Los Angeles Police Average Total Compensation $157,151 Per Year

Turns out the Los Angeles Fire and Police Pension system return rate was 17.3 percent for 2013-2014, and other public pension funds reported similar double-digit returns and five-year returns exceeding their assumed rates. 
– LAPPL Board of Directors on 08/07/2014, in their post “Misuse of statistics behind erroneous LA police officer salary claims.”

The above quote was made in response to last week’s UnionWatch editorial “How Much Do Los Angeles Police Officers Make?” that analyzed total compensation for LAPD officers. The substance of their overall response was to challenge two assumptions made in that editorial, (1) that the annual rate-of-return projection of 7.75% used by the LAFPP (Los Angeles Fire & Police Pensions system) is too optimistic, and (2) that the employer’s “unfunded contribution” – that annual sum paid to LAFPP by the City of Los Angeles towards reducing the plan’s unfunded liability – must be considered part of an officer’s annual total compensation. Only the 2nd of these challenges, by the way, might indicate any downward impact on our average total compensation estimate of $157,151 per year.

This editorial will examine and defend both of these assumptions, starting with our assertion that a 7.75% rate-of-return projection is too optimistic. How much a pension fund can earn each year, on average, over the long-term, is a topic of intense expert debate. The historical performance of the LAFPP shows that as of 6-30-2013 their one year return was 13.01%, but the five year average return through that date was only 5.05%. If you go back ten years the annual average was 7.66%. But as investment professionals always remind us, past performance is not an indicator of future performance. The global economy is in the terminal phases of a debt binge that began back in the 1980’s; we’re in uncharted territory; nobody knows how investments will perform as this debt unwinds. What we do know is that throughout the industrialized world the population is aging – as a percent of total population, we have twice as many people selling their investments to fund their retirements as a generation ago. These twin phenomena, debt and demographics, suggest investment performances from now on face unprecedented headwinds. To debate this point is not to “misuse statistics.” To ignore this debate is intellectually dishonest. We are at the top of a bull market and LAFPP is only 83% funded. If the long-term average annual earnings projections aren’t overly optimistic, when you’re at the top of a market there should be a surplus in the pension fund.

Ultimately, if the LAPPL Board of Directors are so confident that a 7.75% rate-of-return can be sustained over the next 20-30 years, then they should support building triggers into the benefit formulas, allowing them to be lowered if and when earnings do not meet projections. Here is a summary of proposals to do just that: “The Case for Adjustable Defined Benefits,” CPC, July 2014. The sooner they adopt options like these, the less likely their entire defined benefit system will eventually catastrophically implode.

Which brings us to the unfunded liability, and why employer payments against this unfunded liability belong included in the total compensation of employees.

The LAPPL argument appears partly valid when they state “unfunded liabilities include pension liabilities of already retired and deferred plan members, not just active officers.” That’s true – but the problem with that reasoning is this unfunded liability is not being paid down. This means the payment towards the unfunded liability – to the extent it is not actually reducing the amount owed – is a permanent annual payment required to financially sustain the pension fund. If that is true, then currently active employees will benefit when they retire from the employer’s ongoing unfunded contribution that will, at that point, be allocated to those still active employees. Only if the unfunded liability is being paid down can you begin to make the argument that all of it does not belong included in total compensation for active employees.

Basic accounting concepts support this. If the unfunded liability is not being reduced, then the entire employer’s payment towards the unfunded liability is additional deferred compensation towards their future pension benefits. So how much of an unfunded payment is being made by the City of Los Angeles into the LAFPP? Is it reducing the balance owed?

Reviewing the most recent publicly available statements, the City of Los Angeles, Fire and Police Pension System – Financial Statements, 6-30-2013, on page 19 there is a discussion of the allocation of employer pension contributions. In that fiscal year, the employer made a $246 million “normal contribution” and a $129 million “unfunded contribution.”

The official unfunded liability for LAFPP is $2.97 billion. At a discount rate of 7.75%, just a minimal interest only payment would be $230 million. This means that during FYE 6-30-2013, the LAFPP received an unfunded contribution from the employer that was $101 million less than the amount required just to pay the interest! The fund necessarily incurred negative amortization. In that context, 100% of that unfunded contribution belongs allocated to the active employees as part of their total compensation, because at that rate, a generation from now, these unfunded contributions will continue unabated to shore up the system they will then benefit from as retirees.

For these reasons, our organization stands behind the earlier estimate of total compensation for Los Angeles police officers of $157,151 per year. The debate over whether or not any of the unfunded contribution should not be allocated to individual officers as part of their compensation is moot until the amount of the employer’s unfunded contribution, at the very least, is sufficient to avoid negative amortization.

