CalPERS data deflates another pension fiction

Public-employee unions are notorious for championing easily debunked myths as they claim that the nation’s growing unfunded pension liabilities are no real problem. It’s hard to justify six-figure, lifetime guaranteed pensions to a public that retires mostly on measly amounts, so unions play fast-and-loose with the numbers.

The biggest whopper, still championed by police and fire unions, is that public-safety officials deserve their lush pensions because they die three to five years after retirement due to the supposed high stress levels and dangers of their jobs. The California Public Employees’ Retirement System (CalPERS) is an advocate for bad pension policies, but it’s got great actuarial tables. As I reported here, the longest-living employees are cops, followed closely by firefighters — most of who live into their mid-80s. CalPERS calls the union claims a myth in a presentation it provides.

The “we die early” argument could have been excused in the past based on shoddy research and ignorance, but there’s no excuse for anyone trotting out such disinformation today given the facts that are out there.

The next-biggest whopper is that the reports about pension abuse are exaggerations based on a few anecdotes because the average pension received by government employees is somewhere in the mid-20s range. I’ve argued repeatedly that such a number is not reliable for a few reasons. First, it includes pensioners who have only been in the system a short time. Second, it includes pensioners who retired years ago under much-less-generous formulas. Third, that number is about triple what the average private-sector pensioner receives, which shows that even this low number actually is relatively high.

The formulas are the formulas, is my bottom-line argument. If a person takes a job as a deputy sheriff in California and works 30 years under the common “3 percent at 50″ formula, that person will retire with 90 percent of final pay, no matter what — and that’s before the myriad pension-spiking gimmicks that sometimes send the amount above the final working pay. This isn’t about anecdotes, but legally binding formulas.

Now, a Sacramento Bee analysis of CalPERS data shows that, once again, unions are inaccurate and pension reformers are on-target. According to the newspaper, average retirement payments doubled for new retirees in the last 13 years (since the passage of pension-hiking legislation) and initial pension payments tripled for many public-safety officials (police, firefighters, prison guards, etc.)

California Highway Patrol officers’ monthly retirement benefits more than doubled to $7,418. That’s close to $89,000 a year on average, with many officers receiving far higher amounts. The average for all state police and firefighters soared to around $60,000 a year and more than $36,000 a year for all retirees. As experts noted, the state aggressively increased pension payments for all categories of public employees and did so retroactively. Those who retire in recent years receive far higher amounts than the averages — and these benefit levels dwarf the outdated poor-mouth numbers union activists use to downplay the payments and the liabilities.

What’s the chance the unions will stop using the low numbers and start dealing with reality? About the same chance they stop peddling the nonsense that police and firefighters die shortly after retirement.

 

Comments (14) Add yours ↓
  1. Tough Love

    Steve, You mentioned 2 reasons why Union-published Public Sector “average” Public Sector pensions are low (the inclusion in the average of short career workers, and retirees of long ago with lower salaries/formulas). There are 2 others … the inclusion of part-time workers and the 50%-share suvivorship payments to beneficiaries.

    September 12, 2013 Reply
  2. SeeSaw

    It doesn’t matter why they are low–they are still numbers that factor into the bottom line, and that’s where you get the average. I wonder why the author doesn’t do an article on those, “short timers”, he refers to here, instead of piggy-backing on a SacBee article, and doing his own journalistic investigation. Let’s hear about some of those short-timers.

    Let’s see: The minimum age allowed by CalPERs is 50 and the minimum time required of a short-timer is five years. How many workers do you know who are going to retire after five years? The reality is that those low salaried part-timers are receiving less than $500/month, with 20 years service time. A full-time worker with an above average salary, after 13 years, will receive less than a $1,000, using the highest formula allowed. And, if the retiree chooses the survivorship payments, (which most don’t–you should do a study on that, Author), the forfeiture off the top of the unmodified amount leaves only enough to barely survive.

    September 12, 2013 Reply
  3. Tough Love

    SeeSaw, No matter how you “spin” it …. the pensions of CA Public Sector workers will ALWAYS be AT LEAST at least 2x greater in value at retirement than those of comparable private sector workers retiring at the SAME age, with the SAME years of service, and the SAME pay.

    And that 2x, is MOST OFTEN 3x-4x for non-safety workers and 4x-6x for safety workers.

    THAT’s the relevant comparison.

