How Much Do CalPERS Retirees Really Make?

INTRODUCTION

The pay and benefits of public employees is a discussion of increasing relevance to taxpayers. As noted in a CPPC study published earlier this month “How Much Do California’s State, City and County Workers Really Make?,” in California, personnel costs are estimated to consume 40% of total city budgets, 41% of the state budget for direct operations, and 52% of county budgets. In many cities and counties the percentage is much higher. And these averages don’t include personnel costs for outside contractors, nor do they include payments on debt that is directly related to personnel costs, such as pension obligation bonds.

Meanwhile, even when budgets are balanced, as may be the case this fiscal year at least for the State government, there is an overhang of debt obligations facing California’s state and local governments that are only manageable as long as interest rates remain relatively low. Another CPPC study published in 2013 entitled “Calculating California’s Total State and Local Government Debt,” estimated California’s total state and local bond debt at $382.9 billion as of June 30, 2012. That same study reported California’s officially recognized state and local unfunded obligations for retirement health insurance and pension obligations at $265.1 billion. Using more conservative assumptions regarding pension fund performance, the study estimated these retirement obligations on the part of California’s state and local governments could increase by an additional $389.8 billion. In all, it is quite likely that California’s taxpayers currently owe over $1.0 trillion in total debt and unfunded retirement obligations incurred by state and local government, and most of that is for retirement benefits for state and local government employees.

In this environment it is important to present factual information relating to public sector compensation. With respect to retirement benefits, it is helpful to present complete and accurate aggregate data, in order for policymakers and taxpayers to determine whether or not current benefit formulas are fair and financially sustainable. This study analyzes data from CalPERS, using nearly a half-million records obtained from CalPERS for 2012. In particular, this study presents data showing, by year of retirement, what the average pension benefits were in 2012. The study then normalizes these benefits to account for full careers using two benchmarks – the public sector “full career” expectation of 30 years, and the private sector “full career” expectation of 43 years.

*   *   *

METHODS AND ASSUMPTIONS TO ACQUIRE DATA

The analysis and charts developed for this study can be evaluated by downloading the following spreadsheet. Please note the file size is 23 MB.

CalPERS-2012_Analysis_normalized-pensions-by-year-of-retirement.xlxs

The source data was acquired from the website www.TransparentCalifornia.com, an online resource produced through a joint-venture involving the California Policy Center and the Nevada Policy Research Institute. Since the focus in this study involves aggregate data, the names of individual participants have been removed from the spreadsheet.

Because the information provided by CalPERS included “year of retirement” and “years of service,” it is possible to normalize the information to produce “full career” equivalent pensions. It is vital to make this analysis, because no statistic representing average pensions can be evaluated apart from knowing how long most participants actually worked. It would be analogous to saying that an active worker only was paid $100 for a day’s work, without knowing how many hours they worked. Did they work ten hours and earn $10 per hour, or did they only work one hour and earn $100 per hour? Without looking at how many years participants worked to earn their pensions, we cannot even begin to have a productive discussion as to whether or these pensions are fair and appropriate or not.

From a standpoint of financial sustainability it is also vital to know how many years of service the average pensioner logged. Using the payroll analogy again, if a person only worked one hour in a day and made $100, and the employer needed someone at that post for ten hours, than the employer cost was actually $1,000 per day, whereas if that person worked a ten hour day and made $100, then the employer cost was only $100. This is precisely what is at stake when evaluating the overall cost to taxpayers of public sector pensions. For example, if the average years of service for a pensioner is only 20 years, and a private sector career is actually 40 years, then the taxpayer is essentially paying for two pensions for each position that would have been filled by one person working 40 years.

*   *   *

AVERAGE LENGTH OF SERVICE AND AVERAGE PENSION – TOTAL POOL OF PARTICIPANTS

In Table 1 it can be seen that nearly a half-million retirees collected pension benefits through CalPERS during 2012, and that the average pension was $30,456 during that year. This average is consistent with the averages frequently cited by spokespersons for CalPERS and public sector unions representing CalPERS participants. But the average CalPERS retiree worked for 19.93 years. It is not reasonable to suggest that someone who has only worked half the duration of a normal career should expect a retirement benefit that might be more appropriate for a full career. And it is impossible to discuss, much less determine, whether or not CalPERS retirement benefits are appropriate, without taking into account how long a retiree has worked in order to earn their retirement benefit.

Table 1  –  Basic CalPERS Data, 2012

20140212_CalPERS_normalized-pensions_Table01The next table, below, depicts how much these overall average pension amounts would increase if the retiree pool had turned in an average “years of service” of 30 years, which is a typical duration to use when considering public sector careers, as well as 43 years, which is typical for any private sector worker who hopes to receive the full Social Security benefit.

These calculations are made by dividing the average annual pension for a CalPERS participant in 2012, $30,456, by the average years of service, 19.93. The result, $1,528, is the amount the average CalPERS retiree accrued in annual pension benefits for each year they worked during their careers. This amount is multiplied by 30 to show what a current CalPERS retiree could expect, on average, if they had worked 30 years; $45,841.  This amount is multiplied by 43 to show what a current CalPERS retiree could expect, on average, if they had worked 43 years; $65,705.

Table 2  –  CalPERS Average Pensions Assuming Full Careers

20140212_CalPERS_normalized-pensions_Table02Just as when considering current compensation for public employees, total compensation – direct pay plus employer paid benefits – is the only truly accurate measurement of how much they make, when considering retirement pensions for retired public employees, pensions adjusted to show what they would have been if the recipient had spent their entire career working and paying into the pension system, i.e., “full career equivalent pensions,” are the only accurate measurements of how much they are really getting in retirement. But there is another crucial variable that must be considered to complete this analysis, which is how much full career equivalent pensions are paying to CalPERS retirees who retired in recent years.