When discussing what levels of total compensation are affordable and appropriate, especially in the case of police officers who risk their lives every day to protect the public, the best approach is to strive for accuracy and fairness, to always behave with intellectual honesty, and to engage in the debate with mutual respect. Unfortunately, the tone of the LAPPL rebuttal to our editorial deviates from these ideals. But that is their job. As unions, their rhetoric easily gravitates to an “us vs. them” mentality. This can have a corrupting effect on public servants, alienating them from private citizens.

The job of public sector unions, and they do it all too well, is to get as much for their members as they possibly can, utilizing the extraordinary leverage they have over public officials who they help elect, and then negotiate with. This tone, and this leverage, does not belong in government work. Public employee unions should be illegal, and can be replaced by voluntary associations that would still wield considerable influence. And public employees should look to the deeper causes of our shared middle class struggle; high taxes, excessive regulations, failed welfare and immigration policies, and inordinate restrictions on land and energy development.

*   *   *

Ed Ring is the executive director of the California Policy Center.

REFERENCES

The quantitative work for this article and the preceding one is summarized on the Excel spreadsheet that can be downloaded by clicking on the link provided below. The CPC welcomes commentary and corrections, if any, and will acknowledge and if necessary retract any statements, calculations or estimates that are demonstrated to be inaccurate:
http://californiapolicycenter.org/wp-content/uploads/2014/08/Los-Angeles-Retirement-Fund-Analysis.xlsx

RELATED POSTS

How Much Do Los Angeles Police Officers Make?, August 5, 2014

The Case for Adjustable Defined Benefits, July 31, 2014

Two Tales of a City – How Detroit Transcended Ideology to Reform Pensions, July 22, 2014

Government Employee Unions – The Root Cause of California’s Challenges, June 3, 2014

Conservative Politicians and Public Safety Unions, May 13, 2014

Public Pension Solvency Requires Asset Bubbles, April 29, 2014

Evaluating Public Safety Pensions in California, April 25, 2014

San Jose’s Public Safety Pensions – Reduce Now or Slash Later, April 15, 2014

How Much Does Professionalism Cost?, March 11, 2014

A Policy Agenda for Union Reformers Stuck Inside Unions, November 5, 2013

How Public Sector Unions Skew America’s Public Safety and National Security Agenda, June 18, 2013

Should Police and Firefighters be Exempted from Union Reforms?, March 12, 2013

Bipartisan Solutions For California, February 25, 2013

*   *   *

39 replies
  1. Barry Levinson says:

    There is a very simple way to show what is an accurate way of determining total salary and benefits for any public employee.
    Simply eliminate the position and see how much money the taxpayer saves every year.

  2. Tough Love says:

    With the great difficulty we have seem in achieving even marginal givebacks from current workers (ESPECIALLY in crazy California), BY FAR, the BEST why to end all future growth in pensions & benefits is OUTSOURCING (or, better yet, job-abolishment and demanding those remaining work a bit harder … or lose their jobs).

    It’s WAY past time for the financial “mugging” of the Taxpayers by the VERY greedy Public Sector Unions/workers and our enabling elected officials (bought-off with Union campaign contributions and election support) to end.

  3. Douglas47 says:

    Maybe you’re both wrong.

    The System of National Accounts states that “compensation income is …….the present value of the claims to benefits earned by active participants through service to the employer.” This value of benefits accruing in a given year is often referred to as the “normal cost” of the pension. It can differ, often significantly, from the amount the employer contributes to the plan in a given year.”

    So LAPPL is correct in that the unfunded liability cost is not part of the officers compensation.

    On the other hand, of course, there is good argument that what what LAPPL calls normal cost is not the actual compensation either, that it should be the present value of future claims, discounted at a risk free rate, rather than the “expected” rate of return of 7.5%.

    Actually, that might result in a average compensation HIGHER than the alleged $157,151, but at least be consistent.

    Then again, LAPPL is correct in pointing out the idiocy of Ed Ring’s statements:

    ” public employee unions “are the primary force behind the erosion of our freedoms and the ebb of our prosperity. They must be eliminated” and “A California renaissance requires only one thing-the abolition of public sector unions.”

    Pure dumbassery.

  4. Barry Levinson says:

    Douglas47 comments are correct. I just hope all the non-financial types out there, which of course is the majority, understood the nuances of Douglas47’s analysis.

