Retiree with $183,690 Annual Pension Attacks Pension Critics

“Critics of public employee retirement benefits are engaging in hyperbole and pointing to potholes as evidence that millions of elderly Californians should be stripped of their retirement savings.”
Brian Rice, president, Sacramento Area Fire Fighters, Sacramento Bee, June 2, 2015

Notwithstanding the possibility that saying pension reformers want to see “millions of elderly Californians stripped of their retirement savings” is itself “hyperbole,” Brian Rice’s recent Sacramento Bee submission requires a detailed rebuttal. Rice’s piece, entitled “Pensions aren’t being paid at expense of filling potholes,” was in response to a study written by Stephen Eide and released by the Manhattan Institute entitled “California Crowd-Out, How Rising Retirement Benefit Costs Threaten Municipal Services,” published in April 2015.

Rice leads off by attempting to link the Manhattan Institute to the supposedly infamous Koch Bros., despite offering zero evidence that the Koch Brothers contribute to that organization. And, of course, he is relying on this unsubstantiated link to discredit Eide’s work, apparently because if the Koch’s funded the work, then the author had to come up with data and conclusions that fit their agenda, instead of the facts and logic.

We’ll get to facts and logic in a moment, but first it is necessary to consider Brian Rice’s agenda. Because there is virtually no comparison between California’s urban firefighters and the “working class,” “minority, low-income and rural communities,” to whom Rice makes reference in his article, and for whom unions are more legitimately challenged to represent. Brian Rice, who retired in 2011 after 28 years of service, collected a pension in 2013 of $183,690, NOT including other benefits which probably add at least another $10,000 to his total retirement package.

Here’s pension data for Brian Rice. Notice how during retirement his pension still increases each year.

Here’s pension data for Rice and his fellow retirees from Sac Metro Fire – and Rice isn’t even in the top ten. The top spot is held by James Eastman, who collected a modest pension of $231,428 in 2013.

Rice writes: “Public employees have traded off other compensation in order to have a secure retirement.”

Really? Here’s payroll and benefits data for Sac Metro Fire’s active employees. Eleven employees made over $300,000 in 2013, 195 made over $200,000 in 2013, and 408 made over $150,000 in 2013. The Sacramento Bee recently published an analysis of average pay, not including benefits, for Sacramento firefighters. The data shows the average firefighter makes $122,677 per year, NOT including current benefits such as health insurance, and not including the employer’s pension contribution. Add those and the average goes up to $194,083. And no, that average does NOT include captains, who average $163,040 before benefits.

Quite a trade off. Modest pay in return for a secure pension. No hidden agenda there, right? No motive to engage in “hyperbole” when you encounter critics?

Back to potholes. A California Policy Center study published in February 2015, “California City Pension Burdens,” documents the average employer pension contribution for California cities in 2013 at 7% of total revenue. CalPERS is increasing their required pension contribution by 50%, meaning the average will become over 10% of total revenue. And that assumes the markets don’t correct downwards. Many cities are in far worse shape. Is it really necessary for 10% of every dollar in local tax revenue go to pay pensions that average over $100,000 per year for public safety employees who retire early and whose pensions get annual cost-of-living increases?

The “crowding out” effect is real, and it affects more than potholes. Rice is perhaps at his most hyperbolic when he writes “each year, the $13 billion that much-maligned CalPERS pays Californians in pension payments creates $30.4 billion in economic activity. The California Public Employees’ Retirement System also invests in big infrastructure projects for the state, and makes capital available to minority, low-income and rural communities.”

Bull. Bull. And Bull. To wit:

(1) The $13 billion creating $30.4 billion in economic activity is known as a “multiplier.” As Rice puts it, “They spend it on housing, food, gasoline, other necessities, gifts for the grandkids and more – which drives economic activity, creates jobs and increases tax revenues.” We hate to break it to you, Mr. Rice, but if we had been able to keep that money, instead of paying higher taxes so you can have your $183,690 per year pension, we would have also been able to “spend it on housing, food, gasoline,” etc. No net benefit there.

