City Journal Spring 2014

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Spring 2014
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Ed Ring
Gross Understatements « Back to Story

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TL -

Did you see the article today (Dec 6th) in the SacBee regarding the pension changes coming to California. When I posted a week or so ago: "Just a little info on what else he is doing (in case your interested): he has cut pensions for the highest tiers..." I was not in a position to say anymore than that - now the cat is out of the bag. Take a look in the SacBee and see what the new factors are. Ain't saying it's perfect, but things are getting fixed in California. New Jersey, Illinois, Kentucky - not so much.
All government pension plans should be closed immediately; CALPERS should send all remaining funds on account to the feds, who will control it and divvy it up as if current retirees are on social security. The current workers should be forced to pay into social security like the rest of us serfs. Problem solved, cased closed. It is really the only fair thing to do.
While CA's gov't excesses suck, Houston's weather REALLY sucks.
Clearly the overwhelming majority of California voters have long since gone down the path of big, out of control government. There is a solution to these problems. I call it Texas, Houston to be exact.
At least it's a start. The Sacramento (Calif.) Bee has a similar site, but it is far more limited in scope. With over 3,000 governments in California, many "doing their own thing", it is probably hard to get the information needed to ensure better accuracy.
I do realize the local budgets are much more severely impacted than the states - totally agree with you. I don't know what the answer is, and I believe you are on the right track - if there isn't money in the pot to pay the retirement, it is going to be cut by some amount...even if a court doesn't agree.

Regarding the state - while counties & cities can declare insolvency states are not allowed to to do as I understand it. States have power to tax over a much broader population base & to cut costs by throwing the burden on the counties. Not saying it is right, just saying it is so. Jerry Brown is doing that in California right now. Just a little info on what else he is doing (in case your interested): he has cut pensions for the highest tiers, cut 'redevelopment funds' which are political cash cows for the well connected, quietly gotten rid of entire classes of state employees (was a shock even to me), reduced state vehicle costs, telecommunication costs, closed police academies (for two years I think), and other numerous things. The guy really knows what he is doing. While Schwarzenegger talked a lot, he didn't have a single clue how to manage the state. The budget is much lower now that a Democrat is in office - which seems strange as can be. Just for disclosure, I'm a Ron Paul/Peter Schiff kind of guy.
BOPRN, I think you don't realize the full financial impact of these very generous pensions & benefits.. While the taxpayer contribution to pensions at the state level is in the single digits, at the local level it is many multiples greater, with "Total Compensation" (cash pay plus pension accruals plus healthcare) consuming 60-80% of the whole budget. That doesn't leave much for anything else.

As to reductions for PAST service accruals, clearly that's only going to be addressed as part of a city's (State's ?) insolvency, and the Federal Courts will ultimately decide if such accruals can be reduced. In a few of the worst cases, payments will likely be reduced even if the Courts decide otherwise since even the Courts cannot create funds that don't exist (the Illinois teacher's Plan and perhaps San Bernadino comes to mind here).

I'm not particularly for going after the retirees (especially those with more modest pensions), but in fairness to others (the Public Sector actives and taxpayers), some give-back from this group may be appropriate.

We are not far apart at all. On the other website I was being as aggressive as you to make a point - nobody listens to the aggressive guy. All they hear is the attitude, not the content. While I don't agree with all of what you have to say, I agree with a lot of it, and you would find most people who work for the government do too. GIVE PEOPLE A CHANCE.

To your points. While I understand your intent of 'past service' being changed, I don't believe it is ethically or legal to do so. The ethical part: people signed up for X%, and that is what they expect to get paid. It is no different than a contractor quoting a price - and being hired. The legal part: It goes against all kinds of retirement law, and then there is the bought years of military and ARSC time. There is no way to undo that annuity. Even if one could, every last PER member's account would have to be reviewed, modified, and somehow altered with the approval of a court of law for each individual case where a person has purchased time. It becomes such a logistic nightmare that any cost savings would be thrown out the window.

