Speaking of those California pensions

You almost got it right.

The California Foundation for Fiscal Responsibility need to do some fact checking:

Public employees already contribute 5% of each paycheck to their pension plan.

Workers eligible for social security don't qualify for the same pension rates as those not eligible (the difference isn't huge, but they are different.)

Sick pay works out to ~2% for every 2,000 hours that isn't used. Trivial.

During the "fat" years when the stock market was booming, the state and local governments stopped making payments to CALPERS and spent the money elsewhere. Now that investment have fallen, they are all crying, "poor me!"

Calpers= Trough feeders

jim wrote:

You almost got it right.
Public employees already contribute 5% of each paycheck to their pension plan.

Baloney, most contribute NOTHING, the muni "picks up" the employees contribution.
And cry me a river with a WHOPPING 5% contribution, for trough feeders who retire at age 50 with pensions more than what they made that 5% doesn't even cover 1% of the real costs.
Jig is up trough feeder, deal with it

Thankfully I have a cal pers retirement and I am able to apply for social security, though I will not get the full amount due to my fat calpers retirement but gee, things are really great for me!! Thanks California, the greatest state!!!

Joan King wrote:

Calpers= Trough feeders

To say "public employees pay 5% of their pay into their pension fund" may be accurate - in some cases - but it misses the point. CalPERS has enjoyed excellent annual returns for several decades because (1) in the 1980's stocks were undervalued, and experienced higher than normal gains for about 15 years to get back to normal valuations,(2) in the 1990's and up until 2007 stocks continued to appreciate at higher than normal rates and became overvalued because of the internet bubble, followed by the real estate bubble, and (3) in the early days, CalPERS operated a relatively small fund, but now CalPERS and the other public employee pension funds (combined) manage well over a trillion in assets, and are the biggest single source of new equity investments. A small fund can, theoretically, outperform the market forever, but a fund that controls hundreds of billions in assets cannot. It is too big.

For these reasons, CalPERS officials are being disingenuous when they suggest that their fund will rebound and that their fund can earn - adjusting for inflation - returns of 8% per year or more. The sustainable rate of economic growth for the global economy in which CalPERS is invested is the rate at which their fund will appreciate, because economic growth enables growth of corporate cash flows, which are the only ultimate determinants of stock values. CalPERS should expect a 4% annual return, adjusting for inflation, at best in the coming years. Less for the next several years, as stocks return to normal values from their current inflated values.

With all this in mind, a 5% employee contribution is pretty small potatoes. Using CalPERS current inflated, over-optimistic, unrealistic estimates of 8% fund growth per year, it is necessary on average to put 16% of salary into a fund each year to guarantee pension solvency. This means the employee pays 5%, and the taxpayers pay 11%. But if pension funds DON'T earn 8% per year, but instead only earn 4%, which is realistic, it is necessary to put 25% of salary or more into a fund each year to guarantee the same benefits in retirement. This is the painful financial reality you face. When one applies a realistic rate of expected growth to CalPERS, i.e., 4% per year, CalPERS is totally, tragically insolvent. Your 5% is a drop in the bucket. It may seem like a meaningful contribution to you, but actually it is nowhere near what is necessary for you to get what you've been promised in retirement. Deal with it.

"That's the group of retired government employees who get six-digit or bigger pensions. It's a small group, by CalPERS standards - just 5,100 out of 500,000 retirees. And of the total number, half receive relatively modest pensions of $16,900 or less."

To quote the 1980s band "Talking Heads," "Same as it ever was." In the private sector, the CEO's and vice presidents get millions and millions of dollars in stock options and perks in retirement. The average Joe gets a 401(k) which has an average worth of around $50k. By the time average Joe retires, he buys an immediate annuity with his 401(k) and receives a munificient $600 a month per every $100,000, according to www.immediateannuities.com . Woo-'efing-hoo!

The government CAO's, and assistant CAOs will get their names published on the "$100,000 Club" roster while half of the average workers will limp by with $16,900 in today's dollars. Better than the private sector? Yes. Living rich? No. Not a while lot of difference between the public and private sector it looks like when it comes to retirement benefits...the rich get richer and the "average Joe" gets the crumbs. OMG! I'm starting to sound like Karl Marx! LOL!

Jack Strong quick apply facts and logic to your statements, you might get yelled at around here.

Everything you said is correct. I would like to add that the 100K club may only be 5100 now, and that is only CALPERS participants not including the large municipalities that have their own insolvent funds, but is is growing at a exponential rate.

As boomers start retiring in greater numbers with larger salaries and pensions calculation formulas, courtesy of Gray Davis, the number will skyrocket. Public employees of today are paid far better than in generations past on a real valuation. As the older retirees die off with their small pension checks and the new one retire, the tsunami will curl over and drown us all.

Here are some more ways to help fix the atrocious public employees pension mess:

Stop counting overtime pay in the base salaries used to calculate public employees pensions

Outlaw giving public employees retirement credits for partial years worked.