(2) Rice claims $13 billion is paid out annually by CalPERS to pensioners. Actually last year it was $17.7 billion (ref. CalPERS CAFR 6-30-2014, page 24). But Rice neglects to mention that 15% of those pensioners have moved out of California. And Rice ignores the other side of the equation, which is that based on their asset allocation to-date, 91% of the $12.6 billion paid into CalPERS last year was invested out-of-state. CalPERS has $301 billion in assets, and ninety-one percent of that money is invested out-of-state. As it stands today, California’s citizens, their cities, and the overall economy would be a lot better off if CalPERS, and every other pension system in California, did not exist.

(3) When it comes to infrastructure, not only is CalPERS investing a ridiculously minute portion of their portfolio, but the primary reason there isn’t money for infrastructure is because cities, counties, and the state are too busy allocating all of their financial resources to overcompensated public employees. And if CalPERS and the other pension systems were willing to invest for reasonable rates of return, instead of speculating on global markets, they could take their roughly $700 billion in assets and finance revenue producing civil infrastructure such as dams, upgraded water treatment to allow reuse of waste water, desalination plants, aqueduct upgrades, port expansions, road and freeway upgrades, bridge repair – the list is endless.

Despite Mr. Rice’s hyperbole, most pension reformers do not want to abolish defined benefit pensions for public employees, if these pensions could be made fair and financially sustainable. That would require returning to the conservative investment guidelines in place until Prop. 21 was passed in 1984, and it would require returning to the modest and fair benefit formulas that were in place until SB 400 was passed in 1999. Taking these steps would not only save defined benefit pensions, but enable massive investment by the pension systems in revenue producing civil infrastructure.

There’s a lot of middle ground between someone collecting a pension of $183,690 per year, and being “stripped of their retirement savings,” Mr. Rice.

*   *   *

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

34 replies
  1. CK says:

    Remember, anyone who makes $183K/year is part of the evil rich 1% and should be taxed down to a “fair” income. Unless, of course, they are union retirees. Then they are barely getting by on such a modest amount.

  2. Robert Sarkissian says:

    Public employees pensions are the single most destructive force behind every mmunicipality’s failing finances. At this point we are merely rearranging the deck chairs on the Titanic. Financial collapse is inevitable.

  3. Mark says:

    One interesting note about Sac Metro Fire is that its fire Chief is Kurt Henke, who as part of the Vallejo firefighters union played a major role in moving that city into bankruptcy several years ago.

  4. CJ_Roses says:

    Simply a fantastic fleecing of another lying union clown.

    If only the public were not so naive.

  5. Al says:

    you are correct that govt pensions will “kill us all”. they made sense once upon a time, but the public employee unions have, thru a combination of fear tactics and judicious campaign funding, turned the rest of us into their slaves.

    now, for the average worker, there is no way in hell they will ever get a pension of over 100k a year, and I keep reading how social security is running out of money. but for these govt pensions, they will just raise your taxes or take the money from other areas to pay these fine folks.

    note that I am not saying you dont deserve a decent pension. but making more in retirement than you ever did working makes no sense at all. not to me.

    so, for the firemen and such who get such gold plated pensions….good for you.

    to the rest of us who allow them to get way with such egregious work arounds of the system….we are dumbasses.

    dumbasses who will go without (insert here: sound infrastructure, livable wages, reasonable taxes, etc) while brian rice complains that he is barely making ends meet.

    So, brian, enjoy it while it lasts. because I assure you it wont. it is financially impossible for it to last. and what is unsustainable will not be sustained.

    consider this: many promises were made, few will be kept.

  6. Sandy says:

    How can we as taxpayers have no power to fight this steady erosion of fiscal solvency at every government level due to outlandish pensions. If this were 1776 Boston, we’d be dumping tea in the harbor! Our elected representatives benefit from the very pension schemes we’re fighting to reform and successfully twist the facts to support the stays quo (with impunity).

