CA: When bills come due for pension-spiking (TANSTAAFL)

OC Register ^ | 1/2/05 | Op/Ed

[NormsRevenge]

'TANSTAAFL," an acronym popularized by Robert Heinlein's classic libertarian novel "The Moon Is a Harsh Mistress," means, "There ain't no such thing as a free lunch." It's one of life's most basic lessons, but, unfortunately, its message has been lost on public employee unions and the politicians who do their bidding.

Through aggressive political behavior, public-sector unions have not only pushed public-sector salaries above comparable salaries in the private sector, but they have achieved astounding pension plans for their members.

Firefighters and police officers in Orange County can earn more than $100,000 a year, and they can receive 100 percent of their final pay in guaranteed pensions for the rest of their lives if they work a little more than 33 years. The county recently spiked pensions for all other county employees, so they can retire at age 55 with 81 percent of their pay ... for life.

This is unsustainable over the long run. There ain't no free lunch. As the bills come due when the pension plans' rosy investment scenarios don't pan out, there are essentially three ways to pick up the tab:

First, other government services can be cut.

Second, debt can be floated.

Third, taxes can be raised.

The Orange County retirement spikes will probably not be felt for a few years, but county residents can look just south to see what's coming. The city of San Diego is undergoing a huge fiscal crisis sparked by overpromises on pensions, leaving a $1.2 billion pension deficit. It has chosen the first method - cutting services - to deal with the mess.

--snip--

Governments are notorious for ignoring their core responsibilities, especially infrastructure-related activities that are hard to see (sewer construction), while they make promises (pension spikes) that pay political dividends. But, again, the bill always comes due.

[Maria S]

Isn't this kind of the way government employees' benefits work? Do government employees pay into social security or have their own retirement program? Do they have their own medical group or do they receive medicare when 65?

I've never been clear about how they are different than private citizens.

[dr huer]

Maybe greenspan will help the Orange County politicians out with lots more inflation.

[exnavychick]

Well, I can't speak for GS types, but as an ex military person, I can tell you that I paid SS and Medicare taxes, and I also had TSP available to me instead of a regular pension, if I had decided to do my full twenty years. Whether or not I could draw a pension and SS, I don't know.

[John Jorsett]

Whether or not I could draw a pension and SS, I don't know.

Unless things have changed in recent years, the answer is yes. My late father-in-law got a military pension, a pension from the phone company where he worked post-military, and Social Security. Not bad.

[exnavychick]

Not a bad deal if you can get it! I'm sure I'll get flamed for that one. :)

[kitty_wilson_esquire]

Sadly, City of San Diego Employees do not contribute to the Social Security Benefits program and as City employees will not enjoy the security provided in their later years from Social Security Program features. Unless they have prior or later contributions. Read on, please!

At the City of San Diego they do not pay into Social Security. They have a Supplemental Savings Program (SPSP)that matches the employee contribution with a City contribution up approx 3.5% for a total of 6+% of paycheck gross income into SPSP.

It gets better...

The City pays the employee's contribution (up to 13% per year depending upon age and length of time in City employment) into the City Employees Retirement Savings (CERS) and after 10 years of City employment the employee becomes vested for a life time Defined income benefit after age 62. OR, after 20 years of city employment and at age 55 he or she becomes vested for a life time defined income benefit. It is around 2.25% per year of service (20 Years * 2.25% = 45% of their highest years salary. $100,000 annual salary times 45% is $45,000 for life.)

Oh, but it gets even better...

An employee can purchase "Air Time" of up to 5 years to increase the numbers of years that the benefit is calculated by. (20 years worked + 5 Years air time = 25 years * 2.25% = 56.25% or in the case of the $100,000 a year salary $56,250.) I'm not good at math so correct me if I am wrong.

It gets even better...

The employee contributes into a 401(k) program.

It gets even better...

The employee contributes into a 457 program.


It gets even better...

After 20 years with the City and at age 55 the employee qualifies for "free" medical insurance for life. Free to the employee, but not free to the taxpayer/ratepayer.


And, yes, it gets even better...


After at age 55 with 20 years of City employment, the employee can enter the Deferred Retirement Option Program (DROP) AND receive their retirement check in a "special" trust retirement account for the next five (5) years while they remain active city employees who are receiving their hard earned paychecks. (That would be $56,250 * 5 years or an extra $281,000) on the day the employee retires.

And it gets even better...

All money in the City Employees Retirement System earns at the rate of 8% come rain or shine. ($281,000 * .08 = $22480 per year. Oh yes, that would be $56,250 plus $22,480 or $78,750 a year for the rest of the employee's life. Plus "free" medical/dental benefits, a 401K savings account, a SPSP savings account, and a 457 savings account.) Who needs Social Security?


And YES, it gets even better...

They live in sunny San Diego, California.


Howard Jarvis just rolled over in his grave and is trying to bust out and lead a 2nd Proposition 13 revolt in the State of California. To this point, he's been beaten by the same system of Municipal Windmills that were churning up private sector funds for local government folly in 1974-1978 with out any accountability.

[MonroeDNA]

Socialism at work.

When the taxpayers all flee SD, it's gonna be funny to watch.

[Lancey Howard]

When the taxpayers all flee SD, it's gonna be funny to watch.

Hilarious!! There will be implosions like this all over California and in other parts of the country as well - - mainly in the big, blue, concentrated parasite nests (cities).

And this is where we taxpayers need to be extremely vigilant.... As soon as these sick scumbags come after OUR money for a bailout (and you KNOW they eventually will), we need to be ready to lock and loa..... get really, really irate.

[Little Bill]

My sister just retired at 55 with 80% of he final years earnings, about 60K a year w/full medical. Sweet heart deal with the teachers Union so that our commisars could borrow from the Teachers retirement fund for the Big Dig.

[calcowgirl]

Firefighters and police officers in Orange County can earn more than $100,000 a year, and they can receive 100 percent of their final pay in guaranteed pensions for the rest of their lives if they work a little more than 33 years.

Amazing! This is so out of whack with the private sector. Our public "servants" sure get sweet benefits.

[jimtorr]

Do government employees pay into social security or have their own retirement program? Do they have their own medical group or do they receive medicare when 65?

The answer to your question is, generally, yes, all of the above. Of course, I do as well, and I work in the corporate world.

[Lancey Howard]

I'm in private business. Self-employed. When I retire, I hope I have a lot of equity in my house. I'd like to help my kids get on the government parasite bandwagon, with the great pay and the lifetime bennies and plenty of days off, etc., but I'm not "connected".

[jrp]

Nice. The retiree health care benefit alone is huge. My brother works for the state of CA and has similar benefits. It's completely outrageous.

[staytrue]

"There ain't no such thing as a free lunch." It's one of life's most basic lessons

Yes there is. It is social security pay as you go. Generation 1 pays nothing and gets benefits (free lunch) from generation 2. Generation 2 pays in and gets benefits from generation 3.

Everyone gets paid except the last generation. But seriously, if there is a last generation, do you think they give a fxxx about losing ssi benefits. So the first generation can get one free lunch.