    It is always important to compare public sector pension benefits to the private sector and social security. First public pensions are much more generous than social security. It is like comparing diamonds to quartz. Also with social security the costs are divided equally in all cases between employer and employee. With public pensions, it is quite common for unions to negotiate that the employer meaning the taxpayer is responsible for much of the employee portion of the costs as well as the employer portion. In Fullerton over 40% of safety workers salary is paid by the taxpayers. An incredible huge amount of money that does not even cover the millions of unfunded pension liabilities.

    It is clear that no matter how obvious it becomes that these huge pension benefits are drowning our municipalities, counties and states into red ink, those safety unions are not going to relinquish their bloated benefits voluntarily. The paying public has to decide to fight as hard or harder than those unions and their elected official allies to effect real financial change. No pension and retiree health care reform means no real financial government reform. So far in California, the politicians have been playing around at the edges and not willing to take the necessary steps to help the beleaguered taxpayer.

  5. Ed Ring says:

    Douglas47 – you make a good point about a “risk free” rate, but you are not confronting the current temptation to use an optimistic rate in order to shift costs away from normal contributions and weight them instead to the unfunded contributions. The higher the projected rate, the lower the normal contribution. Then when the returns fail to hit these optimistic projections, the unfunded liability – and required unfunded contribution – increases. The reason there is an unfunded contribution is because the normal contribution was inadequate.

    You also aren’t acknowledging that until the unfunded contribution is at least sufficient to avoid negative amortization, it is a permanent fixture of pension funding. These unfunded contributions will continue to get paid. Of course in this set of circumstances they constitute compensation for current employees. The fact that GASB hasn’t caught up yet is frankly irrelevant. It took GASB twenty years to even require municipalities to recognize unfunded liabilities on their balance sheets (one of their most recent rulings which took effect with fiscal years beginning 7-1-2014).

    It’s unfortunate this debate is restricted to accountants, because it has real world implications. Public employee unions are successfully arguing that employees bear NO responsibility for making a part of the unfunded contribution through withholding. Then they share paying part of the normal contribution, but that calculation is understated because of the optimistic rate of return assumption. This, in turn, causes the unfunded liability to grow. Get it?

    This manipulative behavior is another example of why public sector unions are a problem. They are simply too powerful – even voluntary associations of politically active public employees are a problem. At the federal level this is dealt with via the Hatch Act, but for some reason they get a pass at the state and municipal level. The ways public employee unions are ruining California are so varied they almost defy description. For starters, their political power has effectively replaced politicians who used to come from business – where people think about the bottom line and think about results, or perish – to politicians who come from labor activism – where the prevailing mentality is us vs. them and the level of financial and business management expertise is minimal. So they really can’t govern very well.

    Public employee unions are so powerful, moreover, they have cowed the business community into doing whatever they want. This results in less competition, more cronyism, and favors the worst elements of the business and financial community. Public employee unions are bankrupting our cities and counties, corrupting business, and enacting punitive legislation and taxation in order to expand their membership and increase their pay and benefits. They have destroyed our system of public education, making California’s K-12 schools among the worst in the world, while making higher education unaffordable.

    Somebody has to criticize public sector unions, because until they are either eliminated or, at the very least, substantially reduced in power and influence, they are going to continue to undermine our economy, our prosperity, our freedom and our future. If you want to call all of this “dumbassery,” then we’ll just have to agree to disagree.

  6. Tough Love says:

    Quoting Douglas47 says … “The System of National Accounts states that “compensation income is …….the present value of the claims to benefits earned by active participants through service to the employer.””

    Earth to Douglas47 says ….. Grossly excessive Public Sector pensions & benefits obtained by your Unions’ BUYING sufficient legislative votes with campaign contributions, election support, and threats, are NEVER “earned”. They are stolen from Taxpayers who rightfully should (and WILL) renege on such underhanded deals.

  7. Tough Love says:

    I agree completely, and doing so requires an end to Collective Bargaining with Public Sector Unions/Associations.

    It’s astonishing that the Public Sector Unions have accomplished what most would never have thought possible ….. the passage of laws, regulations, and Court decisions (by conflicted judges and legislators bought-off with Union money) that block all avenues to the reform (e.g., reductions in pension formulas/provisions for the FUTURE Service of current workers) of the current grossly excessive pensions granted by prior legislators and administrations ALSO bought-off with Union money.

    Taxpayers …………It’s WAY past time to IGNORE Public Sector Unions, end Public Sector Collective bargaining, and take back your government.

    And that necessitates showing the door to the legislators would lie, cheat, and steal all whilst they betray us Taxpayers. Public Sector workers are entitled to a taxpayer-funded pension EQUAL in value to that of the Private Sector worker in a job with comparable risks, education, skills, and experience ….. NOT a pension that is RIGHT NOW routinely 3 to 4 times greater in value at retirement (and often 4x-6x greater for safety workers).