    September 12, 2013 Reply
  4. SkippingDog

    If Greenhut and Tough Love are being intellectually honest about their objections, it would seem there is an easy solution to determining what the real average pension in California might be. Just strike the outliers by removing the bottom 10% and top 10% from the aggregate, then average the remainder and let’s see what a real average looks like.

    September 12, 2013 Reply
  5. Tough Love

    Nice try SkippingDog….

    While such a calculation so might be instructive, an average so calculated should ONLY include full (30 year) career, full-time retirees of the most recent calendar year.

    THAT’s the relevant figure to compare to their Private Sector counterparts.

    And even then, such a Public/Private Sector comparison would VERY SIGNIFICANTLY understate the value of the Public Sector workers retirement package vs that of the comparable Private Sector worker because looking ONLY at average pension payouts in $$$ does not reflect the very substantial incremental value of;
    (a) the much earlier (unreduced) full retirement ages in PUBLIC sector Plans
    (b) the inclusion of post-retirement COLAS (almost unheard of in Private Sector Plans)
    (c) the tax-free absurdly-easy-to-meet “disability” pensions unjustly granted FAR FAR too many safety workers
    (d) the under-priced survivorship pensions granted Public Sector worker beneficiaries.

    The last thing you (as a Public Sector retiree working desperately to avoid justifiable givebacks …. such as your retroactive pension increase a decade ago) is an “intellectually honest” discussion or pension comparison with comparable Private Sector workers.

    September 12, 2013 Reply
  6. Steven Greenhut

    The formulas are the formulas. If a person works for 30 years at “3 percent at 50,” that person will receive 90 percent of the last years’ pay … before all those egregious pension-spiking gimmicks. Period. Because the formulas have increased dramatically in recent years, the averages will keep going up as the pool increases to include more workers who have worked under the enhanced formulas. That was the whole purpose, wasn’t it? Advocates wanted to dramatically increase pensions for government employees. It worked. Now defenders of the system try to hide the real amounts by playing games and spinning. But CalPERS numbers are credible.

    September 12, 2013 Reply
  7. Tough Love

    Quoting Steven Greenhut …”The formulas are the formulas. If a person works for 30 years at “3 percent at 50,” that person will receive 90 percent of the last years’ pay …”

    Steven I hope that you are simply make a statement, but not with agreement that pensions so large are in any way appropriate (or “fair” to Taxpayers).

    The calculations are not overly difficult. The cost to fund a 3%@50 (COLA-adjusted) pension over the working career of the employee with payments beginning at age 55 is roughly a LEVEL ANNUAL 55-60% of cash pay. With the worker contribution being perhaps 10% of pay, that leaves the 45%-50% balance an obligation of the Taxpayers.

    When the very Typical Private Sector worker gets (towards their retirement) the employer’s Social Security Contribution (on their behalf) of 6.4% of pay plus a 401K Plan with another 3-5% of pay, totaling perhaps 10-11% of pay and with Public Sector workers earning no less than their Private Sector counterparts in “cash pay” why is ANY greater taxpayer retirement-contribution necessary or justifiable let alone ones that are (in the above example) 4 to 5 TIMES greater ?

    And to make matters worse, putting blinders on and underfunding (as vitally all States /Cities do today via overly optimistic investment assumptions and by discounting Plan “liabilities” at FAR to high interest rates) does NOT make the enormous cost of such generous promises go away. It just unfairly defers them to future taxpayers.

    Going back to your original quote, I do not believe these grossly excessive promised pension should be honored. Certainly no elected official or management representative at the “bargaining table” in any way represented Taxpayer interests, with most (if not all) having their actions colored by self-interest in one way or another.

    Hopefully, the outcome of the Detroit Bankruptcy will establish the legal stage to renege on all promised pensions (AND Retiree Healthcare) in excess of what the typical Private Sector retiree gets from his/her employer.

    September 12, 2013 Reply
  8. SeeSaw

    The 3% at 50 and 3% at 60 formulas both lasted at my former entity for less than ten years. The new workers were already getting trimmed formulas, and the recent pension reform cut them even further for the next batch of new workers. Many public entities, and I believe the state is one, never did adopt the 3% at 60 for miscellaneous employees. I go back to the beginning–it began with the CHP and other safety groups wanted in on it too. The upgraded formulas were later pitched to the Legislature because, it was thought that the economy was going to keep growing. There was never any planned conspiracy to dramatically increase the pensions. And, you keep referring to egregious spiking gimmicks–Such was ended by CalPERS in 1993. The miscellaneous pensions are calculated on base salary only.

