California’s public pensions are breaking the bank(latimes.com)
latimes.com
California’s public pensions are breaking the bank
http://www.latimes.com/projects/la-me-pension-crisis-initiatives/#nt=oft09a-6gp1
116 comments
Pension funds are one of the largest victims of Central Banks after the 2008/2009 financial crisis. Quantitative easing on top of zero/negative interest rate policies has dramatically reduced the risk-free return on capital. Bond yields have collapsed worldwide.
In short, the problem is this: commitments were made when interest rates were higher than now. Interest rates have now stayed far lower for far longer than expected. Meeting those commitments in the recent few years would have required taking more risk than the funds can justify.
In short, the problem is this: commitments were made when interest rates were higher than now. Interest rates have now stayed far lower for far longer than expected. Meeting those commitments in the recent few years would have required taking more risk than the funds can justify.
It's much worse than that. Commitments have been made that could never have been met - and not just in California.
Hard equations are coming home to roost.
Hard equations are coming home to roost.
Facts. The baby boomer generation set up public commitments on the back of the taxpayer, from municipal to federal, that simply cannot be met. On top of that, after inheriting a system that allowed them to get a post-secondary education doing unskilled labor, they sloppily set up incentives that caused their children to inherit mortgage-level debt with horrible employment prospects for a comparable education in their era. Thing is, they are reliant on the people they saddled with this piss-poor situation for continued retirement payments.
Speaking for the municipal aspect: the municipal voters voted for these measures and certainly voted for the mayors and city councilmen who brought these measures into place. Then the cities, under the same politicians, failed to fully fund the pensions they had set up (they are normally required to fund pensions, each year, to a significant level, but the cities postponed the funding).
Years pass and then the cities lament, crying that these pension funds are now undue "public commitments on the back of the taxpayer", such as aswanson says above. IOW cities are trying to screw retirees out of their pensions.
For example, at this very moment Houston, in the name of "Pension Reform", is trying to coax the state to pass a law that would cut the pension of widows and widowers in half!
And that's just part of the cutbacks Houston is asking.
Years pass and then the cities lament, crying that these pension funds are now undue "public commitments on the back of the taxpayer", such as aswanson says above. IOW cities are trying to screw retirees out of their pensions.
For example, at this very moment Houston, in the name of "Pension Reform", is trying to coax the state to pass a law that would cut the pension of widows and widowers in half!
And that's just part of the cutbacks Houston is asking.
The municipal and state governments that brought the measures into place generally operated in an ethically-compromised environment and mathematical fairy land.
The people that voted in the fundamentally-flawed plans are also the ones that are standing to benefit from them as the legislative fixes are rolling in. I sympathize that they have built plans around the expectations of the money being there, but at the same time I think it's pretty unrealistic to expect current taxpayers to pay for unrealistic and underfunded plans.
The people that voted in the fundamentally-flawed plans are also the ones that are standing to benefit from them as the legislative fixes are rolling in. I sympathize that they have built plans around the expectations of the money being there, but at the same time I think it's pretty unrealistic to expect current taxpayers to pay for unrealistic and underfunded plans.
I remember, back in the 90's, going to one of those retirement planning/sales sessions, where they explained how much you would need to invest at what rates to have a good retirement. With the little I knew then about economics/investment, I knew there was no way they were going to be able to deliver the 8-12% annual return they assumed would be required to meet their projections.
So yes, I sympathise with people who allowed themselves to be lied to, i really do, because ultimately this is white collar crime we're talking about - but caveat emptor also applies.
So yes, I sympathise with people who allowed themselves to be lied to, i really do, because ultimately this is white collar crime we're talking about - but caveat emptor also applies.
Most pension systems assume 7% rates of return.
We educate individual investors to believe that they should achieve similar yields in their 401k accounts, why is only "white collar crime" when you need to fulfill the promise?
We educate individual investors to believe that they should achieve similar yields in their 401k accounts, why is only "white collar crime" when you need to fulfill the promise?
Guaranteed 8% rate of return, let alone %12, violates historical data/mathematics. Anyone other than Renaissance Technologies advertising as much needs to be sued.
The average rate of inflation through the 80s was 5.6%
Given that, an expected 8% rate of return isn't unreasonable.
Given that, an expected 8% rate of return isn't unreasonable.
That implies a 2.4 percent rate of real growth in a hyperinflationary era, so assume a 4.4 real rate of return in normal circumstances. That is the number we should be basing projections on, as it correlates more closely to real dollars in the retirement age years. 8-12 percent estimates are bs, and red herrings because they don't relate real returns.
Historic data is not good enough to base a long term policy on. Not without precise risk valuation at least.
No, but it generally makes sense to talk about expected investment return over the rate of inflation. Hence, the raw number is meaningless - a 12% return rate in an environment with inflation of 9% is almost as reasonable as a 3% return rate in an environment with inflation of 0%.
That's one of several things to bear in mind - but it's not a straightforward one - the various causes of high inflation tend to mitigate against matching investment rates.
Leaving that aside - even at the time it seemed ridiculous - so learning 20 years later that the "professionals" involved have essentially bet everybody's future, on projecting those kinds of returns for 40 years...
... because we all understand I hope. When this thing blows up - its not going to be pretty.
Leaving that aside - even at the time it seemed ridiculous - so learning 20 years later that the "professionals" involved have essentially bet everybody's future, on projecting those kinds of returns for 40 years...
... because we all understand I hope. When this thing blows up - its not going to be pretty.
A pension plan is a contract between the municipality and its employees. Like most contracts, you either hold to it or you can be sued, at the least. Expecting to be able to weasel out of paying years later, after employees have retired is certainly a violation of civil law, if not criminal.
The retired employees completed their part of the contract and payment is due in full. They gave up higher levels of income to work at jobs where the pension is guaranteed (cities pay less than private firms, on average). To change the rules once employees have retired and without compensation will result in lawsuits and criminal prosecution, as it should.
WkndTriathlete says: "...it's pretty unrealistic to expect current taxpayers to pay for unrealistic and underfunded plans."
Sorry, that's what taxes are for. And what’s the problem with paying taxes anyway? To live in a city you pay city rates. Paying taxes on a well-managed city budget is one of the best ways to maintain and ensure that your property values increase. But for God’s sake, pay attention to politics and hold leaders accountable!
If you don’t want to pay taxes, then become a “Mountain Man” and move to Montana. Live on a mountaintop w/o roads, sewer, water, hospitals, stores, and cellphones. Or maybe you want your city to go the way of Detroit? You can
– kill your property values,
– call 911 and get nothing, not even a dial tone,
– Burn your own trash,
– Run your own septic system,
– Run your own electric generator,
– Buy a satellite cellphone (no other option – no other service available),
– Drive to another city once a month to stock up on flour, sugar, beans and batteries.
