In New York, a 44-year-old firefighter retires with a $101,000 a year pension, for life. Near Chicago, a parks commissioner quits and begins collecting a $166,000 pension – a sum sweetened by $50,000 thanks to a one-time retirement year windfall of $270,000. And in California, a former city manager pulls down $500,000 in retirement checks every year....
Wall Street analyst Meredith Whitney correctly predicted the need for a government bailout of banks three years ago, so people listened in September when she forecast who will be next to beg for a federal bailout: States like California, New Jersey and Ohio. State and local governments have effectively run up huge credit card bills, and soon won’t even be able to make the minimum payments on that debt. What happens then? Middle America, Whitney predicted in a report called “Tragedy of the Commons,” might revolt at the idea at bailing out coastal states for years of mismanagement and overspending.
A Ponzi scheme?
In truth, pension systems rely on what might be considered an accounting trick, not unlike the trick which keeps the Social Security system afloat for now. While state workers contribute payments to the system – typically about 5 percent of their salary -- and those payments are matched by government employers -- about 10 percent -- those payments scarcely cover the eventual payouts.
“You can never pay enough to pay for your retirement,” Tom said.
In fact, "defined benefit" pension plans make no direct connection between the worker's contributions and the benefits enjoyed later. Pension systems hope for large investment gains during a worker's career – in many states the calculations project an annual return of around 8 percent, a fantasy -- but really rely on the
Sacramento has published Encinitas pension payouts online, here.
A Look Back at 2005
Encinitas workers get improved salaries, benefits
The City Council brought finality to months of negotiations Wednesday by approving 3.2 percent raises and increases to health and retirement benefits for city staffers...
Bussey said the premiums Encinitas pays to the California Public Employee Retirement System could increase with downturns in the economy.
Encinitas approves worker's contracts
James Bond cast the dissenting vote in the 4-1 decision to approve the contract. Bond said he was concerned that the increase in city contribution to employee pension funds might cause financial strain in the future.
Encinitas must stand with taxpayers
"In Encinitas, the City Council is scheduled to vote on a pay package that would give a staggering 35 percent raise to city workers in the form of a lavish, lifetime boost in their retirement incomes. For good measure, ordinary wages would rise 3.2 percent annually for three years. All this comes as the state government wrestles with billions of dollars in projected deficits, a precarious condition that threatens the fiscal health of local governments."
Encinitas pays city employees well and wisely, by Jerome Stocks
"The employees, not the city, will assume the lion's share of the increased cost of the pension plan enhancement"
The city pension projections assume a 7.75% yearly rate of return and a 3% rate of inflation. We have not found rates of return for secure investment instruments anywhere near a guaranteed 8%, in the private market. Any resulting shortfall will have to come from the taxpayers. Coming hyperinflation is a concern among many economists.
We have been unable to find the city's pension documents online.
For decades the State of California and local governments have offered a "defined benefit" retirement plan for employees. A defined benefit plan guarantees an annual pension based on retirement age, years of service, a multiplier and final salary (retirement formula). For most cities in California, including Encinitas, the retirement plans are managed by the Public Employees Retirement System (PERS). Cities & employees make annual contributions to PERS which in turn pays the retirees.
Due to changes in the retirement formula in the 1990's, contract agreements that required cities to pay both the city's and the employees contribution to PERS and the recent volatility in the stock market have made these increased benefits no longer sustainable.
Current State law prevents cities from changing the retirement formula for existing employees. However, we can create a different retirement plan for new employees. I will recommend increasing the retirement age, averaging the last three years of wages to determine final salary calculation and reducing the multiplier.
Current employees will be required to pay their full retirement contribution requirement.
For the Record: I am a retired State employee. I was hired before the retirement formulas were changed and I paid the employee contribution. My total gross is $1214.42 a month with $109.11 in deductions for medical benefits.
Notes: The ETA will publish any candidate's positions on financial issues.
In 2005 current council members Houlihan, Dalager, and Stocks voted to increase pension liabilities. More information can be found here.
NCT Pension Forum
Officials with a county watchdog group asked taxpayers Wednesday to contact their city officials and request reform for municipalities' generous pension plans.
EUC Blog Pension Reform Discussion
...SDCTA has lots of resources and papers on their web site, but I'll sum up the presentation here. Encinitas city employees can retire at 55 and get paid essentially a full salary for as long as they live. That is completely out of line with private-sector, real-world benefits. You'd have to build a 401(k) in the millions by the time you're 55 to match that kind of cheese. And that's before we even get into paying for their health care for life. These massive benefits are a huge and growing drain on city resources...
ETA & SDCTA TO HOLD JOINT FORUM ON PUBLIC EMPLOYEE PENSIONS
Event Will Be Held at Encinitas Library on April 28 at 6:00 PM
ENCINITAS—The Encinitas Taxpayers Association will host the San Diego County Taxpayers Association (SDCTA) as the SDCTA presents the findings of its watershed report on public employee pensions in San Diego County cities. Residents of Encinitas and other North County cities are encouraged to attend and learn more about the costs of their city’s employee pension obligations.
The presentation will include updated information concerning the state of city pensions gathered since the analysis was first released in the fall of 2009.
Presentation of SDCTA’s “San Diego Pension Plans Phase I: CalPERS-Contracted Municipalities,” the first part of a two-part study analyzing 17 city governments in San Diego County that participate in the California Public Employee Retirement System, including Encinitas.
Wednesday, April 28
6:00 PM to 7:00 PM
540 Cornish Drive
JoAnne Golden, Policy Manager for SDCTA. Ms. Golden has a Master of Public Policy from Pepperdine University with a specialization in economics and state and local policy. Prior to working at the SDCTA she worked for Schmitz & Associates, a Malibu-based land use consulting firm, and the Metro Orlando Economic Development Commission.
Here, for example, is what the California Public Employees' Retirement System, better known as CalPERS, told its retired members early in the fall of 2008, when it had lost more than $70 billion on its investments so far that year, more than one-fourth of the previous $260 billion value of all its investments:
"It is important for you to know that the current credit crisis does not directly affect your retirement benefits, which are securely protected by law, or our ability to pay benefits."
Translation: Not to worry; the taxpayers will have to bail us out.
In fact, retired public employees from the 2,000-odd cities and counties that contribute to the plan have not seen a nickel's reduction in their stipends. CalPERS paid out $10.88 billion in retirement benefits in 2008, plus an estimated $5.7 billion in health benefits.