Speaking as a retired "misc" CA State employee - mid-management and retired at age 55 - I now receive about 65% of what I made while working. I feel I earned it... I worked hard for 30 years and my pension is by no means extravagant. Yes, I retired relatively young at 55, but my benefits were reduced proportionately. And even though I thankfully have medical insurance, I still have to contend with the prospect of rising costs on a fixed income. I agree that things have to change if the pension fund is non-sustainable, however, I am concerned with ensuring that promises on which many of us have made financial/life decisions be upheld. For example, I don't want to see my health benefit premiums go through the roof. There are other ways to find the money, such as some cited in your article. I am glad that your recommendations don't suggest taking away from those of us who were promised pensions and played by the rules to get them.

runthenumbers wrote:

Jack Strong quick apply facts and logic to your statements, you might get yelled at around here.
Everything you said is correct. I would like to add that the 100K club may only be 5100 now, and that is only CALPERS participants not including the large municipalities that have their own insolvent funds, but is is growing at a exponential rate.

The fact is the 6 figure pensions apply to 1% of retirees, but accounts for 7% of Calpers expenses, and as stated is growing exponentially.

In addition, the average ROI for Calpers the last 10 years is just 2.41%, the 8% ROI is a joke-and will never be met.

Reader wrote:

I agree that things have to change if the pension fund is non-sustainable, however, I am concerned with ensuring that promises on which many of us have made financial/life decisions be upheld. For example, I don't want to see my health benefit premiums go through the roof. There are other ways to find the money, such as some cited in your article. I am glad that your recommendations don't suggest taking away from those of us who were promised pensions and played by the rules to get them.

You didn't "earn" your pension or "play by the rules".

You were gifted 50% retroactive pension increases BY BRIBING ELECTED OFFICIALS-SEE sb400 passed in 1999.

Another trough feeder whopper.

Joan,

If I was gifted a 50% retroactive pension increase in 1999, no one told me and I'm not getting the money.

Critics are irate about the $100+K club; they repeat the cry about retirees at age 50 receiving 100+% of their base pay in retirement. That's a very unusual situation; those retirees have to be public safety officers whose municipalities negociated 3% per year at age 50 retirement compensation packages with the unions. The vast majority of state employees qualify for 2% per year at age 55 and much less if they retire before that.

Don't get me wrong. I see no problem in a pension cap or adjustments to keep the system solvent, but the blame for the mess can be laid at the feet of the munis that gave away the store with promises of future compensation that have now come home to roost.

I agree with some of what you recommend, but you miss the underlying reasons some of these "enhancements" were made. Ronald Reagan signed the bill approving accumulated sick leave toward retirement for state employees as a way of encouraging employees to use their sick leave only when they are sick. It was viewed as a win-win. At most an employee might rack up a year's worth of credit over a 30 year career. That pays off by more time on the job and is an inexpensive benefit. Vacation time isn't a widely offered retirement credit. Maybe for some but definitely not all.

There is fuzzy thinking about the additional benefits for safety retirement. It was never conceived of as a benefit for hazardous work as you indicate. It was an inducement to get people out of the workforce early to avoid more expensive disability retirement. Guys (and gals) get injured a lot easier and sustain more drastic injuries fighting fires, carrying bodies or beating up suspects after they turn 50. They just don't heal as fast and so the agencies have shown they save the taxpayers money by retiring them early instead of retiring them "too late" to avoid the costly disability retirement.

How much people pay toward their retirement is certainly a legitimate discussion. It's the discussion about paying a private sector employee $100,000 salary with no benefits or paying someone to do the same work $60,000 with benefits. In short, you must look at the entire picture to know what is fair. In the end, we should all be thinking about what is a fair and decent retirement scheme for everyone, in and out of government. How low do we set the bar for people in retirement and how do we best finance something better than forcing anyone to eat cat food or collect cans when they retire?

Joan King wrote:

<quoted text>
Baloney, most contribute NOTHING, the muni "picks up" the employees contribution.
And cry me a river with a WHOPPING 5% contribution, for trough feeders who retire at age 50 with pensions more than what they made that 5% doesn't even cover 1% of the real costs.
Jig is up trough feeder, deal with it

Wow, menopause hit you pretty hard, eh?

Joan King wrote:

<quoted text>
You didn't "earn" your pension or "play by the rules".
You were gifted 50% retroactive pension increases BY BRIBING ELECTED OFFICIALS-SEE sb400 passed in 1999.
Another trough feeder whopper.

When I went to work for the State government in my 20s, I was informed about the pension system and anticipated retirement at some point. How wacky of me. I worked for 30 years and then retired. Wow, what a schemer I am. I'm concerned about the pension fund remaining solvent enough so that my health benefit premiums don't rise to insane levels. Gee, I am so greedy.

You seem to have an issue with pensions in general. I am a "trough feeder" to you because I was smart enough to provide for my future. I'm sure you think I did nothing productive for 30 years but merely sat at a desk and counted my gold coins along with all of the other government employees, while we thumbed our noses at the public we were ostensibly hired to serve.

Grow up, Joan. And as for 1999, if you have wiretaps of all of my salacious activities that year, I hope you have some luck selling them to Lifetime.

Just_The_Facts_Maam wrote:

There is fuzzy thinking about the additional benefits for safety retirement. It was never conceived of as a benefit for hazardous work as you indicate. It was an inducement to get people out of the workforce early to avoid more expensive disability retirement.

I agreed with everything you wrote, although as someone who was in HR for years with the State, I definitely saw disability retirement abuse. Safety employees actually "time" and plan their safety retirement date. It's more common than the pattern of injury=retirement. What I saw more often was someone's "back injury" suddenly meriting a disability retirement, when most financially optimal for the employee. It saddened me to see that kind of abuse. And for the record, I am speaking about the period in my career when I worked at CDF.