The retired employees completed their part of the contract and payment is due in full. They gave up higher levels of income to work at jobs where the pension is guaranteed (cities pay less than private firms, on average). To change the rules once employees have retired and without compensation will result in lawsuits and criminal prosecution, as it should.
WkndTriathlete says: "...it's pretty unrealistic to expect current taxpayers to pay for unrealistic and underfunded plans."
Sorry, that's what taxes are for. And what’s the problem with paying taxes anyway? To live in a city you pay city rates. Paying taxes on a well-managed city budget is one of the best ways to maintain and ensure that your property values increase. But for God’s sake, pay attention to politics and hold leaders accountable!
If you don’t want to pay taxes, then become a “Mountain Man” and move to Montana. Live on a mountaintop w/o roads, sewer, water, hospitals, stores, and cellphones. Or maybe you want your city to go the way of Detroit? You can
– kill your property values,
– call 911 and get nothing, not even a dial tone,
– Burn your own trash,
– Run your own septic system,
– Run your own electric generator,
– Buy a satellite cellphone (no other option – no other service available),
– Drive to another city once a month to stock up on flour, sugar, beans and batteries.
That's bullshit. States with more responsible governance where pensions were funded are fine.
The problem is that government failed to govern itself. I'm a person with a public pension that is largely funded. By offering that pension, my employer saved significant sums of money compared to paying someone like me a market rate.
The real devil here is the dumb, inflationary fiscal policy where debt is virtually free and nobody can actually save anything.
The problem is that government failed to govern itself. I'm a person with a public pension that is largely funded. By offering that pension, my employer saved significant sums of money compared to paying someone like me a market rate.
The real devil here is the dumb, inflationary fiscal policy where debt is virtually free and nobody can actually save anything.
In even shorter, whoever designed those plans failed to account for the fact that future economic environment may be different from the current one. Despite that being pretty much their only job - otherwise they could just give that money to people to invest for themselves in 401k, IRA, etc. plans. The whole notion of one big pension plan is based on the premise that whoever manages this plan knows what they're doing better - or at least not worse - than non-professional people could, and even than most of people on professional market could. "We didn't predict interest rates could change" doesn't really inspire confidence in that premise.
The worst aspect, though, is that the next step would be to ask for my and other taxpayer's money to fix the botched job the pension managers did. And next worst aspect would be that this request would never be refused, because you can't deny people their money, can you? That means, if they work for the government, if they not, you can take their money as much as you wish, that's why they are called "tax payers".
The worst aspect, though, is that the next step would be to ask for my and other taxpayer's money to fix the botched job the pension managers did. And next worst aspect would be that this request would never be refused, because you can't deny people their money, can you? That means, if they work for the government, if they not, you can take their money as much as you wish, that's why they are called "tax payers".
Pension funds are one of the largest victims of Central Banks after the 2008/2009 financial crisis. Quantitative easing on top of zero/negative interest rate policies has dramatically reduced the risk-free return on capital. Bond yields have collapsed worldwide.
As a layperson, the 2008 financial crisis felt like this to me: Someone shrank the effective value of my savings and earnings by something like half.
As a layperson, the 2008 financial crisis felt like this to me: Someone shrank the effective value of my savings and earnings by something like half.
No argument there, but public employee pension funds have access to a unique resource: they can hold the taxpayers over a bucket to make up for the deficit. In California's case, the difference comes from tax increases and cuts in funding to higher education.
That's an overly simplistic view that assumes that everything else stays constant. If the central bank policies increased the GDP as hypothesized then the overall effect to pension funds would be positive compared to a world where GDP languished at or below recession levels even with higher nominal returns.
This is part of the real reason why California is imposing the new gas tax in the name of infrastructure.
Part of the reason why even reasonable people do not take left's claims of "tax to protect environment" seriously because this is all the money that they can see going to the pockets of politicians and government employees.
Part of the reason why even reasonable people do not take left's claims of "tax to protect environment" seriously because this is all the money that they can see going to the pockets of politicians and government employees.
> This is part of the real reason why California is imposing the new gas tax in the name of infrastructure.
> Part of the reason why even reasonable people do not take left's claims of "tax to protect environment" seriously because this is all the money that they can see going to the pockets of politicians and government employees.
"Hey, I want to be able to rob government employees of the compensation they were contractually promised when they did their jobs."
Color your argument however you want, in whatever political flavor you like, that is essentially what you suggest. I'm really not going to feel guilty if the government taxes you to pay average Americans the pay they agreed too.
Sorry, I'm genuinely not interested in your politics of envy.
Personally, as far as I can tell, for the same job the government would pay me less than I make now. So...I'm really not worried Government employees are being overcompensated.
> Part of the reason why even reasonable people do not take left's claims of "tax to protect environment" seriously because this is all the money that they can see going to the pockets of politicians and government employees.
"Hey, I want to be able to rob government employees of the compensation they were contractually promised when they did their jobs."
Color your argument however you want, in whatever political flavor you like, that is essentially what you suggest. I'm really not going to feel guilty if the government taxes you to pay average Americans the pay they agreed too.
Sorry, I'm genuinely not interested in your politics of envy.
Personally, as far as I can tell, for the same job the government would pay me less than I make now. So...I'm really not worried Government employees are being overcompensated.
>>"Hey, I want to be able to rob government employees of the compensation they were contractually promised when they did their jobs."
Government departments promised each other outrageous compensation and somebody who is coming 30 years and wasn't even present back then is supposed to be skinned to the bone so that grand pa can swing his golf club in Scotland?
[Source:http://www.latimes.com/projects/la-me-el-monte-pensions/]
Who is the one doing the 'robbing' here?
There is limit up to how much you can abuse these things until the next generations call it quits and leave you with nothing.
Government departments promised each other outrageous compensation and somebody who is coming 30 years and wasn't even present back then is supposed to be skinned to the bone so that grand pa can swing his golf club in Scotland?
[Source:http://www.latimes.com/projects/la-me-el-monte-pensions/]
Who is the one doing the 'robbing' here?
There is limit up to how much you can abuse these things until the next generations call it quits and leave you with nothing.
> Government departments promised each other outrageous compensation and somebody who is coming 30 years and wasn't even present back then is supposed to be skinned to the bone so that grand pa can swing his golf club in Scotland?
Okay, so question, why aren't you working as a Government employee due to the outrageous compensation that dwarfs all alternatives?
Okay, so question, why aren't you working as a Government employee due to the outrageous compensation that dwarfs all alternatives?
I don't understand your question.
Did I state the compensation for government employees is more than every other job out there?