    September 12, 2013 Reply
  9. Jack Tachspeyr

    SeeSaw,
    Who pays you to spew all your misleading BS? You’re good at what you do, throwing up little points to make it harder for the sincere but financially challenged reader to know what to believe. The reason these pensions are crippling our economy and turning our nation into government elites vs. impoverished taxpayers is because of people like YOU. You ought to be ashamed of yourself.

    Tough Love and Greenhut have bothered to debunk your misleading drivel in this comments. But you and your minions are everywhere. The greatest irony: The big bankers are on YOUR side – getting filthy rich managing trillions of dollars in public employee pension funds with no risk (taxpayers cover losses) and collecting commissions on bonds issued to cover union caused government deficits.

    September 13, 2013 Reply
  10. SeeSaw

    Nobody pays me anything to participate on these forums and put out the talking points which are based on actual experience and fact. There is no BS or drivel in what I say. I worked in the public sector for 40 years and 8 months, and I probably know a lot more about it than you. You come off as just another one of those who are sore that they missed the boat.

    September 13, 2013 Reply
  11. Tough Love

    Quoting SeeSaw …”There is no BS or drivel in what I say.”

    SeeSaw, Omission or misinformation is as bad as direct “BS or drivel”.

    Above, you said …”The 3% at 50 and 3% at 60 formulas both lasted at my former entity for less than ten years. The new workers were already getting trimmed formulas, and the recent pension reform cut them even further for the next batch of new workers.”

    Interesting how you mention the pension formula reduction for “new” workers w/o mentioning that those reductions do not apply to the future service of all CURRENT workers, with the associated (excessive) future pension accruals exacerbating the financial hole we are in for years to come. Clearly an “omission” of sufficient materiality to label your response “BS and drivel”.

    September 13, 2013 Reply
  12. SeeSaw

    That’s correct. The new formulas do not pertain to the workers who were at the entity when the enhanced formulas were adopted in 2001. The workers on payroll at that time, and those who are still lucky enough to be there (there have been multiple layoffs) remain covered by those, now defunct, formulas. The 3% at 50 and 3% at 60 formulas are now extinct for new workers. Those hired after 2005, for safety, and after 2010, for miscellaneous, are covered by the 3% at 55 and 2% at 60 formulas. And, newer employees hired after Jan. 1, 2013, are covered by yet, lower formulas–plus they must work until age 57, for safety, and age 67, for miscellaneous, to achieve the maximum retirement amounts. (That means that younger workers wanting to get a foot in the door, to start public sector careers, will have to wait longer than formerly.) Can’t figure what you consider drivel about any of that, TL–all are facts. But one thing I do know is, nobody will need to look far this upcoming holiday season to find the, “Grinch”. TL, you are that and “Scrooge”, all rolled into one.

    September 13, 2013 Reply
  13. Tough Love

    SeeeSaw, If you were thinking clearly and not so biased, you would realize the excessive taxes collected to fund the insatiable greed of Public Sector Unions & workers (as necessitated by their grossly excessive pensions & benefits) make THEM the Grinches.

    September 13, 2013 Reply
  14. did my twenty

    I JUST RETIRED AS A SERGEANT WITH 20 YRS OF SERVICE WITH THE NYPD. MY PENSION IS 78 K A YEAR WITH A 12000 ANUAL VARIABLE SUPPLEMENT PAYABLE ON DEC 15 EVERY YEAR. IT IS CONDITION OF EMPLOYMENT TO GET A PENSION, AND PAID HEALTH BENIFITS.I HAVE EARNED EVERY PENNY COMMING TO ME. TO HEAR EVERYONE IN MY FAMILY BICKER AND COMPLAIN ABOUT THE ECONOMY, AND SAY I AM NOT DESERVING OF MY PENSION AT AGE 40 IS RIDICULOUS. PUBLIC EMPLOYEES RUN THE CITIES IN THIS COUNTRY NOT THE BUREAYUCRATS WHO SIT IDILY BEHIND AND COMPLAIN. THEY GET A PENSION TO OR ARE THEY EXEMPT?

    September 18, 2013 Reply

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