    Rise up and DEMAND change !

  8. Douglas47 says:

    Just my humble opinion, TL, but your post has nothing substantive. It’s just a rant, childish and boorish. It’s not just nonproductive, it’s counterproductive.

    That’s my opinion, anyway, as

    “Grossly excessive Public Sector pensions & benefits”

    Is your opinion. Nothing more.

  9. Douglas47 says:

    I didn’t make THAT good a point about the risk free rate. I just mentioned that is one point of view. I have read some prominent economists who acknowledge its use in assessing and disclosure in pension systems, but not necessarily useful in determine the normal rate in real life systems.

    My MAIN point is that what is called pension reform is actually pension reduction, therefore a reduction in total compensation. Which MAY be OK if it’s done properly. A simple conversion of ALL public employees from a DB to a DC, though, is not the way. TL and his ilk seem to imply that ALL public sector pensions and benefits are “grossly excessive”. Or ” bloated benefits”, as Mr. Levinson calls them. Not an uncommon opinion. Supported more by emotion than by fact.

    The unions (my opinion again) are not nearly as powerful, greedy, or Machiavellian, as you claim. My experience has been just the opposite, in fact.

    Disagreeing is one thing we can agree on.

  10. Douglas47 says:

    Barry Levinson,

    You cannot just compare public sector pension to private sector pension and Social Security, outside the context of “total compensation”

    Leaving aside public safety for the nonce, look at the average public sector cash pay. (Speaking of “nuanced”, Barry, you may NEVER see a word more nuanced than ” average”, as it is used here.
    “Average” public sector wages in general, and for California state workers in particular, are widely agreed to be about twelve percent lower than equivalent private sector workers.
    Depending on whom you believe, when adding on the cost of benefits, including normal cost of pensions, public workers are either “roughly equal” to the private sector or, according to Briggs and Richwine, they have a twenty percent “premium” over equivalent private sector workers. The main difference is using the riskless discount rate to value pension and retiree health costs, rather than the “expected” ROI.

    Now, for the nuanced average. Public sector pay is notoriously compressed compared to the private sector. The lowest paid public workers, as a rule, earn about the same in wages as their private sector peers, but, with benefits, earn higher total compensation. Somewhere in the middle, public workers earn less cash, but compensating benefits make them “roughly equal” in total compensation. On the highest end, public sector PhDs and other professionals earn much less than their private sector counterparts. As much as 38% less. Even with their benefits, discounted at the risk free rate, they may earn up to 17% less than private sector peers.

    Many degreed and professional government employees are UNDERPAID, even when discounting they benefits “properly”. Blanket reductions in ALL pensions would only exacerbate that.

    I should send an apology card to Mike Genest. My favorite line. His company did a study showing public employees were ” overpaid” by thirty percent. When asked about his OWN six figure pay, (and subsequent six figure pension) said

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

    Yet the American Enterprise Institute seems to corroborate his statement. EVEN USING THE RISK FREE RATE to value retiree health and pension costs, many government employees are “grossly and excessively” UNDERPAID.

    How many? Which ones? I don’t know. But you should have more evidence before making the blanket statement that “grossly excessive” benefits are obtained by threatening legislators, buying votes, not earned, but “stolen from taxpayers”.

    Colorful, emotional, dumbassery.

  11. Tough Love says:

    Quoting …. “My MAIN point is that what is called pension reform is actually pension reduction, therefore a reduction in total compensation.”

    In the case of Public Sector pensions, “reform” necessitates “reductions” because CURRENT Public Sector Total Compensation is (via the pension & benefit components) indeed grossly excessive by any reasonably metric …. even though you (as a Public Sector worker protecting his turf) refuse to accept that.

    In my sleepy NJ town the base pay of police patrolmen (with just 5 years of experience exceeds $120K). It would be real hard to consider them underpaid just in “cash pay”, yet we are told that it is our responsibility to fund 80-90% of a pension that for the TYPICAL full career officer retiring TODAY, has a lump sum “value” upon retirement (usually under age 55) close to $2 million. THOSE are FACTS and your protestations that Public Sector workers aren’t over-compensations are simply self-interested BS.

  12. Woodrow says:

    A side issue not addressed, is how those returns were reached. Employees and the unions don’t care because on the surface it makes them look competent. However, if the public were to be given unfettered access to those pension funds, I’d bet there’s a heck of a lot of risk in there. Everyone wants yield, and they want it TODAY, risk be damned.