My point is you can't award your self a unreasonable pay package and then expect somebody who didn't even sign up to pay for it, pay for it.
Did I state the compensation for government employees is more than every other job out there?
My point is you can't award your self a unreasonable pay package and then expect somebody who didn't even sign up to pay for it, pay for it.
> Did I state the compensation for government employees is more than every other job out there?
Which is an admission that your following sentence is a fiction:
> My point is you can't award your self a unreasonable pay package and then expect somebody who didn't even sign up to pay for it, pay for it.
Government employees aren't overpaid when the people who can get them can be paid more by the private sector in terms of total compensation.
The next problem with your argument is you intend to rob people who agreed to be paid $X for their labor after they kept up their end of the bargain.
The third problem is, if you do that, you'll see a steep decline in police & military who heavily rely on pensions as part of the total compensation package. I suggest robbing your police, military, and other emergency/security forces because you think their compensation is unreasonable is unlikely to be a wise choice if you enjoy a stable society.
Oh btw, it gets better, since in order to do this you have to void a good chunk of legal precedent about employment and will likely create a ton of other unintended, non-obvious consequences.
If you don't like how the government operates, exercise your power to vote rather than attempting to rob people after they upheld their end of the social contract.
Which is an admission that your following sentence is a fiction:
> My point is you can't award your self a unreasonable pay package and then expect somebody who didn't even sign up to pay for it, pay for it.
Government employees aren't overpaid when the people who can get them can be paid more by the private sector in terms of total compensation.
The next problem with your argument is you intend to rob people who agreed to be paid $X for their labor after they kept up their end of the bargain.
The third problem is, if you do that, you'll see a steep decline in police & military who heavily rely on pensions as part of the total compensation package. I suggest robbing your police, military, and other emergency/security forces because you think their compensation is unreasonable is unlikely to be a wise choice if you enjoy a stable society.
Oh btw, it gets better, since in order to do this you have to void a good chunk of legal precedent about employment and will likely create a ton of other unintended, non-obvious consequences.
If you don't like how the government operates, exercise your power to vote rather than attempting to rob people after they upheld their end of the social contract.
Whatever you think of pentions, the politicians are a minuscule portion of the government payroll.
"New projections show the state's annual bill for retirement obligations is expected to reach $11 billion by the time Brown leaves office in January 2019—nearly double what it was eight years earlier." That's the state's "annual bill," i.e., the direct costs taken from the general-fund budget. That number doesn't even include those "unfunded" pension liabilities that according to some estimates top $1 trillion. [1]
That's more than double the $5.2 billion a year the Brown administration hopes to raise from a plan that would boost gas taxes by 12 cents a gallon, raise the vehicle-license fee by $25 to $175 a year (depending on the value of the vehicle), impose a $100 annual fee on electric cars because they don't currently pay gas taxes and include a large hike on diesel fuel. Money is fungible, so if the state overspends on pensions, it has to make it up somewhere else. [2]
[1] http://www.mercurynews.com/2017/01/04/jerry-browns-pension-r...
[2] http://reason.com/blog/2017/04/07/california-road-tax-hike-i...
That's more than double the $5.2 billion a year the Brown administration hopes to raise from a plan that would boost gas taxes by 12 cents a gallon, raise the vehicle-license fee by $25 to $175 a year (depending on the value of the vehicle), impose a $100 annual fee on electric cars because they don't currently pay gas taxes and include a large hike on diesel fuel. Money is fungible, so if the state overspends on pensions, it has to make it up somewhere else. [2]
[1] http://www.mercurynews.com/2017/01/04/jerry-browns-pension-r...
[2] http://reason.com/blog/2017/04/07/california-road-tax-hike-i...
I'm saying the total number of government employees vastly exceeds the number of politicians.
From the article: "In Los Angeles and other cities, [retirement benefits] account for 20% or more of general fund spending."
That is certainly not a minuscule portion.
That is certainly not a minuscule portion.
And what percentage of general fund spending goes to salaries, and salaries of contractors? The other 80%?
Pensions are part of employee salaries. Not budgeting for them is like buying a house, and not budgeting for anything past the first mortgage payment.
Why are we talking about defaulting, or haircutting pensions, instead of defaulting... On any of the other people or companies that the state owes money to?
Pensions are part of employee salaries. Not budgeting for them is like buying a house, and not budgeting for anything past the first mortgage payment.
Why are we talking about defaulting, or haircutting pensions, instead of defaulting... On any of the other people or companies that the state owes money to?
I think the big focus of the article is the "California Rule" that prevents changes to pension commits that have yet to be earned. It's like buying a house and having the real estate market crash. You can renegotiate your property taxes (lowered home value). You can refinance your mortgage.
Changing future pension payment rules is entirely reasonable, as long as your prior work results in pro-rated payouts.
Changing 'future' pension payment rules, where a pension kicks in after 20 years of employment, when you are on year 19, should not fly.
Changing 'future' pension payment rules, where a pension kicks in after 20 years of employment, when you are on year 19, should not fly.
Social security pushes back retirement ages continually. Not an extra year at year 19 of 20, but tacking on 5-10% to everyone's remaining time is reasonable and the govt does it all the time for other entitlements.
I fail to see how social security, which is a national program for all citizens, is any less holy than pensions. Pensions are usually backed by city and state govt which have much shallower pockets.
What I'm saying is if the federal government can cut back social security benefits there's no reason we shouldn't cut future pension benefits
I fail to see how social security, which is a national program for all citizens, is any less holy than pensions. Pensions are usually backed by city and state govt which have much shallower pockets.
What I'm saying is if the federal government can cut back social security benefits there's no reason we shouldn't cut future pension benefits
> Social security pushes back retirement ages continually.
SS is a welfare program. This is fundamentally different from a salary. Welfare programs can, and do change just before, or just after, you become eligible for them. This is fine. This is social programs are supposed to work. (Although, generally, their accounts should not be plundered to fund illegal wars.) There was no contract that you signed when you started paying into SS. It's a tax, which funds a welfare program.
Salaries, on the other hand, are sacred. Pensions aren't social programs. They are deferred salaries. Cutting pensions is a salary clawback.
If you're going to stop paying the pensions you're obligated to, you damn better have declared bankruptcy, and let your creditors - including the pensioners - pick over your carcass.
SS is a welfare program. This is fundamentally different from a salary. Welfare programs can, and do change just before, or just after, you become eligible for them. This is fine. This is social programs are supposed to work. (Although, generally, their accounts should not be plundered to fund illegal wars.) There was no contract that you signed when you started paying into SS. It's a tax, which funds a welfare program.
Salaries, on the other hand, are sacred. Pensions aren't social programs. They are deferred salaries. Cutting pensions is a salary clawback.
