack up their pensions.
In the gov’t depts where I’ve worked, those opportunities simply didn’t exist. I agree that it happens, but my feeling (based on anecdotal observation and knowledge from friends) is that it’s much less than what the rumors makes it seem. At the end of the day, the biggest precentage of workers still tend to make $25k or less per year in retirement.
No doubt Public service unions have done a fine job of doing what they are paid and existing to do. They have a few advantages, in many cases the bureaucrats or pols that negotiate these contracts have severe conflicts of interest when doing this. ( Like they benefit from the contract itself!) Another is you cannot offshore most of the services they provide, nor you can out source them because some of the employees have tenure and have civil service protection. What has happened over the course of these last 30 yrs.+ is that the private Union movement has been hammered flat by business as most American manufacturing has been sent to China and elsewhere. Without strong Unions like they had prior to this period the averag American that doesn’t have a Publ;ic service job has in many cases lost his/her job, health benefits , and retirement and still has to pay for all of these things in the tax rate for the Public employees. This is a fact and unfortunately the Gopers have picked up this and are using it to sow hatred , resentment and jealously out here, and guess what it’s working. Why? For a couple of reasons that have more to do with human nature then anything else. 1. It’s easier to blame somebody u perceive as a possibly unfairly advantaged competitor ( public employees) then someone ( the bosses) that still can provide work and benefits maybe. This is the case even though the bosses are the ones actually causing this disparity among working people. 2. People hate paying taxes and people who are seeen as working for them are viewed as non-productive parasites by some people. It’s absurd of course because nobody would actually say that to a cops face would they? Nevertheless, here’s where jealous comes in. All these folks are seen as having things they can’t achieve anymore and they’re angry. I was, till I reasoned it through. In reality the people who took the Public road to employment lucked out and I didn’t. It’s not their fault the Privately held economy has basically collapsed to some extent. It’s also not their fault that it’s not recovering either. But, somebody has to be blamed and the Reich wing has masterfully placed the blame of the Public service employee. The result will be more GOP victory like in NJ. The politics of jealous and rage ( the mad hatters tea party)is everywhere. The left will be blamed Unions will be blamed everyone but the wealthy and their BIG Corps. will be blamed.
Hear here! Ditto!
Here in CA the situation is out of control. Even Dem Gov candidate Jerry Brown, who is deeply in bed with the unions, has proposed revisions to prevent this gaming of the system. In addition to cramming overtime into the last year to increase the base multiplier, other scams include:
- Not taking a vacation in the last year and adding the value of the unused vacation (which can be up to three weeks) to the base salary multiplier.
- Hiring high-level public safety officials (chiefs, deputy chiefs, etc.) at inflated salaries from other cities when those officials are only going to stay in the job for one-two years. That way, much of the official’s retirement is paid for by the previous city/cities that employed them. (Previous employers of Bell’s notorious city manager, asst. manager, and police chief will foot a lot of the bill for their retirement packages.)
- Granting disability status to retirees who aren’t really disabled. This neat trick makes half of the retiree’s pension exempt from income tax. In my city we’ve got a former fire chief who retired on a 50% disability who you can find running along the beach every morning. Except, of course, when he’s swimming and biking as part of his training for the seniors mini-triathalon.
There are four problems with things as they now stand:
1. Public employee unions should not be able to contribute money or support to political candidates. Otherwise you get into the situation we have now: elected officials are too beholden to the big unions. When they sit down at the negotiating table, nobody represents the taxpayer.
2. Private sector unions and pension plans should be stronger. Workers have been getting increasingly screwed over the past thirty years. 401(k) plans are a scam; many people dependent on them will have a rude awakening when they retire. Businesses should be required to offer, and adequately fund, defined benefit plans.
3. Public employee pension plans, at least in CA, have habitually, for decades, over-estimated their Return on Investments. For decades they used a projected annual rate of 8% despite the fact that year-after-year they came nowhere close to earning this rate of return. As the prospect of the baby boomer retirement loomed closer, they turned from investing in bonds to riskier vehicles that offered a higher rate of return. (Translation: mortgage-backed securities.) You know how that went. CALPERS lost $500 million as an investor on the catastrophically ill-fated Tishman Cooper Stuyvesant purchase. Sale price: $8 billion; value when Tishman committed “strategic default” and walked away: $1.5 bil.