    That light isn’t what public unions think it is, that’s the debt train coming. Trillions of liquidity poured into markets, none of which made it to middle-class Americans, but inflated asset prices to the moon, maybe even for a couple more years if we use some historic metrics. The problem is those metrics have been altered by The Fed and FASB, price discovery is now absent.

    Velocity tells me the fat & happy era is coming to an end, maybe abruptly so. Public unions and their political cronies have another issue when this happens, The People are already broke, so much demand has been pulled forward there’s not much left: No bailout coming – it leads to even a worse scenario. In the mean time, enjoy extend & pretend.

  13. Barry Levinson says:

    Douglas47 your analysis of low, middle and high compensated public employees failed to include public safety workers, police and fire.

    Please tell us what private sector employment group that employs hundreds of thousands if not over a million employees,(which normally only requires a high school diploma), makes on average $157,000 a year in salary and benefits(LAPD)and can retire at the age of 50 after 30 years of service with 90% of their highest salary plus medical benefits as well.

    Clearly, it is public safety workers whose retiree benefits must be either adjusted downward (or those employees must pay a much higher percentage of the total cost) if we want to have financially sound local governments in the future.

  14. Tough Love says:

    Douglas47, who comments under that a a few similar handles likes to blow-off “facts” and “demonstrations” that conflict with his agenda (to keep the pig-fest” rolling along).

    The following is a mathematical demonstration of police overcompensation that I have previously posted. Thought you might like to read it.
    ———————————————-

    In California the typical recent Pubic Safety retiree’s pension starts at just about $100,000 and is COLA adjusted thereafter. By looking at a table of life annuity factors, such a single life immediate annuity has a value or cost upon retirement of just about $1.8 Million (18 times the annual pension). One way to judge if that is reasonable (or “appropriate and fair”) is to answer the question … What would be the necessary INCOME LEVEL (or Final Average Salary … FAS) of a Private Sector worker with the TYPICAL Private Sector DB pension (for the few Private Sector workers lucky enough to still be covered by such a pensions) to obtain a pension from his/her employer with the SAME $1.8 Million “value” upon retirement ?

    Assume the CA safety worker has the typical 3% of final average pay per-year-of-service pension factor, had a final average salary of $111,111, 30 years of service and retired at age 55… resulting in the starting pension of $111,111 x .03 x 30 = $100,000. Next, let’s assume the Private Sector worker’s DB pension formula is 1.25% per year of service (a quite typical formula), is NOT COLA adjusted (routine in PRIVATE Sector Plans), and has a full unreduced retirement age of 62 (with a 4% reduction in pension payout for each year of age that you retire begin collecting your pension before age 62).

    For a given Final Average Salary (FAS), this Private Sector worker’s annual pension (P) is given by the formula P = (FAS x 30 x .0125)x (1-((62-55)x.04)), with the latter part of that formula being the adjustment for early retirement at age 55. Shortening that formula, we have P = (FAS x 30 x .0125) x 0.72.

    From above, we saw that the Safety worker’s pension (being COLA-increased) has a lump sum “value” of 18 times the annual STARTING pension. With no COLA increases, the lump sum “value” is only 13 times the annual pension. Therefore the Lump Sum “value” of the Private Sector worker’s pension is given by 13 x P, and since we are SETTING that value equal to the $1.8 Million value of the safety worker’s pension we have $1,800,000 = 13 x P, and solving for P, we have P= $1,800,000/13 = $138,462. This Private Sector non-COLA-increased annual pension of $138,462 can be looked at as being mathematically equivalent to an otherwise identical pension starting at $100,000 that includes 3% annual COLA increases (i.e., the Safety worker’s pension).

    Now since we know the annual Private Sector worker’s annual pension “P”, we can plug it into my above formula of P = (FAS x 30 x .0125) x 0.72 to solve for FAS. Doing so we have, $138,462 = (FAS x 30 x .0125) x 0.72, from which

    FAS = $138,462/(30 x 0.0125 x 0.72) = $512,822

    What this shows is that a Private Sector worker (with a TYPICAL DB pension formula and provisions) would need to have a final average salary of $512,812 to generate a pension from his/her employer with the SAME $1.8 Million “value” as the TYPICAL Safety worker pension …. or $512,822/$111,111 = 4.62 times the Safety worker’s salary.