If you're going to stop paying the pensions you're obligated to, you damn better have declared bankruptcy, and let your creditors - including the pensioners - pick over your carcass.
Social security is a pension program with contributions made from salaries, and future benefits based on the amount of contributions and age at retirement, as opposed to need.
There are other programs administered by the Social Security Administration (e.g. SSDI) that are welfare programs, but that's not what the previous poster was talking about.
There are other programs administered by the Social Security Administration (e.g. SSDI) that are welfare programs, but that's not what the previous poster was talking about.
Unlike a pension, there is no enumerated entitlement of what you will receive out of SS. You didn't enter any contract when you started making payments. The government could shut it down tomorrow, and it would not be considered a default.
The fact that the payments are structured much like a pension is tangential. For example, nothing stops the feds from restructuring it into flat payments.
The fact that the payments are structured much like a pension is tangential. For example, nothing stops the feds from restructuring it into flat payments.
> there is no enumerated entitlement of what you will receive out of SS
What do you base this statement on? The Federal Government enumerates the exact formula used to determine future social security benefit payments, even for people 40 years away from retirement. Given a known salary scale, a 22 year old can calculate their expected future social security benefit down to the penny. This future benefit is funded by a 12.4% tax/contribution from your salary. It's a % contribution for a defined benefit.
How is that any different than a state or municipal pension?
They are in fact so similar that, in some states, participation in the state's pension plan entirely replaces (rather than compliments) participation in social security.
What do you base this statement on? The Federal Government enumerates the exact formula used to determine future social security benefit payments, even for people 40 years away from retirement. Given a known salary scale, a 22 year old can calculate their expected future social security benefit down to the penny. This future benefit is funded by a 12.4% tax/contribution from your salary. It's a % contribution for a defined benefit.
How is that any different than a state or municipal pension?
They are in fact so similar that, in some states, participation in the state's pension plan entirely replaces (rather than compliments) participation in social security.
surely that figure is for all employees, not the politicians?
I think I confused the question. Politicians' salaries aren't the 20%, yes that is all salary. But part of the article is discussing the corruption going on here where state employees endorse politicians who end up pushing for legislation that pays them lavishly in retirement.
This is what happens when your public sector unions have local and state politicians in their pockets.
Check out public sector salaries in SF sorted by overtime:
http://transparentcalifornia.com/salaries/san-francisco/?&s=...
http://transparentcalifornia.com/salaries/san-francisco/?&s=...
Holy crap. I used to say things like "San Francisco is getting so expensive that essential service workers like teachers, police, and firefighters won't be able to live there." Well, I guess take police off that list: http://transparentcalifornia.com/salaries/search/?q=Police%2...
The overtime amounts are often more than the base salary.
The overtime amounts are often more than the base salary.
Well, that explains housing prices in SF...
This goes for everyone in this thread but please don't only be cynical about this - there's a lot we can do around the margin
- Approve HOME SF - a Katy Tang plan to provide bonuses for dense housing near transit
- Approve the Safai/Breed housing plan, which would require 18% of units to be affordable, vs 28%
- Show up to the Brisbane Baylands meetings and voice our support for a plan that includes 4400 units of housing, vs zero units
- Support SB 35, which would fast track projects that are near transit and include affordable housing
- Support SB 167, which would allow the state to be a lot more aggressive pursuing violators of the Housing Accountability Act.
- Approve HOME SF - a Katy Tang plan to provide bonuses for dense housing near transit
- Approve the Safai/Breed housing plan, which would require 18% of units to be affordable, vs 28%
- Show up to the Brisbane Baylands meetings and voice our support for a plan that includes 4400 units of housing, vs zero units
- Support SB 35, which would fast track projects that are near transit and include affordable housing
- Support SB 167, which would allow the state to be a lot more aggressive pursuing violators of the Housing Accountability Act.
a Katy Tang plan to provide bonuses for dense housing near transit
Whether a development would be profitable has little to do with whether it would be politically viable in San Francisco. In particular areas near transit aren't necessarily zoned for high density. Follow Kim-mai Cutler or go to a SF Yimby newbie meeting to learn more.
My point was typically you don't need to provide bonuses for higher density developments near transit. Developments will naturally become higher density because they have to.
You can't purchase a lot of land and bulldoze it for a 3-story building near a subway station. It's just not profitable. The building will naturally be a high-rise. No "bonuses" needed to induce that.
You can't purchase a lot of land and bulldoze it for a 3-story building near a subway station. It's just not profitable. The building will naturally be a high-rise. No "bonuses" needed to induce that.
[deleted]
http://www.ocregister.com/2016/08/12/the-100k-club-public-re...
21K of $100K+ pensions. I wonder how much i should make to afford 401K contributions large enough to have result equivalent to one of those $300K/year pensions.
21K of $100K+ pensions. I wonder how much i should make to afford 401K contributions large enough to have result equivalent to one of those $300K/year pensions.
Well, lets think about it. The average life expectancy in the US is about 79 years. If we assume a retirement age of 65, that is 14 years of retirement on average. Lets make it 15 for the math.
According to bankrate, you would need to save about $24,000 a year for 40 working years to be able to support $300,000 a year for 15 years of retirement (using the default bankrate settings of 7% returns during pre-retirement years and 4% returns during your retirement years).
That is only 8% of your annual salary (assuming you were making $300,000). That is NOT an unreasonable saving rate for your retirement.
You also have to remember that retirement benefits is a HUGE selling point for government work; they are able to pay WAY below market rates to workers because they have promised this benefit.
Of course, when you are planning your own retirement, you can't just assume you are going to die at exactly 79 years old, so you have to save more. That is one advantage of a pension fund - it averages out the cost for people who die early versus people who die late.
Anyway, bottom line, the pensions aren't ridiculous when you look at them in context. Of course, they were not being properly funded, but that isn't the fault of the people who took them.
According to bankrate, you would need to save about $24,000 a year for 40 working years to be able to support $300,000 a year for 15 years of retirement (using the default bankrate settings of 7% returns during pre-retirement years and 4% returns during your retirement years).
That is only 8% of your annual salary (assuming you were making $300,000). That is NOT an unreasonable saving rate for your retirement.
You also have to remember that retirement benefits is a HUGE selling point for government work; they are able to pay WAY below market rates to workers because they have promised this benefit.
Of course, when you are planning your own retirement, you can't just assume you are going to die at exactly 79 years old, so you have to save more. That is one advantage of a pension fund - it averages out the cost for people who die early versus people who die late.
Anyway, bottom line, the pensions aren't ridiculous when you look at them in context. Of course, they were not being properly funded, but that isn't the fault of the people who took them.