*   *   *

AVERAGE PENSION ADJUSTED FOR FULL-CAREER – SHOWN BY YEAR OF RETIREMENT

Because the data provided by CalPERS includes not only years of service for each participant, but also the year they retired, it is possible to calculate average “full-career” pension benefits based on the year they retired. It is important to do this because pension benefits for California’s state and local government workers were steadily enhanced over the past decades, especially after 1999 when SB 400 was passed by the California state legislature. In general, pension formulas have been altered to bestow pension benefits that are approximately 50% better today than they were 20 years ago. At the same time, pension benefits are calculated on rates of pay, which themselves have increased at a rate exceeding inflation for at least the last 20 years.

Table 3 depicts the unambiguous impact of these trends. The last column to the right on the table, “Avg Pension, 43 Years Svc” shows what retirees would be really getting in pension benefits if they had worked 43 years – from age 25 through age 67 (one may substitute age 22 through age 64, or whatever, of course). As seen, the 21,590 retirees in 2012, had they worked 43 years, would have collected average annual pensions of $73,040.

In general, pensions adjusted to reflect a full career in the private sector exceeded $70,000 per year starting with those CalPERS participants retiring in 2002. They exceeded $60,000 but were less than $70,000 for CalPERS participants retiring in 2003, 2001, and 2000. Participants who retired between the years 1990 and 1999 collect pensions today – again, had they worked a full private sector career – greater than $50,000 and less than $60,000. Participants who retired between 1984 and 1989 collect pensions today greater than $40,000 and less than $50,000. And participants who retired prior to 1984 collect pensions today that are less than $40,000.

It is hard to find a data set that shows a greater correlation than this one: The earlier you retired, the less you’re going to get in your pension today. That is because pension formulas were enhanced over the past 10-20 years. Not only were they enhanced, but they were enhanced retroactively, meaning that someone nearing retirement who had been accruing pension benefits at a rate of 2.0% per year, for example, suddenly began accruing pension benefits at a rate of 3.0% per year not only for the years remaining in their career, but for every year they worked.

To speculate as to why it was possible to retroactively enhance pension formulas through legislative action, yet it is purportedly unconstitutional and therefore impossible to merely reduce these formulas for active workers from now on, would go beyond the scope of this modest analysis.

Table 3  –  CalPERS Average “Full Career” Pensions By Year of Retirement

20140212_CalPERS_normalized-pensions_Table03-a

It is probably necessary to reiterate as to why full-career equivalent pensions are the only accurate measurement to use when discussing whether or not today’s public sector pension benefits are appropriate or financially sustainable. The reason is simple and bears repeating:  Defenders of pensions as they are use “averages” that don’t seem terribly alarming. Notwithstanding the fact that a self-employed person in the private sector would have to earn over $100,000 per year and contribute 12.4% of their lifetime earnings in order to collect the maximum Social Security benefit of $31,704 at age 68, which barely exceeds the average CalPERS pension of $30,546, that average CalPERS pension is based on an average years of service of 19 years. Somebody who has only worked for 19 years should not have an expectation of a pension that exceeds the maximum Social Security benefit that requires 12.4% of a six-figure annual income and 43 years of work. Few, if any participants in CalPERS are contributing more than 12.4% of their pay into their pension account. The taxpayers make up the difference.

When debating the financial sustainability of CalPERS and the other pension funds serving California’s state and local government workers, there are many issues. How the unfunded liability is estimated is the topic of intense debate, focusing primarily on what rate-of-return these funds believe they will average over the next few decades. That rate-of-return estimate also is a primary determinant of how the “normal contribution” is calculated. There are myriad aspects to the debate over how to adequately fund public sector pensions. But missing from that debate far too frequently is an honest assessment of just how much, on average, these pensions are really worth to the recipients.

This study has presented a calculation of what CalPERS’s average pension benefit is based on years worked as well as year of retirement. It has normalized that data to show that a retiree who worked 30 years and retired last year, on average, can expect a pension of over $50,000 per year, and if they worked 43 years and retired last year, on average, can expect a pension of over $70,000 per year. Those millions of private sector taxpayers in California who have already worked well over 30 years, with no end in sight, should think carefully about these facts about pensions, when considering what sort of reforms to preserve solvency might be equitable for all workers, public and private.

About the Author:

Ed Ring is the executive director for the California Policy Center where he oversees execution of the Center’s strategic plan. He is also the editor of ProsperityCalifornia.org and UnionWatch.org. Previously as a consultant and full-time employee primarily for start-up companies in the Silicon Valley, Ring has done financial accounting for over 20 years, and brings this expertise to his analysis and commentary on issues of public sector finance. Ring has an MBA in Finance from the University of Southern California, and a BA in Political Science from UC Davis.

54 replies
  1. Tough Love
    Tough Love says:

    Ed, As I’ve said many times, Public Sector pensions should be compared to Private Sector pensions to appropriately judge the level of “generosity” and hence fairness to taxpayers. The following provides that comparison.

    You said …”These calculations are made by dividing the average annual pension for a CalPERS participant in 2012, $30,456, by the average years of service, 19.93. The result, $1,528, is the amount the average CalPERS retiree accrued in annual pension benefits for each year they worked during their careers. ”

    Boeing (the airplane manufacturing company) provides (by Private Sector standards) a very generous DB pension to their employees. The employee retiring in 2012 would get a pension of $83/mo (or $996/yr) per year of service.

    That $996 is directly comparable to the $1,528 in your quote above. Hence on average the $$$ pension payout is $1528/$996 = 1.534 times greater for the Public Sector worker.

    I said “$$$ pension payout” above because 2 adjustments to that 1.534 multiple are necessary to arrive at the correct “value” comparison.

    First, only the Public Sector pension is COLA-increased. COLA alone increases an otherwise identical pension (w/o COLA increases) by 1/3 or a factor of 1.33.

    Second, we should adjust for the Public Sector worker typically collecting an unreduced pension roughly 5 years younger. That difference requires an adjustment factor of 1.25.

    These factors are all multiplicative, giving the true “value” of the average 2012 CalPERS pension as 1.5628 x 1.33 x 1.25 = 2.54 times that provided by Boeing.

