The British call it “pension apartheid,” the enormous gap between the retirement benefits bestowed on public employees and workers in the private sector where defined benefit plans have all but disappeared.
In Los Angeles and throughout California, the reference to segregation hardly goes far enough to describe what amounts to wage slavery for the masses in support of luxurious lives in retirement for many local and state government employees who are paid more than those in private employment for comparable work and have to gamble their life savings in 401k plans at the mercy of Wall Street and the bankers.
Public employee pension funds gamble, too, but when they lose 25 to 30 percent of their assets, not to worry — taxpayers have to make good on their losses.
Retire at 55 versus 67 for Social Security, Cadillac health plans versus Medicare, 75 to 90 percent of highest salary versus nothing, zilch, zero for the vast majority of private sector workers.
As we start this election year, everybody has a plan to deal with the issue — not solve it but get it off the top agenda of issues that are reducing our services, deferring maintenance, increasing fees and charges for nearly everything government provides and leading to smoke-and-mirror budget tricks that will burden our lives and our children’s lives for decades to come.
More than
12,000 retired government employees now draw six-figure pensions from CalPERS along and thousands more from the three L.A. pension funds, the teachers, UC and other separate funds — numbers that are soaring as senior highly-paid staff head to exits.
The cost to taxpayers is staggering and getting bigger every year, which is why felons are being dumped on our streets, classrooms are overcrowded, parks are closing, library hours cut and the rich and powerful have joined Gov. Jerry Brown or offered parallel schemes for tepid pension reforms tied to substantial tax increases.
Two weeks ago, the state
Legislative Analyst’s Office issued a report on two ballot measures being circulated by reformers like the governor’s plan would actually add billions every year to taxpayer pensions costs for 20 to 30 years before they start paying dividends.
The reason is that new public employees would either get a 401k without a guaranteed pension or a hybrid of a 401k and guaranteed defined benefit pension so they would be contributing nothing or far less to pay for the pensions of those who are retired or retire in coming years because all these pension funds are run a credit card with only current bills being paid off.
This unfunded liability and the soaring burden of pensions and health care costs of public employees didn’t just happen. It was put in the spotlight by the economic downturn but it wasn’t caused by that.
“You can see the contributions dropped next to nothing. At that time, the state and many local governments increased benefits, and shortly thereafter the investment marks took a downward dive, and then later in the decade in 2008, another downward dive again. And these factors have contributed to the large increase you see in state Pension Contributions thereafter.”
Need I mention that Antonio Villaraigosa was the Speaker of the Assembly at the time cops and firefighters got a jump in their annual accrual from 2 to 3 percent and were granted pensions 90 percent of salary with all other public employees getting big increases as well.
That is the same Antonio Villaraigosa who as mayor foisted on the public a pension reform plan last spring that brought in higher contributions from workers in the short-term in exchange for hard guarantees of pension and health care protection that will bleed the city treasure dry for decades.
That was last March just one month after t
he Little Hoover Commission, the watchdog on state government, issued a report proposing a cap in
the $80,000 – $90,000 range of the
maximum salary that could be used to calculate pension benefits, a higher retirement age to discourage early retirement, requiring workers and government agencies to share funding costs, steps to prevent spiking in the year before retirement, banning retroactive pension increases, ending government contribution “holidays,” and, of course, accountability and transparency that have long been missing.
“One need look no further than the actions of
some 200 public agencies in the months since the steep decline in the stock
market and housing values in 2008: Rather than foreswear risky behaviors, these
public agencies in California instead have improved pension benefits for their
employees. Up and down the state, cities, counties, and fire and water districts rewarded
employees with “golden
handshake” agreements that provide extra service credit to retire early;
introduced favorable methods to calculate pension benefits based on the single highest year of compensation; and lowered retirement ages that extend the government’s obligation to pay lifetime
retirement benefits. These actions further burden pension plans that already are
unsustainable.”
“The ability and willingness of leaders to contain growing pension
obligations should
concern not only taxpayers who are seeing vital services and
programs cut to balance budgets, but the public employees who have the most to lose. A
pension is worthless without a job to back it.
“The Legislature has the tools to put state
and local public employee
pensions back on a path that can restore stability and public confidence to state and local pension
systems. Marginal changes, however, will fall short of the need for serious action. Adding a “second tier” of lower pension benefits for new hires, for example, will not deliver savings for a generation, while pension costs are swelling now as Baby Boomers retire.“
It is not anti-union or anti-public employee or even anti-tax to demand that the people we elect to high office do their jobs for the benefit of society as a whole.
We have the chance in this election year to hold those seeking public office accountable for their past actions and to demand a commitment to genuine reform.
The power is ours to exercise and if we keep on electing the people responsible for this and so many other messes, we have no one to blame but ourselves.