>According to bankrate, you would need to save about $24,000 a year for 40 working years to be able to support $300,000 a year
how could have one saved $24K/year in 1977? I think it was pretty damn good whole salary back then. And it is kind of obvious that $24K yearly savings today wouldn't get you an equivalent of today's $300K/year in 2057.
how could have one saved $24K/year in 1977? I think it was pretty damn good whole salary back then. And it is kind of obvious that $24K yearly savings today wouldn't get you an equivalent of today's $300K/year in 2057.
> Of course, they were not being properly funded, but that isn't the fault of the people who took them.
Yet it is somehow the fault of the taxpayers, who are asked to sacrifice part of their income to make up for it.
Yet it is somehow the fault of the taxpayers, who are asked to sacrifice part of their income to make up for it.
Well, yes, because the taxpayers elected the government who made those choices. Taxpayers are ALWYAS responsible for the choices their government makes.
Can someone explain how pensions are calculated? How do they get so high?
From what I hear in Canada, university professors get some percentage per year of service of their average salary, but it is capped at 75% or something. No professor has $200k annual pension payments.
Also, what is the purpose of such high pension promises? Does the government really have such a high talent retention problem?
From what I hear in Canada, university professors get some percentage per year of service of their average salary, but it is capped at 75% or something. No professor has $200k annual pension payments.
Also, what is the purpose of such high pension promises? Does the government really have such a high talent retention problem?
It depends on the pension (in California, there are a number of big ones.) Here is the calculator for calstrs, the teacher's pension fund:
http://resources.calstrs.com/CalSTRSComResourcesWebUI/Calcul...
I think it is about 2% of your highest salary per year of service (once you hit 60). In other words, if you work 40 years and made $100,000 in your highest paid year, you would get $80,000 (80% of 100k). Some of them take highest 3 year average, or something like that.
The pension promises are absolutely about solving a talent retention problem. They pay way under market, and try to make up for it by offering amazing retirement benefits. If they were funding the pension properly, this wouldn't actually gain anything (since you could just give the employees more money instead). However, the government never funds them properly, and is basically borrowing from the future to retain employees today.
It should be noted, however, that governments aren't the only ones who do this. Detroit motor companies did the same thing (offered amazing pension plans in lieu of more money to keep workers), and also failed to properly fund them. The difference is that auto companies can file bankruptcy and not be obligated for the pensions. Because of this threat, unions were more willing to negotiate a lower pension rate in return for no bankruptcy.
Personally, I think a deal is a deal. If a worker chooses to give up salary in return for a pension, you shouldn't be able to just revoke that when you realize you promised too much.
http://resources.calstrs.com/CalSTRSComResourcesWebUI/Calcul...
I think it is about 2% of your highest salary per year of service (once you hit 60). In other words, if you work 40 years and made $100,000 in your highest paid year, you would get $80,000 (80% of 100k). Some of them take highest 3 year average, or something like that.
The pension promises are absolutely about solving a talent retention problem. They pay way under market, and try to make up for it by offering amazing retirement benefits. If they were funding the pension properly, this wouldn't actually gain anything (since you could just give the employees more money instead). However, the government never funds them properly, and is basically borrowing from the future to retain employees today.
It should be noted, however, that governments aren't the only ones who do this. Detroit motor companies did the same thing (offered amazing pension plans in lieu of more money to keep workers), and also failed to properly fund them. The difference is that auto companies can file bankruptcy and not be obligated for the pensions. Because of this threat, unions were more willing to negotiate a lower pension rate in return for no bankruptcy.
Personally, I think a deal is a deal. If a worker chooses to give up salary in return for a pension, you shouldn't be able to just revoke that when you realize you promised too much.
highest salary per year of service
you shouldn't be able to just revoke that when you realize you promised too much.
See also https://www.city-journal.org/html/pension-fund-ate-californi...
> WHAT? Why not the average? This is crazy.
Inflation. If you work for, say, 30 years at 2% annual inflation, that comes out to about 81% total inflation by the end of it--that makes weighting early years the same as later years completely untenable.
Inflation. If you work for, say, 30 years at 2% annual inflation, that comes out to about 81% total inflation by the end of it--that makes weighting early years the same as later years completely untenable.
Then weight the average by inflation? That's not why they use the maximum ...
> Can someone explain how pensions are calculated? How do they get so high?
It's based on peak earnings, including overtime: http://dailycaller.com/2014/06/20/california-public-employee... So naturally California public employees will rack up huge amounts of overtime in their final year of employment.
> Also, what is the purpose of such high pension promises?
Well funded public sector employee unions donate huge amounts to Democrat politicians and strongly encourage their members to vote for the same. More simply, it's outright corruption.
> Does the government really have such a high talent retention problem?
Based on my visits to the California DMV, no.
It's based on peak earnings, including overtime: http://dailycaller.com/2014/06/20/california-public-employee... So naturally California public employees will rack up huge amounts of overtime in their final year of employment.
> Also, what is the purpose of such high pension promises?
Well funded public sector employee unions donate huge amounts to Democrat politicians and strongly encourage their members to vote for the same. More simply, it's outright corruption.
> Does the government really have such a high talent retention problem?
Based on my visits to the California DMV, no.
>It's based on peak earnings, including overtime: http://dailycaller.com/2014/06/20/california-public-employee....
plus saved vacation and sick days, including carryover from all the previous years. The number of such saved carried over days are usually not capped. As result the last year total may easily double the previous years yearly income. It is called "spiking".
plus saved vacation and sick days, including carryover from all the previous years. The number of such saved carried over days are usually not capped. As result the last year total may easily double the previous years yearly income. It is called "spiking".
It's based on peak earnings, including overtime
I don't think it is possible to contribute enough 'pre-tax' reliably insure a $200K/year retirement income.
Not hard, actually. Suppose you are 25 years old, today. You run your own little software consultancy business, and average $200,000 a year in revenue (before inflation), in perpetuity.
You max your IRA every year ($5500 tax advantaged). You also have a Solo 401K, in which for Tax Year 2017 you can contribute up to $18,000 a year as an employee and a total (including employer -- your business -- contributions) of $54,000 tax-advantaged dollars. We'll ignore "catch up contributions" and the fact these limits increase over time, and make this a round $60,000/year.
Let's assume that, after expenses, averages a 4.75% return over 40 years. Conservative, but let's roll with it. Based on the calculator the SSA provides, your monthly SS benefit is ~$6500 at age 65.
After 40 years, you have ~$6.75M in your tax advantaged accounts. With a conservative withdrawal rate to keep your lifestyle the same, you can have ~$220K in retirement income a year (in today's money before taxes taken into account) w/ SS. However, the problem with that is you'd never draw it down. Even if you adjusted it for inflation, you'd die long before depleting your savings.