    And for the skeptics that say …. this can’t be correct …. we can just reverse the order of calculations and SHOW that this $512,822 PRIVATE Sector salary is indeed necessary to generate a pension with a “value” equal to that (the $1.8 Million) of the Public Sector Safety worker … as follows:

    (a) Private Sector worker’s Annual (non-COLA-increased) pension = $512,822 x 30 x 0.0125 x .72 = $138,462
    (b) Lump sum value (using the 13 times life annuity factor applicable to non-COLA-increased pensions) = $138.462 x 13 = $1.8 Million

    While most reasonable people would suggest that (give the nature of the occupations) Safety workers should receive pensions equivalent to Private Sector workers with salaries say 10% or 25% or 50% greater than they, I find it incredulous to believe that ANYONE would feel it appropriate to provide the TYPICAL CA Safety worker retiree with a pension equivalent to that of the Private Sector worker making over $500,000 annually. Taxpayers (who pay for all but the 10-20% of Total Coat Public Sector pensions typically paid for by the worker’s own contributions and the investment earnings thereon) simply cannot afford anything even remotely close to this level of generosity.

    And to preemptively address the anticipated comeback ………… the 4.62 times greater CA safety pension is NOT a function of the Officer’s final pay. It would remain 4.62% even if the officer’s final pay (and hence starting pension) were 10%, 20% or even 50% lower.

    The 4.62 time greater CA Safety worker pension results from the MUCH richer Formula and MUCH more generous “provisions” as follows:

    (1) Benefit from the richer “formula” of 3% vs 1.25% = 3.00/1.25= 2.40 greater
    (2) Benefit from only the CA safety worker getting COLA increases = 18/13 = 1.3846
    (3) Benefit from no CA Safety worker pension reduction for full (unreduced) retirement at age 55 = 1.00/0.72 = 1.3889

    The above beneficial ratios are multiplicative, giving the overall advantage of 2.40 x 1.3846 x 1.3889 = 4.62 times.

  15. Ed Ring says:

    ToughLove and Douglas47 – it will elevate the dialogue if you both might refrain from using terms such as “pigfest” and “dumbassery.” The substance of your debate is impressive; the invective detracts from its value.

  16. Douglas47 says:

    Noted.

    My apologies.
    ……………
    “ public employee unions “are the primary force behind the erosion of our freedoms and the ebb of our prosperity.” ?

    Strongly disagree.

  17. Ed Ring says:

    Douglas47 – it would be a boring world if we all agreed on everything. But for a moment, imagine California without government unions.

    We would be able to implement adjustable pensions in order to preserve defined benefits without impoverishing taxpayers (or crashing the economy).

    We would be able to try new and creative solutions in public education.

    We would be able to promote government workers based on their merit instead of their seniority – retaining the finest and attracting additional fine employees who don’t want any part of a unionized work environment.

    It wouldn’t be so easy for corporations to engage in cronyism by brokering one-stop deals with the unions that control legislation.

    We wouldn’t have unions, with their insatiable desire for more money, colluding with predatory financial firms to coerce politicians into signing grossly irresponsible, exploitative bond financings.

    We wouldn’t have pension funds purchasing derivatives because they have no other way to hit the unrealistic earnings targets the unions force them to retain.

    We wouldn’t have elected officials who primarily come from labor activism and are far less capable of understanding fiscal issues.

    We would be able to streamline and modernize government operations without having to go through a union.

    We wouldn’t have a government whose union controlled agenda is MORE government, regardless of the cost or benefit to society.

    We would be able to invest in cost-effective infrastructure projects instead of having to pour every spare bit of revenue into higher and higher pay and benefits for unionized government workers.

    Whatever virtues government unions offer can be retained via voluntary associations and without collective bargaining and union work rules.

  18. Tough Love says:

    Ed, I know the math too well to stand aside, feeling an obligation to less informed Taxpayers.

    While I honestly speak my mind (as I have done here …. calling a spade a spade), I can see how toning it down might keep us focused on the issue at hand … Public Sector pension & benefit reform.

  19. Douglas47 says:

    Barry Levinson,

    Police and fire are different. There’s no private job that compares. But be careful about anything you read on the web. Especially when people start doing math. Police pay varies widely from LA and other major cities to rural and valley cities. And you don’t know if they are comparing patrolmen, or including Sgts/Dets, etc.

    You can safely bet $157,151 is totally bogus.

    Read Biggs and Richwine state by state comparison of public sector wages. (They exclude safety, also). When computing public and private total compensation, they include the value of vacation, sick leave, health care, retiree health care, and several other costs.

    $157,151 is probably low.

    On the other hand, some private sector schmuck who gets envious of public “compensation” probably never considers that his “salary” typically is only about 70% of his total compensation.

    In “total compensation”, most people don’t realize how much they actually cost their employee.