I agree that the pension problem needs to be addressed, but isn’t it true that current pensions are legally binding and any attempt to change these agreements would be fought in court? Hence, the need to change the contracts with new hires who aren’t covered by previous contracts.
Please respond with the realistic options available to lawmakers and not the pie-in-the-sky fantasy of amending these agreements without resorting to bankruptcy, which it seems is the only way to abrogate these pension contracts legally.
Bankruptcy, however, could cost the state even more money in credit rating downgrades, higher interest and borrowing costs than the savings from pension reform.
Any links to studies which rebut my remarks?
It’s sad to see Mr. Kaye so seriously misinformed.
1. The independent, nonpartisan Legislative Analyst (LAO) issued a report last week saying the Republican ballot measures would cost governments at least $1 BILLION more PER YEAR for the next 30 YEARS because of the way they were written.
2. The LAO also said these ballot measures were likely to be thrown out by the courts.
3. Yes, Mr. Kaye, about 10,000 retirees (out of millions) get $100,000+ pensions. That represents less than 2.4 percent of retirees. Is the solution to slash benefits for 98 percent of the retirees who were PROMISED as part of their employment the ability to have a secure retirement. The average CalPERS pension is just $24,000. And many state pension recipients do NOT receive Social Security.
4. Why in the world would we want to reward Wall Street with the infusion of billions of dollars in pension plans when it’s the greed of Wall Street that has caused the economic crisis? The rate of return over CalPERS history is 8.2 percent. And there is no reason to suggest that as the economy covers that the sky is falling. Stop cropping the picture of the pension system of the past couple of years and consider the lifelong performance.
5. Hybrids are MORE expensive to administer and produce LOWER returns. So that means governments will pay more for pension systems while employees will get less in retirement. Does that make sense? Of course not.
Yes, we need to stop spiking and abuse in the system. But Mr. Kaye, your approach lacks any foundation in fact. Pensions represent just 3 percent of the state budget (less than prisons and corporate tax breaks). So let’s put this issue in perspective and stop running around like our hair is on fire.
There’s an out of control Bar across the street from the Gelson’s Market on Reseda Blvd. in Reseda. I just drove past it, and despite calling Dumb-Ass Zine’s office and the LAPD, they just keep playing LOUD ghetto Rap on their cars, yell and scream outside the bar and jaywalk all into the wee hours of the morning. This has been a very LONG STANDING PROBLEM FOR TARZANA! Now, In the private sector, such security personnel and such management WOULD BE FIRED ON THE SPOT. But not in L.A.===The management gets promoted and gets a pension, the Police never get reviewed for such incompetence in letting this type of crime scene take place 7 days a week. The taxpayers then get bumped in their DWP bills and other taxes and “fees” to cover the cost of such MISMANAGEMENT.
If you study history, pay attention to the story of Robespierre and Oliver Cromwell. Both had the King executed and formed a “citizen’s government.” Both found out they couldn’t Govern worth a damn, and thus both were executed. Both by the way RAN THINGS WORSE THAN THE CORRUPT KING BEFORE HIM. Thus the Steven Robert post brings and EXCELLENT POINT to always remember—careful when THE GOVERNED DECIDE TO GOVERN OVERNIGHT! Just changing all the rules overnight will bring a DISASTER just by default. Ron’s point is great however—its time to get the excesses out of Public Servants’ retirements so we can afford the future Public Servants’ we will need to replace the retiring ones and STILL be able to afford both.
Did you notice, as mentioned in the report, that any measure passed will not apply to judges’ pensions? Theirs will remain “unaffected” by any measure.
There should have been mention of the circumstance that does null and void existing pension contracts (upheld by the court)–bankruptcy.
In Los Angeles, contributions to the two pension funds are anticipated to be 25% of the General Fund’s revenue.
But be prepared for more monkey business on the part of Villaraigosa as he is forcing the pension plans to alter the underlying assumptions so as to lower the City’s contribution. At the same time, the annual payout to retirees is increasing as our the benefits for future retirees.
http://www.kcet.org/shows/socal_connected/content/economy/show-me-the-money-double-dipping.html
http://www.kcet.org/shows/socal_connected/content/politics/database-drop-pensions.html
http://blogs.laweekly.com/informer/2011/03/lapd_drop_salaries_pensions.php
in 2011, July, the police received a 7.5 percent raise over next 3 years although the city’s budget is out of control again this year.
the “DROP” program, links above, shows where the monies are going for pensions, after working 20 years, the police and fire go into a drop program. Their 80 to 90% yearly pension paychecks go into a savings account quarterly, this account is paid a guaranteed 5% interest rate, when, after the 5 year drop program is over, they retire and receive a 400K to million dollar savings account.
The DROP program is no longer required, City Council should cancel the DROP program. Let the police and fire retire at 20 years if they wish, hire some of the veterans who are already trained for the paramilitary organizations. Bring them in with pension changes.