  7. Sandy says:

    How can we as taxpayers have no power to fight this steady erosion of fiscal solvency at every government level due to outlandish pensions. If this were 1776 Boston, we’d be dumping tea in the harbor! Our elected representatives benefit from the very pension schemes we’re fighting to reform and successfully twist the facts to support the status quo (with impunity).

  8. Pierre says:

    Keep in mind if one were receiving $180,000 plus as retirement pay the Federal Government would probably need 25% and the State possibly 7 1/2%.

    Question! If one moves out of State is he/she required to pay Calif Income Tx.

    and the streets re still a mess.

    Pierre

  9. nate says:

    No, retirement income is sourced to the state of residency, so the CA retiree that moves to Washington State not only doesn’t pay CA tax but any state income tax at all since WA doesn’t have income tax on individuals.

  10. S Moderation Douglas says:

    “………….and it would require returning to the modest and fair benefit formulas that were in place until SB 400 was passed in 1999.”

    No mention of PEPRA (AB 340)?

    Those formulas have been returned, employee contributions have increased (mine doubled), retirement ages have increased, and a cap on pensionable income means for new employees, $183,000 pensions will no longer occur.

    “most pension reformers do not want to abolish defined benefit pensions for public employees”

    That’s not what I’m hearing.

  11. Equal Time says:

    When you can’t debate on specifics, attack the messenger instead. The amount one who comments receives as a pension is irrelevant to the substance of the debate. Would his “attack on pension critics” be more acceptable if he had no public pension? So shallow. At least he is not a hired gun being paid for what he writes.

  12. Henry Batsel says:

    Maybe we should have a term limit on government employment – 10 years with social security paid just like the rest of us. Entirely put an end to the largess. I will sign the initiative and it will most certainly come to that!

  13. Tony A says:

    No the pensions were not the cause of municipal failures. The recession, poor management and unpaid wage increases were the cause. The pensions are funded at 70% from investment returns, 15% from the employer and 15% from the employee. The problem today is that there is a minority of citizens who don’t like paying for anything to do with government, funded by out of state billionaires, and public managers which shortchanged their obligated payments to the pension systems.

  14. BOPRN says:

    ED,

    Still chasing your tail I see. How sad it is to see you continuing to attack people who worked for a living while the true economic problems the state faces is the billions being given each year to illegals, welfare scammers, and the like. Oddly enough, pensions are becoming less meaningful as minimum wage goes up. With the $15/hour push, many people who gave decades of their lives in government jobs will find their pensions worth less than minimum wage. Of course the minimum wage change, along with the inflation that will come with it will make the pension issue mute in a five or so years. I correctly predicted this a few years ago in a counter argument to one of your many misguided op-eds. Wish I could say it was a joy over the years watching you spew (and your ilk) out hatred towards those who did the job you could not do, but it hasn’t. To watch such pathetic ‘people’ treat those who have worked for a living worse than those who cheat government programs for a living has made me ill. Wish you the best – or at least what you deserve.

  15. SeeSaw says:

    That’s not the way I remember it. I followed the Vallejo Times Herald news from the first step to the final. Vallejo was already into bankruptcy on its own; Kurt Henke was the employee, activist who stood up, took the heat necessary to protect himself and the other firefighters. No wonder he has become Chief in another City.

  16. SeeSaw says:

    I bet you used to live in a sparsely populated area like I did–Wyoming–a town of 3,000. Can you imagine the chaos that would ensue in CA with volunteer firefighters–a state populated by 38 million plus! Can you even imagine the cost of the fire insurance premium on your own home, if your fire department were made up of volunteers!

  17. SeeSaw says:

    Please wake up! Fiscal solvency took a nosedive in 2008–it was a debacle caused by the corruption of Wall Street itself. You must have missed the documentary movie, “Inside Job”. We are only as strong as our weakest link–you and others like you want to weaken the links until our country breaks!

  18. Ed Ring says:

    BOPRN – it is always good to hear from you. The point you’re making about inflation is logical but incorrect because pensions are almost invariably hedged against inflation. In most cases, when the annual purchasing power of a pension benefit for any government retiree falls below 80% of what it was at the time they retired, the 3.0% cap on cost-of-living adjustments is removed without further limit. This means that inflation, at the most, can reduce our pension liability by 20%. That helps, but it is not a game changer.