    And if safety pensions are the biggest problem, why are they so often excluded from pension reform proposals?

  20. Tough Love says:

    Quoting … “And if safety pensions are the biggest problem, why are they so often excluded from pension reform proposals?”

    Because there is a great deal of political mileage by politicians taking pictures with smiling safety workers (what kid hasn’t said that he wants to grow up to be a Fireman?)…… and unfortunately for Taxpayers, political mileage is WAY more important to politicians than fairly representing ALL Taxpayers (NOT just Public Sector workers, and especially safety workers).

  21. SDouglas47 says:

    Congratulations. You have found (created, actually) two hypothetical workers who happen to have the same pension, a $1.8 million present value at age 55.

    The cop worked 30 years at $111,111a year for a lifetime salary of $3,333,330 plus $1.8 M, for a lifetime total income of $5,133,330.

    Private sector guy has a lifetime total income of $17,184,660 (more than three times what the cop made.) We don’t know what he does for a living. Could be a professional baseball player, or distributor of porn flicks.

    And this “somehow” proves that the cops pay is:

    ” grossly excessive by any reasonably metric.”????

    And we all appreciate the part where the cops pay and benefits are:

    “NEVER “earned”. They are stolen from Taxpayers”

    What you have is a total non sequitur. …..” The 4.62 time greater CA Safety worker pension” ……..means nothing, except that adequate math and fallacious logic results in gibberish.

    For the record, TL, I am begging you. Please stop embarrassing yourself. It is painful to watch.

  22. Tough Love says:

    FINAL average salaries (in the last and 30-th year of employment), lifetime wages of:
    (a) 30 x $111,111 = $3,333,330 (+ $1.8 million pension giving your $5,133,330)for the police officer, and
    (b) 30 x $512,812 = $ 15,843,603 (+ $1.8 million pension giving your $17,184,360) for the Private Sector worker

    would imply that each made the SAME dollar salary in each of the 30 years of their career.
    I am simply pointing out that ridiculous assumption to indicate that you are hardy one to judge the detailed mathematical demonstration in my earlier comment.

    ————————-

    And any point you are strugling to make is spacious.

    Why is it that you can’t (or refuse to) understand that Taxpayers have a GIGANTIC FINANCIAL PROBLEM when the TYPICAL full career CA Police Officer receives a pension (80-90% of the cost of which is the responsibility of CA’s taxpayers) equal in value at retirement to that of a Private Sector executive making over $500,000.

  23. Douglas47 says:

    I assumed inflation adjusted dollars to keep the math simple. It isn’t worth correcting for inflation or career advancement because the whole premise is invalid. You are comparing two workers whose only similarity is nearly equal pensions. (And that only because you assumed it into existence.)

    That’s not how it works. That’s not how any of this works.

    You are the hardy one strugling to make a spacious point.

    I didn’t judge the detailed mathematical demonstration, I merely pointed out that the math is moot because the entire premise is invalid.

    Just trying to help.

    I am a giver.

  24. Tough Love says:

    Replying to Douglas47 … Granting the TYPICAL (yes TYPICAL) full-career CA Police Officer a pension equal in value to that of the Private Sector Executive earning $500K annually at retirement (with 80-90% of the cost the responsibility of Taxpayers) is ludicrous ON IT’S FACE because of the ENORMOUS & UNJUSTIFIABLE COST to Taxpayers due to the grossly excessive promised pension.

    Who the two Public/Private Sector workers are and what they did for a living is not relevant.

    You don’t sound like a “giver” to me, but the rather typical insatiably greedy Public Sector “taker”.

  25. Douglas47 says:

    I’m trying to help you out here. Forget about the Private Sector Executive earning $500K annually, he is irrelevant.

    Listen to Dr. Rauh. He is your friend:

    ” Attempting to benchmark the compensation of, say, public safety officials to private sector employees is obviously problematic.”

    ” the appropriate level of pay is simply whatever the employers and employees can agree upon – but that only leads to efficient outcomes if there is transparency about the public sector compensation packages that allows all parties, including taxpayers, to understand the value of the benefits.”

    You can, if you are careful, determine the TRUE total compensation of a policeman in any given city using the same methods Biggs and Richwine did for state workers. (They didn’t include safety or any local workers because there is too much variation to come up with a meaningful average.) If you use the correct discount rates, you can FORGET about the pension, that is figured in.

    Then do the same exact analysis for various other occupations in the area. The public can compare for themselves. If the total compensation of a patrolman is more than the average plumber, but less than a utility lineman (for instance) is that fair? A detective has about the same total compensation as the average real estate broker?