Guess what, there is a “BOUNCE BACK” program for DROP. After they receive a hefty savings account and start their pension receipt, they can go back to work again!
It doesn’t help when you have Bitter Bernie and Dennis Zine collecting pensions plus their high salaries. Hey, 5:58am why aren’t you screamin about the DWP raise of 17% over 3 or 4 years? You should be yelling about the millions at DWP and all the people who instead of being laid off got a free ride across the street.
To Steven Roberts: So much of playing around with statistics to make it sound that you have all the answers. To pick on just one -”Pensions represent just 3 percent of the state budget (less than prisons and corporate tax breaks). So let’s put this issue in perspective”–
You did not state 3% of what? The following is from the state budget.
“The general fund of the state budget is approximately $90 billion but the state actually spends more than $250 billion when $70 billion in federal funds, plus special funds (such as gasoline taxes), state employee pension payouts and borrowed bond funds are included”. 3% of either amount going towards pension is an unjustifiable amount.
Yet another misleading statement- “The average CalPERS pension is just $24,000. And many state pension recipients do not receive Social Security”. It is the same argument debunked in an article in the Wall Street Journal titled “Why Public Pensions are so rich” Jan, 4, 2012.
It compares an average teacher collecting a pension of $60,756 a year to a private sector employee who makes the same wages but will collect only $17,750 per year in social security. The article conludes that there is no good reason why public employees should receive retirement benefits so much more generous than those of other Americans.
Convince us that you deserve more than us.
This is all part of corporate America’s plot to pit private and public employees against one another. Please don’t fall into the trap or play Wall Street’s game. It’s not about public vs. private; it’s about who has the most humane benefits and how can we put everyone back on a level playing field. Yes, police and fire pensions are out of whack with the rest of society’s and should be reformed to bring them in line with those of other public sector employees.
Along with that, private sector employees should fight to do away with pernicious 401K and other “defined contribution” plans, and bring back defined benefit plans. After all, that’s what nearly all private sector employees enjoyed decades ago, and what afforded American families a measure of comfort during their retirement years.
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“Let us take back our city and make it Los Angeles governed by the people for the people”
YJ Draiman for Mayor – proposes a Los Angeles City government for the people by the people, let us take back our city, it is long overdue to listen and address the concerns of the people of Los Angeles. Implement fiscal responsibility; restore trust and integrity in our government. This starts from the Mayor on down to the rest of government officials.
We must stop wasting revenues and resources, implement efficiency and productivity. These are hard economic times; in order for us to survive, we must take immediate action and implement the necessary actions to lessen the impact.
This starts at the top – “Lead by example”, leadership starts the pattern and the rest will follow.
The peoples brigade for honest government.
YJ Draiman for Mayor of Los Angeles 2013
The Pension Crisis – YJ Draiman
Pension reform plan must be devised and put into affect as soon as possible. Every day we wait is an economic drain and an ultimate cause for the failure of government fiscal responsibility, it also increase the potential for bankruptcy. It is an economic suicide and a dereliction of duty for officials not to devise and implement a viable Pension reform, with a short term plan and a long term plan, allowing for modification when necessary.
We have to make an equitable Pension reform plan that all parties can live with. It is in the best interest of everyone, we all have to compromise.
A legal battle will only exasperate the financial situation and will have a disastrous affect on the financial sustainability of the government and the people.
Stop bickering among yourselves and jockeying for position; you are playing with people’s livelihood. Do the jobs you were elected to do or else resign.
Politicians all too often think about the next election. Statesmen think about the next generation.
YJ Draiman
http://www.yjdraiman.org
PS
I look forward to the day when only statesmen will run for office.
A statesman is a servant leader who is not concerned about his political future, but in what is best for the people. A statesman is open-minded, logical, intelligent and compassionate. A statesman reconciles conflict and looks into the future.
Unfortunately, many elected officials are not statesmen or even leaders. They are in office to make themselves feel important, to gain power and sometimes to get money. This kind of elected official is caustic, negative and hateful who stirs up messes, acts self-righteous, gets personal and calls other people names, and is the first to claim he is not a “politician” and that he “is working for the people.” Some think success is getting their picture in the paper handing out a check. Some elected officials think their job is to be against the chief and other elected officials regardless of the issue.
Please think about the kind of people we need in public office to make good decisions for the present and the future. We don’t need gainers; we don’t need self-serving politicians. We need positive leaders and statesmen. Talk to those in office and those running against them. Look at their service history and decide for yourself if they are true statesmen.
This type of elected official is not a statesman. A statesman does not buy votes with “quick fix” hand-outs. A statesman makes the tough decisions. He considers all his constituents. He has a vision and a long-term plan.
http://www.yjdraiman.org