    On another matter – it would further our discussion if you would refrain from incessantly referring to the work that pension critics produce as animated by “hatred.” We do not hate anyone in public service, and our sharpest criticism is reserved for government unions, which should be illegal, and their opportunistic partners in the financial community.

    As for your point about how taxpayers are forced to waste billions each year on “illegals, welfare scammers, and the like,” you make a good point. But public safety unions aren’t doing anything to solve these issues, nor are they trying to take on the environmental extremists. Flawed, corrupt, overbuilt social welfare programs waste billions, but they are also a meal ticket for the government unions because they create government jobs. Misanthropic, extreme environmentalist regulations kill private sector jobs and raise the cost of living for everyone, but because they also make it impossible to build any public infrastructure, they enable more money to be allocated to overpaying government workers.

    Government unions should be illegal. But since they do exist, they might fight for all workers, instead of giving a pass to the environmentalists and the failed, overbuilt programs of the social welfare crowd.

  19. Larry LaFontaine says:

    How did I miss all this Big Retirement Money– As an Engineer from S.B. Fire Dept. I was Disability Retired in1976 at $780. per month

  20. Steve says:

    Ed,
    Since you seem to enjoy transparency so much why is that you and your organization, and other of your ilk, will not make public the names of your donors and the amounts that they donate? I guess it wouldn’t look good to the general populace to know that most of the outright attacks being waged against most of the unions in this country are being funded by some of the richest people in this country. You are right that the author probably would not be able to “prove” that the Koch Brothers and others like them are behind your work and many of the others like you and your organization. You figure these guys have enough money that they are able to hire plenty of lawyers to be able to funnel their money into the political framework without their name being attached to the donation. establish Why not spend your time enlightening the public on the real culprits of the 2008 collapse. Like Martin Sullivan, the former CEO of AIG, whose leadership bankrupted that company but still received a $47 MILLION severance package. A severance package that in essence was paid to him by tax payer money in the form of huge bailouts to AIG, Goldman Sachs and many of the others in the banking and investment industry. The other pile of dung that you so casually throw out there is that a lot of the retirees take their money and run to other states. Those amounts are but a drop in the bucket of what corporate America and the wealthy park in off shore accounts and other “Foreign investments”.
    So how does it feel to be nothing more than a shill for the top 1%?

  21. wesmouch says:

    Since the Union goons have pretended to work all these years then we should pretend to pay their pensions. Public Unions are the great scourge of America and a pillar of Democrat fund raising

  22. Ed Ring says:

    Steve – thank you for your comment. It would be fine with me if we disclosed the names of our donors but they have a right to protect their anonymity and we respect their wishes. I will say that the vast majority of our donations come from individuals who live in California. But you’re missing the point.

    There are wealthy individuals and corporations who make contributions to organizations across the ideological spectrum, and if you analyze their pattern of giving, it is surprisingly balanced. You seem to be claiming that the Koch brothers are funding attacks against the unions, and apparently you think that is a bad thing. Do you have any criticism of the hundreds of millions that come from wealthy donors such as George Soros or Tom Steyer?

    As for your comments regarding the causes of the 2008 economic crisis, you are being rather selective. First of all, if it weren’t for government pension funds pouring money into the markets, demanding 7.5% annual returns – or much more since their $4.0 trillion under management is woefully inadequate to fund the pension commitments they lobbied for and made – there would be far less incentive for corrupt practices on Wall Street. You also ignore the role of cheap credit and subprime lending, which created the financial house of cards in the first place. There is plenty of blame to go around for the crisis of 2008, as well as for the ones preceding 2008, as well as for the inevitable next one.

    Finally, you have a problem with taxpayer money bailing out Wall Street firms – so do we – but you seem to have no problem with taxpayer money bailing out pension funds which are themselves an integral part of Wall Street, and which have overextended themselves precisely because they’re awarding obscenely generous pensions like the one we’re criticizing in this post.