In the interest of doing something in a 'neat/tidy' package, future years of service is where it's at.

To your point of will many cities go belly up - probably, but then 'many' has to be defined. If it is cities where politicians scammed in collusion with groups of public employees....well, it is on them!!! I have no pity for that guy in Bell or others who scam the system. Their pension should be reduced to the 'non-scam' level. As for the states (with the exception of Kentucky & Illinois), I bet they will be OK. Even California has a very small portion of it's overall budget going to pensions. Even if it was doubled (which is kind of a far out chance) it would still be single digit percentage.

I'm not for people spiking their retirement (that ends 01/2013) at the cities/counties. But, I'm also not for the typical retiree getting the shaft while we feed/clothe/house half of Mexico and provide welfare for 10's of millions. Those who were honest, took a job, paid their taxes, put up with the 'boss', and so on have earned a pension. For those who have cheated/spiked the system - let's fix those, and leave the majority of retirees alone.

That sound reasonable?
BOPRN, See, were not as far apart as initially thought.... althouth I still feel that in the cities with the biggest financial problems, giveback of the past (unjust ?) excesses (e.g., SB400) must also come from the PAST service accruals of actives and from those already retired. This is called "sharing" the burden with Public Sector "actives" and Taxpayers.

I leave you with one question. If pension changes (as usually implemented) only apply to new workers, I think many many cities (and States?) will go belly up before the saving from those reductions kick in in 20-30 years (when these NEW workers begin to retire). So I feel such reductions MUST also apply to FUTURE service of CURRENT workers? DO you agree ?

True, the new formulas are applicable to new hires only.

"Protects means" - From my understanding it means that the politicians weren't supposed to do exactly what they did. Beyond that, who knows. It certainly isn't going to protect cities & counties from going bankrupt as a result of under funding pensions. States will be OK, because states will simply push costs down to the county level. Not saying it's right, just saying it's so.

I didn't say SB400 was a poor decision. BUT - I agree it was. It was INSANE. But it is only one state out of 50 (although the biggest). Jerry Brown has been busy undoing that mess, and retirement formulas should all have returned to what they were prior to the year 2000 by the end of his term. He has already made a big dent. Again, it is only for new hires.

There isn't nearly the collusion between unions and politicians that places like Fox news would drum up. Matter of fact, every employee I know that works for the government is in some union - and every last one of them think the unions are FOS & that the pensions need to be fixed. The vast majority of public employees want to be fair, and are professional, they wouldn't have been hired otherwise. So I think you might find more agreement than disagreement with this group than you think.

The question of employees losing past years of service. Say a guy hired on in year 2000 (just for this example). The bill (SB400) was passed in 1999. Well, the employee was hired under the new (higher) formula. It is what the employer agreed to pay - so the employee is entitled to it in my opinion. That is not to say it's not excessive. BUT - years going forward should be able to be negotiated...just like in the private sector. Another problem that would occur with trying to renig on past formula rates is that a lot of people have purchased military time or ARSC time. It is like buying an annuity....and there is no going back on that.

Future years are the key, whether it be new hires or existing employees. Besides, things might work out OK. With the dollar falling & the market going up, the guy with a 50k/year retirement might find that it isn't enough to pay his utilities in 10 years - but the program will be fully funded.
BOPRN, Just to clarify, my understanding of the CA State pension changes is that the % reductions and age increases apply ONLY to NEW employees. My proposal is that reductions (greater than those proposed in CA) apply to FUTURE service accruals of CURRENT (not just NEW) workers.

Also, you said ..." I believe there is federal law that specifically protects PER retirees from improperly run STATE systems." While I am aware of no such law, if one exists, what do you think "protects" means ?

Lastly, you admit that it was a very poor decision to retroactively increase pension factors (via SB400) and to allow "vacation, sick time, and other kinds of built up time to spike their pensions ", but then go on to say that these changes were made by "crooked politicians".

I agree that they were crooked, mostly by agreeing to affirmatively vote for theses increases in exchange for your Union's campaign contributions and election support.