    And it’s still even higher than the 2.54 times ………

    For the Boeing calc., ALL of the retirees are from ONLY those who retired in the single year 2012, as earlier year Boeing retirees would not get $996/yr per year of service, but a lower figure. It appears that YOUR calculation for CalPERS (which uses $30,456) includes ALL year’s retirees (many from long ago under lower pension formulas).

    If we assume that the Public Sector average pension payout in 2012 of $30,456 would be $50,000 if ONLY 2012 retirees were included, the final multiple I calculated above of 2.54 times greater would further increase to 2.54 x $50,000/$30,456 = 4.17 for an apples-to-apples “value” comparison ….. again right in line with the Public to Private Sector pension “value” relationship I have come up with time and time again.

    Bottom line ………. CalPERS average pension is more than FOUR TIMES more valuable than Boeing’s Defined benefit pension.
    ——————————————————————————————————————————–

    Ed, Please correct me if you feel that I have misstated something.

    Reply
    • Maxpro
      Maxpro says:

      ou omitted one pertinent fact. The employee from Boeing would also receive Social Security income where the employee from CalPers would not. Assuming that the employee from Boeing would qualify for the maximum Social Security Benefit ($30,396 for a singe person, so round down to $2,500 per month), the Boeing employee would receive income of $3,496 per month ($996 pension per your numbers plus $2,500 Social Security), while the CalPers retiree would only receive $1,528 per month. Hence, the Boeing employee would actually receive 2.28 times more in retirement than the CalPers employee. Also keep in mind that Boeing would have had to contribute approximately 6%. of the employee’s income to Social Security in addition to the contributions it made to the employee’s Boeing pension. Also keep in mind that Social Security benefits are taxed differently from pension income.

      Just sayin. If you want to play with the statistics, you need to be certain that you include all of the pertinent ones. Not just the ones that support your position.

      Reply
      • Tough Love
        Tough Love says:

        Actually many of the Plans that are administered by CalPERS do in fact participate in Social Security.

        Nationally 2/3-3/4 of all Public Sector workers participate in SS. I don’t know what that percentage is just for California.

        And even where the Public Sector worker does not participate in SS, your conclusions are wrong for multiple reasons.

        First, half of the SS benefit comes from contributions out of the worker’s net pay. This is equivalent to private savings and investment (and a very poor one a that). Since you are not including the Private Savings of the Public Sector worker, that half is not a source of adjustment

        Next, you casually assume the Boeing worker is at the SS maximum wage base (AND has been at it for all 35 years of employment) …… MAYBE 2/3 of it is reasonable (averaging in the engineers and the non-professional staff and the fact that many workers do not have 35 years of full time employment factored into the SS calc in the Private Sector do to periods of unemployment). So perhaps it would be appropriate to add to the Private Sector’s side about $2,500 x 1/2 x 2/3 = $833/month …. but that would only be true if no CalPERS workers participated in SS. Let’s assume that 2/3 are in SS (the lower end of the country-wide average participation of 2/3 to 3/4). Then that $833 increment for the Boeing workers should only be increased (on average) by $844 x 1/3* = $281

        *because 2/3 ARE getting SS and and hence only the 1/3 NOT getting it are entitled to the incremental adjustment.

        So Ok, I’ll agree that $281 seems like an appropriate adjustment to make the comparison more Apples-to-Apples.

        So re-doing my previous work up we have:

        Public Sector worker … $1528 x 1.33 (for COLA) x 1.25 (for younger retirement ages) x 50,000/$30,456 = $4,170
        Boeing worker…. $996 + ($281 x1.33 since SS is COLA adjusted) = $1,370

        So instead of the $4,170/$996 = 4.18 times greater PUBLIC vs Boeing pension advantage, it’s likely more accurate to say the PUBLIC Sector pension advantage is only $4,170/$1,370 = 3.04 times greater.

        Thank you for correcting me ………… but the conclusion changes little. With equal “cash pay” in the Public and Private Sector, there is no justification for ANY greater Taxpayer-funded pensions (OR BENEFITS) let alone ones that are ROUTINELY multiples greater.

        Reply
        • SDouglas47
          SDouglas47 says:

          ” With equal “cash pay” in the Public and Private Sector, there is no justification for ANY greater Taxpayer-funded pensions”
          …………………………………………………
          Really? Still?

          Heritage Foundation/Biggs and Richwine:

          ” After controlling for observable skills and a detailed list of personal characteristics, state workers in California earn about 10.2 percent less in wages than private-sector workers.”

          ” the higher implicit return on public defined-benefit pensions increases the compensation of California’s government workers by approximately 4 percent.”

          The ” Taxpayer-funded pensions” are INCLUDED in those total compensation comparison, they are not *in addition to*

          Yes, I am aware that Biggs and Richwine conclude their is a 30% public sector advantage. (Including a 15% advantage for “job security). If you wish to quote them, please be “fair and balanced” and link the four or five other studies which refute Biggs and find public and private sector compensation “roughly equal”. INCLUDING the cost of pensions.

          Reply
        • Martininsocal
          Martininsocal says:

          Actually, PERS members, for the most part, PERS members do not receive SS retirement benefits. Perhaps there are some who have acquired enough quarterly credits prior to the double dip being eliminate by President Clinton, but for the most part, PERS employees do not contribute into SS and are not eligible to receive anything from it.

          Reply
  2. Ed Ring
    Ed Ring says:

    Tough Love – your comments are accurate, although in the final section of this post we did take a look at the impact of what year a participant retired. Table three shows that the average pension received today is steadily lower as you go back in time. Since as you say, these pensions are increased by annual COLAs, the only explanation can be there were lower pension formulas in the past – and lower base pay upon which the pension multipliers are applied, of course. As stated in the post:

    “It is hard to find a data set that shows a greater correlation than this one: The earlier you retired [that should probably read “the longer ago you retired”], the less you’re going to get in your pension today. That is because pension formulas were enhanced over the past 10-20 years. Not only were they enhanced, but they were enhanced retroactively, meaning that someone nearing retirement who had been accruing pension benefits at a rate of 2.0% per year, for example, suddenly began accruing pension benefits at a rate of 3.0% per year not only for the years remaining in their career, but for every year they worked.”