  23. wesmouch says:

    Are you suggesting that public Union slobs deserve the same pay as CEOs? You have got to be kidding

  24. Ed Ring says:

    Equal Time – the entire point of this post was that the “messenger” was being attacked by Brian Rice. This post is a rebuttal to Rice’s own guest editorial, published in the Sacramento Bee, where he accused pension critics of being funded by the Koch Bros. Instead of focusing on whether or not post-employment pay and benefit packages that average over $100,000 per year for full-career public safety retirees is either fair or affordable, he attempts to associate those who criticize this practice as being biased hirelings of the supposedly infamous Koch Bros.

    This sort of behavior makes Brian Rice fair game to ask a similar question: Is he biased in favor of these pensions that we deem to be unfair to taxpayers and financially unsustainable, because he himself happens to be collecting an annual pension of $183,690 per year?

    Moreover, Equal Time, within the constraints of a short essay, we challenged, and refuted, many of the “facts” that Rice offered up to support his argument. And by the way, it is rather unlikely that Rice wrote his editorial all by himself, because there are literally hundreds, if not thousands, of full time professionals employed by public sector unions who make it their business to produce these sorts of cookie cutter opinion pieces, then work with the various union officials to place them in newspapers and elsewhere in the media.

  25. BOPRN says:

    RESPONSE TO ED’S POST…

    In most cases, when the annual purchasing power of a pension benefit for any government retiree falls below 80%
    75% FOR SOME 80% FOR OTHER 0% FOR YET OTHERS

    of what it was at the time they retired, the 3.0% cap on cost-of-living adjustments is removed without further limit.
    THE CAP IS 2%, NOT 3% A YEAR. THE LAST TWO YEARS THE COLA WAS 1.49% AND 1.64%.

    This means that inflation, at the most, can reduce our pension liability by 20%. That helps, but it is not a game changer.

    20% IS NOT A GAME CHNAGER??? 20% IS FOR SURE A GAME CHANGER. IF YOU WERE TALKING ABOUT UNDERFUNDING OF THE PENSION SYSTEM YOU WOULD GO ON ABOUT A 20% DIFFERENCE, BUT NOW…NO BIG DEAL.

    On another matter – it would further our discussion if you would refrain from incessantly referring to the work that pension critics produce as animated by “hatred.”
    YOU DO HATE GOVERNMENT EMPLOYEES. YOU AND YOUR ILK CONSTANTLY ATTACK THE MIDDLE CLASS GOVERNMENT EMPLOYEE. IF ONE WAS A SUSPICIOUS SORT, YOU COULD BE SEEN AS COLLUDING WITH SOCIALISTS TO ELIMINATE THE LAST REMAINING MIDDLE CLASS JOBS THAT COME WITH BENEFITS. OF MAYBE YOU COULD BE MISTAKEN FOR A CORPORATE SHILL, TRYING TO ENSLAVE WHAT REMAINS OF THE LABOR FORCE – THAT ISN’T ALREADY ENSLAVED. BUT WE ALL KNOW THAT ISN’T THE CASE, WINK.

    As for your point about how taxpayers are forced to waste billions each year on “illegals, welfare scammers, and the like,” you make a good point. But public safety unions aren’t doing anything to solve these issues….
    I FEEL A BIT LIKE JON STEWART HERE…TALKING TO THE SLOW KID IN CLASS. ED – THE PUBLIC SAFETY UNIONS WOULD BE WAY OUT OF LINE TO ADDRESS THESE THINGS. WHAT YOU ARE TALKING ABOUT IS POLITICS, AND THAT IS IN THE ARENA OF POLITICIANS AND THOSE WHO WOULD EFFECT POLITICAL DISCOURSE. THAT WOULD BE PEOPLE LIKE YOUR LITTLE CLICK OF HATERS. YOU SEE, IT IS Y.O.U.R. RESPONSIBILITY TO ADDRESS THE EFFECTS OF ILLEGALS, WELFARE SCAMMERS, AND SUCH. IT IS YOUR RESPONSIBILITY TO ADDRESS HOW THESE PEOPLE NEGATIVELY EFFECT THE ECONOMIC WELL BEING OF THE STATE. IT IS YOUR RESPONSIBILITY TO PUT PUT THESE TOPICS IN PRINT. IT ISN’T COME COP IN L.A. I MEAN…ARE YOU SERIOUS HERE?