You max your IRA every year ($5500 tax advantaged). You also have a Solo 401K, in which for Tax Year 2017 you can contribute up to $18,000 a year as an employee and a total (including employer -- your business -- contributions) of $54,000 tax-advantaged dollars. We'll ignore "catch up contributions" and the fact these limits increase over time, and make this a round $60,000/year.
Let's assume that, after expenses, averages a 4.75% return over 40 years. Conservative, but let's roll with it. Based on the calculator the SSA provides, your monthly SS benefit is ~$6500 at age 65.
After 40 years, you have ~$6.75M in your tax advantaged accounts. With a conservative withdrawal rate to keep your lifestyle the same, you can have ~$220K in retirement income a year (in today's money before taxes taken into account) w/ SS. However, the problem with that is you'd never draw it down. Even if you adjusted it for inflation, you'd die long before depleting your savings.
Probably your whole salary?
And how much less than their private sector counterparts did they make over the course of their career?
Here's an interesting long-form writeup on how CalPERS mismanagement contributed to this situation:
https://www.city-journal.org/html/pension-fund-ate-californi...
https://www.city-journal.org/html/pension-fund-ate-californi...
This demonstrates that ballot initiatives are a poor tool for creating and implementing public policy. When the outcome of a binding statue comes down to the wording, elected legislatures should be given the task. It's part of the reason why the US is set up as a Republic and not a democracy. Even with inevitable gridlock, At least getting folks in the same room helps to eliminate the cognitive biases inherent in us all.
Are the same people that want to break pension contracts the same people who want to break student loan contracts?
Nope, never
Pensions are inherently intergenerational agreements.
I'm not sure why Boomers would expect their children, who are saddled with unprecedented amounts of educational debt and who are priced out of the housing market, to be able to meet that obligation, let alone feel any duty to do so.
I'm not sure why Boomers would expect their children, who are saddled with unprecedented amounts of educational debt and who are priced out of the housing market, to be able to meet that obligation, let alone feel any duty to do so.
Back when I lived in London, I made friends with an old, salty Welshman who had worked as an administrator for the Port of London, before containerized shipping made London as a port eternally obsolete. His last official act on the job, 30 or more years prior, had been to assign himself and his cohort generous pensions and an early retirement (he was in his early 50's at the time). I can't blame the man -- jobs at the port were going away forever, and everybody knew it. But anyway, if the same person cuts the cake and serves it you can bet they'll end up with the biggest piece. Pensions for civil servants often fall into that category.
While we're on the subject of misleading language, let's talk about why this is always labeled as "pension reform" and not what it actually is, "reducing payments", or even better, "reneging on a contract."
I don't understand why it's controversial that California (or any other state) should be legally obligated to pay the pensions they promised to workers. People make long-term decisions based on those promised benefits, and pulling the rug out from under them is unconscionable. And, luckily, in California at least, illegal.
I don't understand why it's controversial that California (or any other state) should be legally obligated to pay the pensions they promised to workers. People make long-term decisions based on those promised benefits, and pulling the rug out from under them is unconscionable. And, luckily, in California at least, illegal.
Ok, that's great, but at a point you simply run out of money. There's nothing ethical about pulling funds out of public schools to pay public pensioners 100k+ pensions.
Politicians bribed unions with promises of payments which could not actually be sustained. That sucks, there need to be checks against that happening, but that doesn't need to be held sacrosanct at the cost of actual services.
There's a reason that the US has a robust bankrupcy court for individuals -- it doesn't matter if you signed a contract for 15% credit card debt; at the point you are out of money and can't pay the bills, there's nothing ethical about keeping someone enslaved to uphold it.
This is the exact same thing, except mostly it's their parents who elected corrupt politicians, so there's even less reason to hold people accountable for the decisions of irresponsible politicians two decades ago.
Politicians bribed unions with promises of payments which could not actually be sustained. That sucks, there need to be checks against that happening, but that doesn't need to be held sacrosanct at the cost of actual services.
There's a reason that the US has a robust bankrupcy court for individuals -- it doesn't matter if you signed a contract for 15% credit card debt; at the point you are out of money and can't pay the bills, there's nothing ethical about keeping someone enslaved to uphold it.
This is the exact same thing, except mostly it's their parents who elected corrupt politicians, so there's even less reason to hold people accountable for the decisions of irresponsible politicians two decades ago.
If the state is unable to pay, then that's not a reason to renege on only these payments - just as in the "robust bankruptcy court for individuals" doesn't mean that you get to skip that one bill that you dislike while all your other assets and creditors are untouched, also if the state of California goes bankrupt, then all outstanding debts are in it together instead of removing pensions while paying other bills in full. The state has a budget surplus, it better start saving it up to pay its future bills.
The fact that their obligations are unfunded is a major problem and borderline accounting fraud - they should start treating it as actual debt, even if suddenly noticing the elephant in the room would actually invoke talks of bankruptcy. Coincidentally, this would also mean that the voters can implement the required changes for future, no matter how scary the wording on the bill sounds.
The fact that their obligations are unfunded is a major problem and borderline accounting fraud - they should start treating it as actual debt, even if suddenly noticing the elephant in the room would actually invoke talks of bankruptcy. Coincidentally, this would also mean that the voters can implement the required changes for future, no matter how scary the wording on the bill sounds.
There's nothing ethical about letting a minority claim the majority of a societies wealth.
You want to fund things? Get Trump to send a bill to Gates, Buffet, Koch's, etc.
Why blame the public system for the mess private capitalism is truly responsible for creating?
You want to fund things? Get Trump to send a bill to Gates, Buffet, Koch's, etc.
Why blame the public system for the mess private capitalism is truly responsible for creating?
What? How did capitalism cause any of this? Politicians promised pensions assuming unrealistic consistent growth in their investments.
These funds stuck trillions of dollars in the stock market, which is exactly how Gates, Buffet, and Koch made their money. The pension funds are still getting massive returns. But that does not stop politicians from promising _even more_ than was possible.
These funds stuck trillions of dollars in the stock market, which is exactly how Gates, Buffet, and Koch made their money. The pension funds are still getting massive returns. But that does not stop politicians from promising _even more_ than was possible.
Capitalism underlies the push for "unrealistic consistent growth in their investments." where "their" in this context primarily means "people who are ready filthy rich."
Capitalists want their investments to grow. Largely at the expense of others.
We'll put the pedal to the metal so the richest can earn more than is necessary. And poo-poo the notion that public workers should get even a smidgen of the same consideration.
Because it won't drive unreasonable growth if we're padding out health plans for the people that do the work.