    Reply
    • SDouglas47
      SDouglas47 says:

      ” meaning that someone nearing retirement who had been accruing pension benefits at a rate of 2.0% per year, for example, suddenly began accruing pension benefits at a rate of 3.0% per year not only for the years remaining in their career, but for every year they worked.”

      You did that on purpose, right? You do know that the 2% @ 50 formula gradually steps up to 2.7% @ 55. ?

      For a safety worker who starts his career at 25 and retires at 55, the 3% @ 50 formula gives 90%. The “2% @ 50 gives 81%.

      In BOTH formulas, if the employee works 35 years they will get exactly the same pension…90%.

      It does happen. Very few retire at 50 with a full pension, and there are many who do work for more than thirty years. For those, “3% @ 50” means nothing. 90% is max, with either formula.

      Reply
      • Tough Love
        Tough Love says:

        Are those “details” really the point ?

        The POINT that the original pensions (that were AT THAT TIME far better than those of almost all Private Sector pensions), were FURTHER increased … and RETROACTIVELY, thereby creating an immediate unfunded liability for the increased pensions (whether 50% or, as you say, somewhat less).

        And that CalPERS, the Unions, and our elected officials all jumped on board saying that these increases could be provided at no additional cost to Taxpayers.

        What a crock …. when the shit hits the fan, at the top of the list of reforms should be a RETROACTIVE reversal of these RETROACTIVE pension increases.

        Reply
        • SDouglas47
          SDouglas47 says:

          Yeah, those “details” are kind of VITAL!

          For any public safety worker (3% @ 50), who retired with 34 years service or more, there was NO PENSION INCREASE. NONE.

          NO “RETROACTIVE INCREASE”

          NO PENSION INCREASE, PERIOD!

          In these cases, a retroactive reversal would get you…………..nothing.

          In my case, and there are many like me, a retroactive decrease would cost me less than $100 a month. I could handle that. Although it would be swell to get retroactive COLAs at the same time.

          Reply
          • Tough Love
            Tough Love says:

            Quoting…”For any public safety worker (3% @ 50), who retired with 34 years service or more, there was NO PENSION INCREASE. NONE. ”

            You just don’t seem to get it ……

            Whether increased or not, a 90% of pay pension (COLA increased to boot) is off-the-wall too generous, unnecessary to attract and retain a qualified workforce, unaffordable, and grossly unfair to the Taxpayers who are called upon to pay for 80-90% of something (this pension) that is in most cases (taking into account BOTH the absurdly rich formula AND the rich provisions such as the very young full retirement ages and the inclusion of COLA increases virtually unheard of in Private Sector pensions) 4 to 6 times greater in value at retirement than what they get.

            Talk about living in a bubble !

          • SDouglas47
            SDouglas47 says:

            Tough Love says:
            December 19, 2012 at 9:05 pm
            No Douglas, ALL full career cops & firemen in CA cities (regardless of rank) retire with $100+K pensions ….. but you already knew that , didn’t you ?
            ……………………………………………..

            You do recall writing this? Perhaps your *opinion* of “off-the-wall too generous, unnecessary to attract and retain a qualified workforce, unaffordable, and grossly unfair to the Taxpayers” pensions is based on your *mistaken* assumptions of the facts.

            GIGO

      • Martininsocal
        Martininsocal says:

        The 3%@50 retirement is exclusive to Public Safety members and should not be portrayed as the norm. In fact, unless the member was in the system prior to the latest change for State Public Safety, they will see a formula that is 2.5%@55 for their retirement. General retirement ranges from 1.25%@67 for State Miscellaneous to 3%@60 for several other bargaining units. You also commit an error when you portray the final numbers as almost unlimited. Safety Retirement when coupled with #5@50 has a cap on maximum benefit payout of 90%. While there are definitely things to be addressed in the State’s spending problems, you picking and choosing only portions of the truth to create a false narrative is counter=productive.

        Reply
  3. SDouglas47
    SDouglas47 says:

    I suppose if you torture those numbers long enough, you can make them say ANYTHING you want.

    GIGO

    or what we call Tough Love math.

    A grain of truth, technically correct, and virtually meaningless.

    Or, more likely, intentionally misleading.
    ……………………………………….
    First,

    ” In general, pension formulas have been altered to bestow pension benefits that are approximately 50% better today than they were 20 years ago. ”

    A grain of truth, but wrong on so many levels. Compare the 2% @ 60 (typical pre 1999) and the new 2% @ 55 (no longer in effect for new employees).

    It is true that the pension will be approximately 50% higher….ONLY IF the employee retires at age 55. If the employee retires at age 50, the difference is less than 1/2%. If he retires at 63 or over (more likely), the difference is less than 3%.

    I’ve already mentioned safety retirements. If the employee works 35 years or more, there is NO DIFFERENCE in pension between 2% @ 50 or 3% @ 50. Either way, it’s 90%.
    …………………………………………
    Second, once again, you are comparing apples and oranges.

    If the fork lift driver at the can company looks at your figures and thinks he “could have had” a $50,000 pension after 30 years if only he had gone to work for the state, he would be delusional. More accurately, he should be compared to a CalTRANS maintenance worker, whose pension would be closer to the “average” $33,000, even after 30 years. AND, working for CalTRANS, he would likely have a lower take home pay for those 30 years.
    ……………………………………………
    Third,

    ” At the same time, pension benefits are calculated on rates of pay, which themselves have increased at a rate exceeding inflation for at least the last 20 years.”

    I don’t think so. With the exception of safety workers, many of whom received substantial increases in mid 2000s.

    Most state workers barely, if at all, kept up with inflation from 1999 thru 2007, then had NO COLAs for the next 5 years. Typical contracts in 2012-13 included 3 to 5% increases which went directly to increased pension contributions, no increase in take home pay.