    Government unions should be illegal.
    IF YOU ONLY HAD A CLUE (EVEN A LITTLE ONE) OF HOW MUCH THE GOVERNMENT SAVED BY PROPER USE OF THESE UNIONS, YOU WOULD BE SINGING A DIFF TUNE.

    FINALLY ED, I just feel sorry for you. If, as you say, you are not a hater – what are you? A jealous corporate boot licker? If you are indeed interested in the economic well-being of the state, you wouldn’t be chasing people who actually work for a living and get paid. No, you would be exposing those who sit at home and claim disability because they don’t want to work. Just the other day, I was sitting in a realtors office looking at a couple of foreclosures to buy. In comes some approx 24 year old kid to drop off a rental agreement. After the guy leaves, the realtor tosses his app aside in anger. I ask ‘what did he do’. The realtor says ‘you want to know’…and reads his income to me – $900 SS disability, girlfriend $900 SS disability, some other assistance package $600 (can’t remember the name of it). $2400 right there. The realtor goes on to tell me the guy has EBT, will get HUD assistance, doesn’t have to pay his own health care…and so on. There was nothing wrong with the guy, but all told he has $4,000 a month coming in and has never worked a day in his life. BUT YOU AND YOUR CLOWNS GO AFTER PEOPLE WHO WORK.

    If that isn’t hate, I don’t know what is.

  26. Robert Fellner says:

    Mr. Rice was also employed under a contract where the employer paid his share of pension contributions and counted that towards his pensionable compensation.

    Ie. He makes $100k a year, if his share of pension contributions would have been 9% of pay, taxpayers pay the full $9k, and when it comes time to compute his pension they base it off $109k, not the actual $100k he made.

    Talk about the best of both worlds! Wages appear lower to help bolster the claim of how “trade-offs were made in lower wages,” while the future multi-million dollar pension package – which costs the employee nothing – is based off a higher amount.

    Article 18 section A on page 29 of their MOU is where this information can be found: https://metrofire.ca.gov/phocadownloadpap/522%20mou%202007-2013.pdf

  27. Equal Time says:

    Regarding this Ring statement – “if it weren’t for government pension funds pouring money into the markets, demanding 7.5% annual returns ” – I did not know an investor could succeed in demanding a rate of return – so I went to my bank and demanded 7.5% on my 24 month CD instead of the .6% it is paying. After the laughter subsided, I was told that investors do not determine the rate of return, it is the market and the banks that determine it. Who woulda thunk? Another theory debunked.

  28. Ed Ring says:

    Equal Time – are you aware that we are apparently in agreement? Risk free rates of investment are not anywhere near 7.5% per year. If you want that much return, risk free, you get “laughed out of the room.” Yet that is what pension funds claim they can earn, year after year, and when they don’t, taxpayers make up the difference.

    As an aside, the government unions love perpetuating this fiction, because the HIGHER one assumes the “risk free” rate-of-return projection, the LOWER the calculation of “normal contributions,” which apparently is the only portion of pension contributions that the unions are willing to negotiate a co-payment for by the employee via payroll withholding. Never mind that this fiction of a 7.5% return is the reason the “unfunded contribution” in most cases constitutes the majority of the employer’s contributions each year to the pension funds.

    Which brings us back to the markets. Yes, when you are given a charter to earn 7.5%, you’ve got $4.0 TRILLION to play with (that’s the approximate asset value of all government employee pension funds in the U.S.), and you’ve got the taxpayers on the hook for any shortfalls – i.e., no risk, no moral hazard – you pour money into risky investments to try to hit your numbers. And that corrupts the markets. If you don’t believe me, go talk to any honest investment banker and get their opinion.

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