And, since the Public Sector workers were the recipients of the benefits (i.e., the increased pensions & benefits) of this "crooked" deal, why shouldn't Taxpayers demand that which as I advocate for ... to reduce these promised pensions and benefits to the level that likely would have been approved in the absence of that Union/politician collusion ? I'm sure that reduction would be AT LEAST the 50% reduction that I would like to see.
Tough Love -

I would like to point out an area of agreement: FUTURE YEARS can be at a reduced benefit level. Say someone is getting 2% @ 55. That could be changed to 1.7% @ 55, or 2% @ 60 for future years (these are just examples). With police/fire/prison employees it becomes more difficult, as they do not pay into SS, and their ability to stay on the job is reduced by the nature of the work. At the state (California) level, police were changed from 3% @ 50 to 2.5% @ 55 recently. The 3% was completely over the top. The 2.5% @ 55 seems about right since they don't get SS. It could be pushed to age 57 like the fed does with it's police. As someone who worked both fed & state & county, I can tell you that working for the fed is not nearly as physically taxing as working for the state or county.

An area of disagreement: A federal bankruptcy test case. This involves a bit of the history of SS & PER systems. Around the time when SS was created, a lot of states, municipalities said 'no thanks'. The belief was that it could be done cheaper at the local level with a PER system, and that the payout would be better for those retired from said system. The fed came back and said, essentially 'well OK, but you have to have it fully funded'. I believe there is federal law that specifically protects PER retirees from improperly run STATE systems. Don't know for lower level of governments. The PER is ahead of other debt obligations as a result of what happened nearly 80 years ago. Does that mean everything is A-OK, no. Currently, California (at the state level) pays less of a percentage into PERS than 20 or 30 years ago. A lot of people will say 'but it is 300% more than 10 years ago'. Ten years ago CALPERS had such large investment gains that it told the state/counties/cities not to send money. There was benefit to taxpayers there. Since there was nothing going into CALPERS, and no payroll tax, and a lot of govt employees don't get SS - the various forms of government were not even having to meet the minimums that private business is held to. You would think at that time the counties/cities would take all this excess money and create a rainy day fund. NOPE. They spent it on every form of entitlement program they could think of, and made structural deficits going forward. They decided to raise retirement factors on top of that. They even let retiring employees use vacation, sick time, and other kinds of built up time to spike their pensions (done at the county/city level - never allowed at the state level). Now these same counties/cities cry that they are poor. It is not because the employee who filled out the application and took the job - it is because of the crooked politicians. Can we hold these people responsible, instead of the middle class employee? Can we look at the years taxpayers saved money (when PER systems didn't even take in money) as well as when PER systems are raising rates?

It is not all simple, and one-sided. But it is worth acknowledging there is a problem.
The country desperately needs a "test case" whereupon the Federal Bankruptcy Court (and the Federal Supreme Court if necessary) settles the issue of when and under what circumstances (regardless of the State's Constitution, State Contract Law, Property rights augments, and Case law history):
(a) FUTURE service Pension accruals for CURRENT workers can be frozen or reduced, and
(b) PAST service Pension accruals can be reduced for both active and/or retired workers.

The pension/benefit financial mess we are in is a product of the collusion between the Public Sector Unions and our self-serving Elected Representatives trading campaign contributions and election support for favorable votes on pay, pensions, and benefits. The Taxpayers have always been the loser in this corrupt arrangement and it's time to put a stop to it.

With Public Sector workers earning no less in "cash pay" than their Private Sector counterparts, there is ZERO justification for ANY greater pension and benefits, (as well as protections from reduction), let alone the MULTIPLES greater Public Sector pensions and benefits that are universal today.

Key to the significant pension/benefit reductions needed is a Federal declaration that such reductions are in fact legal and the States CANNOT block such changes.

San Bernadino may be that "test case" .... and the Taxpayers salvation.
NothingNewHere -

Have you checked out the site for yourself? I used it, and found it to be quite good, and extremely accurate.