    For myself, SB400 increased my pension formula by less than 3%. Losses to inflation decreased my real pensionable income by 7% to 10%, depending on which base years you use. I would have been MUCH better off if the legislature had passed an automatic annual COLA in 1999, instead of the *supposed* “50% increase” of SB400.

    Most any miscellaneous employee who retired within the last five years has lost more to inflation than he gained from SB400.

    Reply
  4. SeeSaw
    SeeSaw says:

    TL, Orange County already tried, four times, and spent millions of dollars of taxpayers’ money to retroactively retract the retroactive increase of 1999 and SB400. Four times, the County of Orange lost–and if it had won and if the retroactive increase had been retracted, it would not have affected only the OC Sheriffs, it would have affected almost one million retired current and retired CalPERS members and potentially millions more current and retired public workers with public retirement plans other than CalPERS.

    Its funny how you say you are working to make things fair for the private sector; if you succeeded in your endeavor, which you won’t, thankfully, you would devastate the financial condition of all those you want to take back from. Give it a rest, TL! You cannot retroactively take back what was lawfully given 15 years ago–there is too much case law preventing you from doing your dirty work. Stay up there in New Jersey and clean up the problems of New Jersey. We will deal with our own problems in CA—our way!

    Reply
    • Tough Love
      Tough Love says:

      Quoting… “if you succeeded in your endeavor, which you won’t, thankfully, you would devastate the financial condition of all those you want to take back from.”

      No SeeSaw, If pensions were a playground “seesaw” (no pun intended), for Public and Private Sector workers with comparable jobs and equal pay, one end of that seesaw (the Public Sector end) would be way up in the air, and the other (the Private Sector end) would be touching the ground.

      I’m not advocating to “reverse” that picture, only BALANCE it, with BOTH workers at the SAME level. Sorry, but the country has insufficient funds for a”V”-shaped seesaw with BOTH ends up in the air.

      If the Public Sector workers have to give back to accomplish that equality, that’s ONLY because they get an UNJUSTIFIED too much now.

      Do you have a problem with “equal”?

      Reply
      • SDouglas47
        SDouglas47 says:

        “Roughly equal”

        ” The Center for State and Local Government Excellence,[2] the Center for Economic and Policy Research,[3] the Economic Policy Institute,[4] and the Center on Wage and Employment Dynamics (CWED)[5] have all released similar studies arguing that the compensation that state and local workers receive is less than or equal to that of comparable private workers.”

        Biggs and Richwine say public sector workers are overcompensated by “as much as” 30%.

        Mike Genest in his study for CFFR came up with a similar 30%.

        BUT, when asked about his own state pay, and $100,000 plus pension, said:

        “We could have made a lot more money in the private sector. We are making more money.” – 

        Some are more equal than others?

        Reply
        • Tough Love
          Tough Love says:

          I’m guessing that Mr. Genset ( with a Masters from U of C @ Berkley) is a wee bit more qualified than oh……maybe 99% of the other CA retirees making $100K pensions.

          Don’t know if he’s one of them, but there are certainly quite a few brilliant Public Sector workers that indeed could make more in the Private Sector…. but that doesn’t mean EVERYBODY, including the OTHER 99% (who are run-of-the-mill) should get these grossly excessive pensions as though THEY are deserving of such.

          Reply
          • SDouglas47
            SDouglas47 says:

            So, completely disregard:

            The Center for State and Local Government Excellence

             the Center for Economic and Policy Research

            the Economic Policy Institute

            the Center on Wage and Employment Dynamics (CWED)

            and, the Center for Retirement Research

            All of whom say that total compensation is roughly equal?

            I guess it’s okay with ToughLove if one guy gets a $100,000 pension because he ” is a wee bit more qualified” (I have no problem with his pension, by the way. I only mention it for the irony.)

            BUT, in TLs *opinion* the OTHER 99% ” get these grossly excessive pensions”????

            I am sure you realize that virtually all researchers agree, state and local workers AS A GROUP, are paid less than their private sector counterparts. Cash pay.

            AND, they all agree that, within this group, public employees in the lowest third of the wage distribution are paid more than their private sector counterparts. Those in the middle are paid about the same, and those in the top tercile are paid about twenty percent less.

            There really isn’t much disagreement here.

            BUT, according to Tough Love, ALL these people have grossly excessive pensions??

            Is it even remotely possible that the some in the lower third of public workers should have their compensation reduced and some of the higher paid public workers should get an INCREASE?
            In the name of “equality”?

            Or, shall we paint them ALL with TLs broad brush as having “grossly excessive pensions”?

            There must be others like Mr. Genest who could have made “more on the outside”. (He did say “we”.)

            My apologies, Mr. Genest. Nothing personal. I was just trying to make a point. The “transparency” of public workers and salaries and pensions is a double edged sword.
            When CFFR first came out with their “$100,000 club”, they were apparently proud of their exposé. I looked at one name on the list and said “my god, he’s a brain surgeon”, literally, chief of neurology. That’s grossly excessive!!!

            AFK

          • Tough Love
            Tough Love says:

            Replying to SDouglas47’s 12:38PM comment ….

            Quoting … “I am sure you realize that virtually all researchers agree, state and local workers AS A GROUP, are paid less than their private sector counterparts. Cash pay. ”

            The studies seem to agree that the lower paid Public Sector workers make more than their Private Sector counterparts while the Private Sector has a small advantage for higher paid workers. Overall, the last study I looked at suggested the Private Sector had an overall 3.5% “cash pay” advantage”.

            Lets run with that…..

            Now lets address pensions …… as a% of pay, Private Sector workers typically get their employer’s SS contribution of 6.4% plus a 3-5% of pay “match” into a 401K Plan … total, or just about 10% of pay. Rarely any more.

            In Public Sector Plans, to fully fund the promised pension over the working career of the employee (as IS appropriate, by NOT passing one worker’s costs onto a FUTURE generation of taxpayers who received no benefits from that employee’s services), requires a level annual TOTAL contribution of 25-45% of pay for non-safety workers (depending on the richness of the Plan formula AND provisions), and 40-60% of pay for safety workers.