Capitalists want their investments to grow. Largely at the expense of others.
We'll put the pedal to the metal so the richest can earn more than is necessary. And poo-poo the notion that public workers should get even a smidgen of the same consideration.
Because it won't drive unreasonable growth if we're padding out health plans for the people that do the work.
> I don't understand why it's controversial that California (or any other state) should be legally obligated to pay the pensions they promised to workers.
One reasonable objection is that public pensions are never fully funded at the time they were negotiated with the public sector unions. This is done on purpose to make the cost look lower to get a better total compensation package. They know they will almost certainly be bailed out later. This is fraud.
Public workers should be forced into defined contributions plans like 401-Ks.
One reasonable objection is that public pensions are never fully funded at the time they were negotiated with the public sector unions. This is done on purpose to make the cost look lower to get a better total compensation package. They know they will almost certainly be bailed out later. This is fraud.
Public workers should be forced into defined contributions plans like 401-Ks.
> I don't understand why it's controversial that California (or any other state) should be legally obligated to pay the pensions they promised to workers.
Because the people of California can no longer afford it. It's unfortunate that baby boomers allowed politicians to kick the can down the road by negotiating pensions rather than salaries, but now fiscal reality is settling in. And you want to talk about unconscionable, what they have in effect done is a money transfer from their children to them, since now younger generations have to pay the pensions, while receiving none of the benefits. That's why you're seeing movements like Generation Screwed here in Canada (http://www.generationscrewed.ca/).
Because the people of California can no longer afford it. It's unfortunate that baby boomers allowed politicians to kick the can down the road by negotiating pensions rather than salaries, but now fiscal reality is settling in. And you want to talk about unconscionable, what they have in effect done is a money transfer from their children to them, since now younger generations have to pay the pensions, while receiving none of the benefits. That's why you're seeing movements like Generation Screwed here in Canada (http://www.generationscrewed.ca/).
Baby boomers didn't allow politicians to kick the can down the road, they demanded it. They got politicians of both parties to pander to them.
The baby boom generation makes me think of the "Half a Life" Star Trek episode.
The baby boom generation makes me think of the "Half a Life" Star Trek episode.
Pension issue isn't renegging on past promises. Its because SB 400(passed in 1999) did retroactive increases on pension payments and lowered retirement ages. Undo those changes.
Won't that hurt people who were trusting that promise to be kept? That could have caused people to stay in the same job and not make their own retirement savings or change to a higher paying job for the 2 decades between 1999 and today.
SB400 was passed under promise that it wouldn't need tax payer support. So a promise is being broken either way.
We wouldn't be in the issue if Calpers wasn't terrible at investing. They did really stupid things like invest in the most risky tranche of CDOs during the subprime crisis. Thats not the fault of tax payers.
We wouldn't be in the issue if Calpers wasn't terrible at investing. They did really stupid things like invest in the most risky tranche of CDOs during the subprime crisis. Thats not the fault of tax payers.
The most recent proposal I find reasonable. Keeping currently funded benefits but no guarantee on ones that haven't been given yet. The government keeps raising my minimum social security retirement age, but since I'm far from it that doesn't change my plans much. I don't see how changing future pension benefits is any different.
I understand your argument, and the real problem is that state never should have made those promises.
I understand your argument, and the real problem is that state never should have made those promises.
There's a difference between changing "if you work for us for another 20 years, here's what your pension would be" and "since you worked for us for another 20 years, here's what your pension is". As I understand it from the article, California's constitution prohibits changing how existing public-sectors accrue pension benefits going forward.
This is much more acceptable, IMO. It's the difference between "we're paying you less than you thought we would for work you did" and "we're going to pay you less for work you'll do in the future". There's an unethical opening for convincing people to take a lower compensation now in exchange for the right to earn a higher compensation later and then reneging on it (see also: firing people immediately before a vesting cliff).
This is much more acceptable, IMO. It's the difference between "we're paying you less than you thought we would for work you did" and "we're going to pay you less for work you'll do in the future". There's an unethical opening for convincing people to take a lower compensation now in exchange for the right to earn a higher compensation later and then reneging on it (see also: firing people immediately before a vesting cliff).
Here's why:
https://en.wikipedia.org/wiki/Odious_debt
Private sector unions are essential and should get more protection from the government, but public sector unions don't make any sense to me.
https://en.wikipedia.org/wiki/Odious_debt
Private sector unions are essential and should get more protection from the government, but public sector unions don't make any sense to me.
Why is there any category of worker that you feel doesn't deserve the right to collective bargaining? Why should any group of workers be prevented from organizing for rights and benefits as a group?
This is a really tough question. And I don't think people really want to argue that workers shouldn't have the ability to form groups and collectively bargain.
To me, the current status isn't as simple as that. The current status that I see is that public pensions have outsized control over government spending, which means you can't just think of these unions in these simple happy terms.
It also seems perverse to many private sector workers that public workers, who are unionized, pay dues to the unions, which lobby the government for more benefits. Essentially the government is paying people to lobby against itself. Private unions don't have this conflict of interest, their funding is based entirely on profits based on the market.
To me, the current status isn't as simple as that. The current status that I see is that public pensions have outsized control over government spending, which means you can't just think of these unions in these simple happy terms.
It also seems perverse to many private sector workers that public workers, who are unionized, pay dues to the unions, which lobby the government for more benefits. Essentially the government is paying people to lobby against itself. Private unions don't have this conflict of interest, their funding is based entirely on profits based on the market.
I can tell you why I think so. When private sector unions negotiate an impossible deal with their employer, the employer goes bankrupt. When public sector unions negotiate an impossible deal, we all end up paying more taxes to make it possible.
In the US, the federal and state governments are functionally and legally unable to undergo bankruptcy. Although municipal governments can technically go bankrupt, only five cities have done it since the Great Recession, and none of those bankruptcies actually resulted in significant debt shedding. In that same timeframe, hundreds of thousands of businesses went through bankruptcy.
In the US, the federal and state governments are functionally and legally unable to undergo bankruptcy. Although municipal governments can technically go bankrupt, only five cities have done it since the Great Recession, and none of those bankruptcies actually resulted in significant debt shedding. In that same timeframe, hundreds of thousands of businesses went through bankruptcy.
The suggestion is not that workers don't deserve the right to collective bargaining. The suggestion is that management typically has insufficient incentive to negotiate aggressively for efficient, sustainable labor contracts. It can yield results such as BART's overtime rules [1].
[1]:http://www.mercurynews.com/2016/11/02/bart-janitors-whopping...
[1]:http://www.mercurynews.com/2016/11/02/bart-janitors-whopping...
Perhaps a solution to this is to allow public sector unions, but to require the general population ratify it.