4) Historically, up until Jan 1. 2006, under the accounting rules for government entities, those entities did not have to account in their annual budgets for future pension liabilies beyond the current year assessment. Owe CALPERS $1.5 mil, budget $1.5 mil. But no need to put away any reserves for the projected assessment three years down the road of $6 mil. This was great for the elected officials who blessed these deals, because by the time future benefits needed to be paid, the officials would either be retired themselves or in a higher office and no longer held to account. (Nice note: the city managers who help negotiate with the employees also belong to CALPERS and get the benefits of the same pension plans. Neat, huh?)
After the law changed, government entities have to allocate for future “post-employment benefits” (PEBs) under the accrual accounting system. At midnight the day this new rule went into effect, one of CA’s various retiree health care funds went from $5 bil in the black to $10 bil in the red. (A more accurate reflection of its true status.)
So now, at the same time government revenues are declining with the economic meltdown, they are now, for the first time, having to put aside greater and greater reserves for the looming liabilities.
Even Brown has admitted that the current CA pension system is “unsustainable”. Projections of the deficit range from $330 bil to $500 bil, but one analysis says the real number is $1 trillion.
The solution is a combination of reforms in the way pensions are calculated and tax increases — but not on ordinary Californians. We need to get rid of state tax breaks for luxury purchases such as yachts and private aircraft, giveaways to oil companies (hey, bet that one’s a surprise!), etc. But what we really need to do is reform the state income tax. You wanns hear something that will blow your mind?
CA’s state income tax top bracket starts at $41K. That’s right; at $41K in taxable income you pay at the same rate as Steven Spielberg, Kobe Bryant, Steve Jobs, etc. Ain’t government wonderful?
My point, though, is that had she not worked at all, she would have collected spousal social security.
“Their base salaries are smaller than what you can get in the private sector,”
Not any more as unemployment is so high among those that need to work wage private wages/benefits have been dropping.
Ever since the Reagan Devolution started the great race to the bottom, the emphasis in our country has been on destroying one’s neighbor at the expense of bettering one’s self.
You make some very good points from a personal perspective. Thanks for that. It’s true and just gets back to the corporate elite pitting one group of “small” people against another group of “small” people. It may feel good to blame an easily identifiable target, such as “public sector employees,” but it’s not going to solve what the real problem is.
Sorry. Missed that, and you’re correct. That’s true.
Good info, and sadly a lot is true.
You point to a lot of issues, one big one of which is that private corporations have been ripping off their employees for years via the dreaded 401(k) system, where often the employee was forced into investing in shaky vehicles over which they had little control.
The older generations used to get defined benefit plans via private corporations. My 90 year old father is still getting a pension, and boy how lucky he is to get it. Until about 8 years ago, he used to get most of his & my mom’s health insurance paid for, too.
It’s really gotten out of whack with the private sector basically renigging on their social contract with their employees at all levels. But we have the right wing screaming about the “nanny state” and pointing fingers of blame at public sector employees as if it’s horrible to expect to get a pension. It’s really too bad how blind some are to how badly they’ve been ripped off.
Yes, there’s problems with the public sector that should be addressed, but wholesale tossing out public sector defined benefit plans is not the solution. And the sooner that private sector employees wake up to the fact that, rather than excoriating public sector employees for having pensions, they should be demanding the same for themselves.
Such a shame. And yes, CA state tax rates are screamingly unfair, but if you listened to my Republican friends – who make way more money than me – you would think that I was personally ripping a pound of flesh out of their behinds. That’s why they love to listen to Rush. He feed them the lies that they want to hear.
If you notice, I agreed on both fronts, the need for better, widespread defined benefit private pensions and reform of the public pension system.
Asking for more meritocracy in unions does not mean I am a cheerleader for large corporations. It is purely strawman.
In my perfect world, the largest company would be the size of whatever the largest company today is that spends ZERO on lobbying.
if your republican friends make way more money than you….maybe you should become republican;)
Also on the chicken and egg point….maybe the growth of the “nanny state” might well have freed many companies of worrying about their “social contract” in the same way that generous welfare states lead to far less charitable giving on the part of their citizens.