            Lets also assume that on average, the worker’s contribute 10% of pay (with some lower and some higher). Using the midpoint of the TOTAL Plan cost requirements of 25%-45% and 40-60% of pay (from above), and subtracting the 10% of pay paid by the workers, leaves (on average) the Taxpayers responsible for 35% – 10% = 25% of pay for non-safety workers and 50% -10% =40% for safety workers.

            And subtracting the 3.5% average “cash pay”advantage that Private Sector workers have over Public Sector workers, leaves a PUBLIC Sector compensation ADVANTAGE of 25%-3.5% =21.5% for non-safety workers and 40%-3.5% = 36.5% for safety workers.

            Next, we deduct the 10% of cash pay that Private Sector workers get (on average) from their employers, leaving a Public Sector “advantage” of 11.5% of pay for non-safety workers and 26.5% of pay for safety workers.

            But we are not done ….. while Public Sector workers ROUTINELY get free or heavily subsidized retiree healthcare (although it can vary widely from place to place), employer-subsidized retiree heathcare is all but gone in the Private Sector. Worker & spouse coverage for a pre-Medicare eligible retiree can easily cost $20K-$25K annually, and noting that many Public Sector workers retire in their 50s, this is a VERY valuable and costly benefit paid for by the Taxpayers. Studies have estimated the cost of Public Sector retiree healthcare promises at from a few % of pay to12% of pay.

            Even if we only added back in 3.5% of pay for retiree heathcare we are left with a PUBLIC Sector compensation ADVANTAGE of 15% of pay for non-safety workers and 30% of pay for safety workers.

            So YES, they ALL have grossly excessive pensions.

        • Tough Love
          Tough Love says:

          So I guess that means that you think Public Sector workers are indeed “special” and deserving of MORE than the Taxpayers who pay their way.

          The workers in Detroit thought so as well …… that’s the future for many CA cities, just not clear exactly how soon.

          Reply
          • abe
            abe says:

            That’s an idiotic comparison. Go back and review what you should have learned in your high school composition class.

  5. Tough Love
    Tough Love says:

    Quoting… “if you succeeded in your endeavor, which you won’t, thankfully, you would devastate the financial condition of all those you want to take back from.”

    No SeeSaw, If pensions were a playground “seesaw” (no pun intended), for Public and Private Sector workers with comparable jobs and equal pay, one end of that seesaw (the Public Sector end) would be way up in the air, and the other (the Private Sector end) would be touching the ground.

    I’m not advocating to “reverse” that picture, only BALANCE it, with BOTH workers at the SAME level. Sorry, but the country has insufficient funds for a”V”-shaped seesaw with BOTH ends up in the air.

    If the Public Sector workers have to give back to accomplish that equality, that’s ONLY because they get an UNJUSTIFIED too much now.

    Do you have a problem with “equal”?

    Reply
  6. SeeSaw
    SeeSaw says:

    No, I mean nothing of the kind! What I mean is, in a capitalistic society nothing is equal! You did not pay my way in the public sector–I paid my own way! I sold my services to those that needed them, just like you paid the grocer for food you needed. Next thing, you will be telling the grocer that he owes you something because you patronized him!

    Reply
    • Tough Love
      Tough Love says:

      The difference between the Private Sector grocer and say the Public Sector Tax clerk is that the grocer MUST charge a competitive price for his products or consumers will shop elsewhere and he will go out of business

      When it comes to the Tax clerk, we cannot choose to shop (i.e., conduct our business) elsewhere …. and they’re certainly not going out of business. It’s that lack of competition that demands special care in making sure that the tax clerk is fairly paid …. but not overpaid (whether it be via cash pay, pensions, or benefits).

      Unfortunately for Taxpayers, it’s the elected officials that either directly or indirectly (via managers that ultimately report to them) determine that compensation …. and all too frequently those elected officials are not motivated by doing the right thing for taxpayers (meaning FAIR, but not excessive compensation) but by making compensation decisions that will get them re-elected.

      Elections are expensive, and happy Unions (made so via high member compensation) are more than willing to generously contribute to the elected official’s campaign and support him in the election.

      And the taxpayers get screwed……….

      Reply
      • abe
        abe says:

        TL seems to have little clue of how public funding works, makes useless comparisons then denigrates public servants endlessly. It is useless trying to teach such a numbskull any sense of reality. Stubborn fools tend to die miserable with their lack of common sense.

        Reply
  7. SeeSaw
    SeeSaw says:

    Well that’s the way our society operates TL. America!! Love it or Leave it! If you want to be the dictator of how all things should be, set up a meeting with Castro and maybe he’ll hire you to be an enforcer in Cuba, TL–or better yet, try N. Korea–then you could just execute the rest of us.

    Reply
    • Tough Love
      Tough Love says:

      What can I say………….

      An EDUCATED citizenry would hopefully rise up, demand change, and put an end to the Public Sector Union/worker ripoff.

      I’m trying to provide that EDUCATION.

      Reply
      • YEEEHAAA
        YEEEHAAA says:

        “I’m trying to provide that EDUCATION.”

        Over the last 3 or 4 years, the arrogance of this guy never ceases to amaze me. He is educating all of us, because he is so much more enlightened than all of us.

        Reply
        • Tough Love
          Tough Love says:

          Sorry buddy, but it’s not arrogance on my part, it’s insatiable greed and a to-hell-with-the-Taxpayers attitude on the part of Public Sector Unions & workers.

          Reply
          • SDouglas47
            SDouglas47 says:

            it was Josh Billings who said:

            “The trouble with most folks isn’t their ignorance. It’s knowin’ so many things that ain’t so.” –
            ……………………………..
            Even worse when they try to *teach* it to others.

          • Tough Love
            Tough Love says:

            Replying to SDouglas47….

            “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

            ― Upton Sinclair,

          • Tough Love
            Tough Love says:

            Who appointed you (clearly a biased Public Sector worker/retiree working feverishly to protect his/her grossly excessive pension/benefit promises) a judge of whether my comment are exaggerations?