I'm sympathetic to the parent comment. All workers should [be allowed to unionize]. But public sector unions are dramatically more effective. I don't know enough economics to convincingly argue it but this is what worries me:
1. Privatization has a terrible track record, but it gains steam when the government is hamstrung by the labor-cost differential.
2. Governments are paying social democrat labor costs, while taking in neoliberal revenues. This makes nice things look inordinately expensive.
3. Jealousy in the private sector fosters conservatism / lazy govt worker stereotypes.
...
Basically long term the private sector unions undermine their own cause.
Once again, if you have a bunch of short-sited actors (c.f. financialization of business) you better be damn well they reach some equilibrium.
1. Privatization has a terrible track record, but it gains steam when the government is hamstrung by the labor-cost differential.
2. Governments are paying social democrat labor costs, while taking in neoliberal revenues. This makes nice things look inordinately expensive.
3. Jealousy in the private sector fosters conservatism / lazy govt worker stereotypes.
...
Basically long term the private sector unions undermine their own cause.
Once again, if you have a bunch of short-sited actors (c.f. financialization of business) you better be damn well they reach some equilibrium.
These workers are not required to work for the public. But public workers do have a duty to work in the most efficient method possible for the public. If that means no pension or less pension, that is the deal. I don't support pulling pensions that have already been promised, though. That's nothing but breaking a contract.
Edit: To clarify first sentence, I mean that they do not have to take or hold these jobs.
Edit: To clarify first sentence, I mean that they do not have to take or hold these jobs.
That's true. But it's also true that contracts are subject to renegotiation in the case of bankruptcy. When we make financial deals we typically assume some of the risk of our financial partners.
Why consider renegotiating pensions, instead of all the other agreements with creditors?
Did the state, or any city, declare bankruptcy?
No. States (currently) cannot declare bankruptcy.
A city certainly can, and they have, e.g. San Bernardino, Stockton, Detroit.
A city certainly can, and they have, e.g. San Bernardino, Stockton, Detroit.
On the flip side, even the existence of pensions is amoral. Promising the funds of future generations, which may never materializes, condems citizens for decades of wasted spending.
Just look at San Jose. Just look at Social Security. It is hard to identify these liabilities as working the way they were intended. And what do the people gain from them? Overpaid cops?
Just look at San Jose. Just look at Social Security. It is hard to identify these liabilities as working the way they were intended. And what do the people gain from them? Overpaid cops?
And yet the Canada Pension Plan is fully funded[0] and in no danger. California's problem is over-promising and mismanaging.
0 - http://www.osfi-bsif.gc.ca/Eng/oca-bac/as-ea/Pages/ascpp.asp...
0 - http://www.osfi-bsif.gc.ca/Eng/oca-bac/as-ea/Pages/ascpp.asp...
I get angry whenever people use the words "fully funded" to describe CPP. On one hand it's true--but it's also very misleading.
After considering investment returns/time value of money/"net present value" of contributions:
If you were a baby boomer, you'll get ~2x what you put in.
If you were born in the 80's, you'll get half what you put in.
So yes, they "fixed" CPP by changing it so that younger people are legally obligated to "invest" their money in a pension fund that returns half of what it should return based on the contributions younger people are making.
I think CPP is in danger. The danger is that someone will create a clear enough explanation of how CPP was "fixed" and young people will decide that there is no reason for them to allow being screwed the way CPP does.
After considering investment returns/time value of money/"net present value" of contributions:
If you were a baby boomer, you'll get ~2x what you put in.
If you were born in the 80's, you'll get half what you put in.
So yes, they "fixed" CPP by changing it so that younger people are legally obligated to "invest" their money in a pension fund that returns half of what it should return based on the contributions younger people are making.
I think CPP is in danger. The danger is that someone will create a clear enough explanation of how CPP was "fixed" and young people will decide that there is no reason for them to allow being screwed the way CPP does.
Agreed.
Pensions, done right, are nothing of the sort. You commit present funds to secure future payments. Social security, which is very much the opposite, has issues as a result.
(I assume you meant immoral, not amoral.)
(I assume you meant immoral, not amoral.)
Are you unaware of what people gain from Social Security?
[deleted]
Why do people even need these level of pensions? They're very substantial if you consider many of these people will have paid off their mortgage by this time, and housing is the only really exploding cost for people recently (apart from healthcare but that'll be covered under Medicare).
The answer that covers many cases is: they otherwise have no retirement.
When I worked for a state university, in IT as a senior DBA, I earned half what private sector friends and professional acquaintances earned.
The story was something like "well, we can't afford to pay you enough to save for yourself, but we'll make sure there's a decent retirement to draw from for you."
The problem is, after the housing bubble, and with low-interest rates, the investment methods they had relied on haven't kept up.
Not saying this covers the more extravagant pay outs. But public workers on the whole have largely been shorted up front in exchange for a decent retirement.
When I worked for a state university, in IT as a senior DBA, I earned half what private sector friends and professional acquaintances earned.
The story was something like "well, we can't afford to pay you enough to save for yourself, but we'll make sure there's a decent retirement to draw from for you."
The problem is, after the housing bubble, and with low-interest rates, the investment methods they had relied on haven't kept up.
Not saying this covers the more extravagant pay outs. But public workers on the whole have largely been shorted up front in exchange for a decent retirement.
Yeah, that's basically the deal: crap job/salary now, cushy retirement later.
How much is the average pension?
According to CalPERS https://www.calpers.ca.gov/docs/forms-publications/facts-at-... it's $32k/yr, which is hardly extravagant.
But that of course includes a lot of people who have spent little time accruing benefits.
According to CalPERS https://www.calpers.ca.gov/docs/forms-publications/facts-at-... it's $32k/yr, which is hardly extravagant.
But that of course includes a lot of people who have spent little time accruing benefits.
[deleted]
Arguing for public pension reductions is a bit like arguing for your employer clawing back your salary, after you stopped working for them.
Most public jobs pay far less then private sector jobs. Pensions are one of the reasons behind it. They are part of your compensation package, not some communist largesse.
Most public jobs pay far less then private sector jobs. Pensions are one of the reasons behind it. They are part of your compensation package, not some communist largesse.
This is a common misconception. You may be surprised by the numbers: http://transparentcalifornia.com/salaries/san-francisco/?&s=...
The people at the top of that list are in executive positions... In the most expensive metro area in the country.
Middle managers in valley firms make more.
Middle managers in valley firms make more.
The one that focused on El Monte was particularly discouraging. http://www.latimes.com/projects/la-me-el-monte-pensions/ A former city manager with a $250K pension rationalizes with: “I have to admit that we made the mistake back then, and I have to admit that I make too much money now, but what can I do?”