Try it at: http://publicpay.ca.gov/
The data is confusing and ill-organized? Never attribute to malice that which may be explained by government employee incompetence.
Ed and I have had some good debates over the years, I really don't see a problem there. If he wants to tell me that I'm not right on something, I WELCOME it - from him. Don't have to agree with Ed on everything to respect him, which I do.

At any rate, not a very good attempt on your part in trying to start up some trouble. Try harder.

One does have to wonder why someone so concerned with California's financial position is not focused on all the welfare & other entitlement programs that exist in the state - esp when you are clear on the other side of the U.S.
BOPRN, So go ahead and tell the author (Ed Ring) that his assertionse are full of crap. Ed is quite accomplished at putting your ilk in it's place.
Tough Love -

And what did I type that is incorrect? Have you used the site, or are you going to go into your usual attack mode?

I did manage to get a screen grab the other day (before the moderator deleted it) of your admission that this is all just a game to you. Don't want to out your true intentions or who you are for that matter, but I am more than willing to.
The world is wrong but Public Sector Pension "Gravy Train Rider" BOPRN is correct. Surprise surprise.
A year or so ago when Chiang said he was going to do this, the usual crowd said that he never would (and had some choice things to call him). Now that he has, the usual crowd says that it is misleading, although I would bet few have even tried the website (and still have some choice things to call him). I did use the site, and found it to be dead on accurate. Input friends, relatives, myself to see how accurate it would be. Tried the state/city/county links, and they worked without a hitch. Was able to come up with all kinds of reports (and it was kind of fun to mess with). Perhaps there is no letting go of the doom, gloom & general nastiness that certain individuals have, don't know. Do know that this article is a load of bovine defecation - there is absolutely zero doubt about that.
"John Chiang has gone to a lot of trouble to give the public an overwhelming mass of misleading data about how much public servants earn."

A government worker misleading the public about compensation! What a surprise! (sarcasm intended)
Unbelievable. Naturally, the 'journalists' out there won't pick this up - we won't see a "Frontline" or "60 Minutes" piece on this deceptive website, or anything relating to the sins of the government - unless it is told from the Democratic party point of view.

The government of California - any government in the hands of the Democratic Party is engaged in a swindle at the hands of taxpayers - pay enormous wages and benefits to public employees, and in return public employee unions give part of the wages and benefits back to the party. There is a word for this practice - it is called "corruption."

The citizen working in the private sector never has a say about any of this - their interests are unrepresented. And if they leave, it's more to the better since a more compliant population can be imported from the south or overseas.

Somehow this corrupt practice never seems to be worthy of publicity in the Democratically controlled media, even after cities go bankrupt.

There is another word for these practices - it's called "repression." When government adopts confiscatory taxes for the sole purpose of feathering its own nest, those policies are repressive. You say that the taxpayers voted for the confiscatory taxes? But that was as a result of the control over the media by government - it doesn't change a thing.

As for the substance of this article - perhaps someone can use the information available to post a true picture of how much our public "servants" make. However, the situation is such that another word is apt - it's called "reality" and its what happens when you run out of other people's money.

The other issue is this: democracy, our republican form of government cannot co-exist with the new world that the Democrats are creating. Sooner or later Democrats will move to silence those who are not accepting of their new vision of government. When it happens it will happen fast, and the soft tyranny will become a true tyranny.
And a public Sector employee (yes, California state controller John Chiang is a Public Sector employee) obfuscating accurate information (especially the full amount of compensation) surprises you ?
If a corporation published such misleading information in it's 10Q's the CFO would be jailed. The essence of the problem here is that there is no accountability in govt. There needs to be Sarbox-style requirements for all levels of government with Sarbox style penalties for misleading the stakeholder, even after they leave office.
Just another reason why California's future is dismal. When state taxes are increased to fund this, retiring Baby Boomers (who as a group likely have the most assets) will move to other states -- as will companies.

Either that, or the state will have to cut salaries and pension benefits for public employees.

I've lived here for 30 years and have enjoyed it. I'm now working on an "exit plan".