            And the ……. ” no one believes anything you say”….. is the hope and desperation of those like you who ride this Public Sector gravy train and don’t want the full extent of this financial “mugging” perpetrated upon the Taxpayers revealed.

            That train will be pulling into the last station in the not to distant future, and that last stop won’t be what you’ve been promised.

            Greed HAS consequences.

          • SDouglas47
            SDouglas47 says:

            Tough Love says:
            December 19, 2012 at 9:05 pm
            No Douglas, ALL full career cops & firemen in CA cities (regardless of rank) retire with $100+K pensions ….. but you already knew that , didn’t you ?
            ……………………………………………..

            You do recall writing this? Perhaps your *opinion* of “off-the-wall too generous, unnecessary to attract and retain a qualified workforce, unaffordable, and grossly unfair to the Taxpayers” pensions is based on your *mistaken* assumptions of the facts.

            GIGO

  8. YEEEHAAA
    YEEEHAAA says:

    An arrogant POSter says:

    “Who appointed you (clearly a biased Public Sector worker/retiree working feverishly to protect his/her grossly excessive pension/benefit promises) a judge of whether my comment are exaggerations?”

    One has to wonder who appointed this POSter the ‘teacher’ and all-knowing, pension expert it claims to be. For those of us who have been following pension forums for the last 4 years, we all know that this POSter knows very little. Talks big…but has nearly zero knowledge. The perfect little shill for the pension hating ‘experts’ of the world.

    Reply
    • Tough Love
      Tough Love says:

      Oh really? Any time you want to debate any of my comments, just let me know. Let the readers be the judge.

      The Taxpayers are rapidly wising-up up to the Public Sector union/worker distortions, material omissions, misleading statement, and out right lies, and they’re going to put an end to the financial “mugging” perpetrated upon them for perhaps the past 2 decades.

      Reply
      • SDouglas47
        SDouglas47 says:

        You “debate” like a politician. When your opinions are shown to be exaggerations, you change the subject. Meanwhile, your *education* is misinforming readers. Case in point: in this article, Ed Ring states:

        ” That is because pension formulas were enhanced over the past 10-20 years.”
        ……….
        ” meaning that someone nearing retirement who had been accruing pension benefits at a rate of 2.0% per year, for example, suddenly began accruing pension benefits at a rate of 3.0% per year not only for the years remaining in their career, but for every year they worked.”
        ………………………………..
        In this case, he avoids using the overused and misleading phrase “50% increase in pensions”.
        I say that phrase is misleading in that it IMPLIES that it applies to ALL public sector retirees, while in fact it affects ONLY safety retirees and ONLY those who actually retire at age 50; a *very* small fraction of retirees.

        In fact, if any public safety worker retires after age 55, his increase under the new formula will be 11%, not 50%. And if he retires after 35 years service or more, his pension increase will be not 50%, but………0%….Nada……..nothing…….nothing retroactive, nothing prospective…..NO increase.

        In MY opinion, “50% increase in pensions” is not an outright lie, but definitely qualifies as “distortions, material omissions, misleading statement.”
        Does Tough Love disagree with my opinion?

        Reply
        • Tough Love
          Tough Love says:

          If you have a problem with the completeness or accuracy of what Mr. Ring says, take it up with him.

          I’m not exaggerating, intentionally leaving important things out, or lying, a very common tactic of Public Sector Unions/workers.

          And it didn’t slip past me your use (in THIS comment) of another common Union tactic … distraction from the issues at hand, which is the grossly excessive pensions of all Public Sector workers. They were excessive BEFORE the retroactive increases and made more so by those increases, whether those increase were 50%, 25%,10% or 5%.

          ALL of the retroactive increases should be rescinded with past payments under those increases deducted (with interest) from future payments.

          Reply
          • SDouglas47
            SDouglas47 says:

            “Debate” like a politician.

            Perhaps to you the “issue” at hand is grossly excessive (in your opinion) pensions, but the *question* at hand was simple enough. Was there, in fact, a 50% increase? Because the claim is ubiquitous, it is important. One could hardly blame the taxpayer for being P. O.d when they constantly read that “public employees” got a 50% increase.

            Whether due to ignorance or intentional misinformation, the claim is provocative.

            I did bring it up with Mr. Ring, earlier in this blog, but I wasn’t referring JUST to what Mr. Ring said:
            ……………………………………
            Tough Love Love • 2 years ago −
            “Skippy, Yes, please tell us EXACTLY what service you rendered for the 50% RETROACTIVE increase in your pension for service rendered PRIOR TO the increase.

            Let me answer for you … nothing, nada, zipo.

            The category of pension excesses that should be at the TOP of the list to renege upon should be these outrageous retroactive increases.”
            …………………………………….
            IF the safety worker had 35 years service or more, there is NOTHING to renege upon. There is nothing to be rescinded. There is nothing to be deducted (with interest) from future payments. Because, in THOSE cases, there is NO benefit increase. NONE. Not retroactive, not proactive, not 50%, 25%,10% or even 5%.

            For some, there was (still is) a 50% increase in pensions. Very few. To imply that a 50% increase is all inclusive, or even average or typical, is “distortions, material omissions, misleading statement.”

          • Tough Love
            Tough Love says:

            Replying to Sdouglas47’s comment of 3:24PM …… My comment to “Skippy” (short for SkippingDog) that you quoted was my understanding of the SB400 (and similar local Plan) changes at that time, and the fact that Skippy (a retired police officer and vocal commentator/supporter of the status quo) never challenged my statement, gave me no reason to believe it was not accurate ….. before OR after I said it.

      • abe
        abe says:

        The overriding question will remain, if everything is as you say and you are as smart as you think your are, then why are you not collecting a public employee pension? Could it be that you are simply arguing to improve your own current situation by ripping others off? Yes, that must be it.