    You have to do this calculation for every jurisdiction, though, and for several different grades, because a “TYPICAL (yes TYPICAL) full-career CA Police Officer” in Adalanto doesn’t make as much as one in Huntington Beach.

    “taker” that’s what the grandkids call me. How did you know?

    “insatiably greedy”, though? Kinda hurts.

    LOL!!!!

  26. Tough Love says:

    Well, play the 4-th video down on the right sidebar above (labeled SEIU Threat). Here’s the direct link:

    http://www.youtube.com/watch?v=avB_iFEURY4

    That women is the greedy Union slug, and the councilmen/women who capitulate to her threats are the pathetic scum that shouldn’t be in politics. What’s sad is that she can’t be prosecuted for her comments.

    Unfortunately probably 90% of politicians capitulate to such threats or betray the taxpayers (by voting AGAINST their better judgment) to continue the flow of campaign contributions and election support.

    Campaign contributions from Public Sector Unions/Associations should be outlawed.

  27. Douglas47 says:

    What is her name?

    What is her position in the union?

    No wonder you’re afraid of the union. You’re afraid of your own shadow.

    Powerful Public Employee Union is an oxymoron.

  28. Tough Love says:

    Douglas47, You’re delusional (or a charlatan) with comments like … you can “FORGET” the pension.

    Of the occupations you mention, the plumber and real estate broker most certainly do not get ANY pension or ANY Retiree healthcare …. ALONE worth $2+ Million to the CA full career police Officer.

    And while the Utility Lineman may work for a company with a retirement Plan, dollars-to-donuts it’s a 401K DC Plan with a contribution 1/10 to 1/5 that needed to fully fund the grossly excessive pension granted the TYPICAL CA Police Officer over his working career.

  29. Douglas47 says:

    “I know the math too well to stand aside, feeling an obligation to less informed Taxpayers.”???

    Math is useless without common sense.

    I tried to help. Your loss.

  30. Barry Levinson says:

    Douglas47 is being so disingenuous with his demanding to know the name and union position of that SEIU speaker.

    My name is Barry Levinson. What is your real full name Douglas47 and are you or have you been a public sector worker?

  31. Douglas47 says:

    Douglas47 is my name. My brother is Darrel47.

    I don’t care what her name is. It seems like it would make a big difference is she were an officer or official spokesperson, rather than just an upset union member.

    I don’t blame the state of New Jersey when TL swings into a rant and calls me a greedy crook.

    I have been a public sector worker (retired). I have been a private sector worker. I am a military veteran (Viet Nam). I do not speak officially for ANY of those groups.

    I see a lot of, shall we say, exaggerations, in these articles and I try to point them out. I have seen that woman, that video, cited several times as an example of the “power” of the unions.

    We don’t know what the committee was about or what was decided. My guess is that, like many citizens of ALL persuasions, she was politely allowed to state her opinion, her emotion.

    If, as TL says, ” probably 90% of politicians capitulate to such threats”, I’d like to know what her position is.

    I’ll try to be less demanding in the future.

    And less disingenuous.

  32. Tough Love says:

    Well, I’m pretty sure I haven’t called you a crook. And when I call you greedy (which I’m quite sure I have), it’s not you I am referring to an an individual, but to your Unions and to Public Sector workers AS A GROUP.

    YES they are greedy, VERY VERY greedy, and show zero or minimal regard for the non-1% Private Sector worker-Taxpayers, most of who make less not only in “cash pay”, but have retirement packages (pension and benefits) mostly with a value at retirement about 1/4-1/3 of what the TYPICAL Public Sector worker has been promised.

    The “MATH” demands that that MUST and WILL change, in some case resulting in material pension and/or benefit reductions for retirees as well s for CURRENT actives.

  33. Douglas47 says:

    Are Shell Oil employees pensions too high?

    Linda Cook was head of Shell’s gas and power division.

    $7.6m severance payment 

    pension pot worth almost $25m

    allowed Cook, after 29 years of service, to draw her pension from the age of 55, 
    ……………………………..

    Assume she worked very hard and had great responsibilities. Do you think she worked 18 times harder than the police chief of Westhampton Beach ?

    But, the police chief pay came from MY TAX DOLLARS!

    Do you think a large part of Linda Cook’s pay didn’t come out of your pocket? Even if you never bought a drop of Shell gas in your life?

    I bet her pension is AT LEAST 2x greater in value than SeeSaw’s.

  34. Tough Love says:

    You’re delusional and clueless.

    What I don’t know is if Public Sector workers START OUT this way or if if DEVELOPS OVER TIME.

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