        Reply
  9. Ed Ring
    Ed Ring says:

    SDouglas47 – It is interesting to just watch these comments flow, but you made (at least!) two points that merit a response:

    (1) You mention that many studies tend to conclude that total compensation in the upper third (by level of education and skills required) of workers favor the private sector, the lower third favors the public sector, and in the middle third compensation is roughly equal. Whether or not I would agree with that overall, I think you’re right about the proportions. What you leave out is that these studies invariably use “comparable jobs” in large corporations. They don’t include (because it is almost impossible, for one thing) independent contractors or employees in small private companies. When you normalize the compensation by job skills, education, and time commitment required (a crucial addition), for employees in small companies and independent contractors, you will get a very different result in the upper third, the middle third, and the lower third. And these are by far the most numerous jobs in America. Even if we restrict “private sector” to “large corporations,” I would argue your point that most upper echelon employees in the private sector earn greater total compensation packages than similarly skilled employees in the public sector. But relatively few jobs like that are left in large corporations compared to the total private sector workforce.

    (2) You may argue that eliminating earlier retirement reduces the actuarial liability, but we have typically done our analyses using 55 for safety and 60 for non-safety. And regardless, the point we’re making in this article isn’t about the actuarial liability, it’s about the average pension per years of service. And from that perspective, changing the age, for example, from 50 to 55 doesn’t make much difference. Most retirees with 30 years experience never did retire at age 50. That may have been some other reformer’s shibboleth, but not ours. Believe it or not, we try to avoid parroting shibboleths on this forum. Retiring at age 55, or age 57, or age 60, or age 65 for that matter, with an average pension of around $100,000, which is what the average is for public safety employees with 30+ years of experience, is simply not affordable.

    In principle, one may argue that public employees should earn a defined benefit that exceeds Social Security, especially if they truly contribute more towards their retirements than Social Security participants are required to contribute. And by the way, that defined benefit should be adjustable, upwards or downwards, depending on the solvency of the fund – just like Social Security is adjustable. But beyond modestly exceeding what Social Security may offer, public employee retirement security should depend on them being challenged to save and invest their earnings just like private citizens must save and invest. Otherwise they cannot possibly empathize with the situation that faces the people they serve.

    Reply
    • SDouglas47
      SDouglas47 says:

      Where to begin?

      Smarter people than I did the studies which found that “total compensation” of comparable public and private sector workers is “roughly equal”. My understanding is that they do not use comparable jobs in large corporations. They use comparable jobs in the total private sector.
      Although it is true that in comparing “averages”, total compensation for private sector workers was $29.23 per hour (Dec. 2013), while the average for state and local governments was $42.51. AND the average for large companies is $42.35 (service industries) or $46.08 in goods producing companies.

      But trying to find exact comparisons is a fools errand anyway. A CalTRANS mechanic makes the same base pay wherever he works in the state. In Fresno, he makes about the same as a private mechanic. In the bay area or LA, he makes a lot less than local mechanics (even though there is currently a 5% retention adjustment.) The “averages” studied by the experts include benefits, but you can have two workers in identical positions, one making $800 MORE per month in healthcare than his single co-worker. For years, I made a thousand dollars less (insurance) than a family man working with me, because I was on my wife’s private sector health plan. It never occurred to me to complain that “he gets more than me”. And, considering my insurance, my wife was effectively making $500 more per month than her single coworker. That’s life in the real world.

      A wise guy once told me that the “average” Californian has one testicle and one ovary.

      I have no idea what you are saying about the actuarial liability of earlier retirement ? My concern is that, because of articles like this one, there are huge misconceptions in the general public about the pay and pensions of public workers. I see them constantly in letters, blogs, editorials, etc. There are SO many references to safety pensions that many people believe it is typical for MOST public workers to retire at 50 with a “full” pension. (And that $100,000 is a typical pension.)

      I have no idea what a shibboleth is. My concern is the public perception that public workers “retire earlier” than private sector because “retirement age” is 60 for miscellaneous employees while “retirement age” for social security is 67. (Disregarding safety workers for the moment)

      According to an ING study, Gallup polls, and others, the age at which people actually retire is virtually the same, public or private. “60” and “67” are nominal retirement formulas, NOT typical retirement ages.

      Misconceptions. Public sector workers have higher pensions. If you have two similar workers with “roughly equal” total compensation, but one of those invests 10% of his total (and spends the other 90%, and the other invests 20%, leaving LESS take home pay; guess what? One will have a MUCH higher pension.

      Average pay? A fork lift driver at Home Depot (“average” pay for the private sector) reads this article and thinks, if I had got a job with the state, I could be making $65,000 a year! “average” state salary. True, but you would need to get an engineering degree and license, or work your way up over twenty years to a middle management job.

      And my particular point today. Joe citizen reads in DOZENS of articles (and some of these are actually left wing pundits who pass along the phrase without examining)

      “SB400, which increased pensions by 50%”

      ANY normal person reading that would assume that if the average pension were $50,000 a year in 1999, they would be $75,000 in 2000. Any sane taxpayer would be P.O.ed.

      And, they would be mistaken.

      Reply
      • Tough Love
        Tough Love says:

        It’s hard to tell whether you are knowingly lying or actually believe everything you just stated, but I have rarely seen SO Many false statements in a single comment. I can’t fathom where you could pick up such nonsense other than from your Union.

        I’m sure Ed Ring will see them as well, and since you certainly won’t believe anything I say, I’ll leave it to Mr. Ring to respond (or to not do so).

        Reply
        • SDouglas47
          SDouglas47 says:

          There’s one thing we agree on.

          On the lighter side, I quoted some of Mr. Rings statistics on public sector compensation, on another web site, and this is the response I got:

          ” Doug, we ALL know that California Policy Center is a left wing union mouthpiece for the public unions. That is a verified fact.”

          Reply
  10. Bahjat Sharif
    Bahjat Sharif says:

    CalPERS’ Pensions are funded by prudent worldwide investments. A recent update of income amounts through June 30, 2012 shows that CalPERS investments now pay 64 cents of every dollar in pensions paid. Public employees who retire with a CalPERS pension benefit contribute 8-11 percent of their take home pay to help fund their own pensions.

    Reply

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