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Did CalPERS Fail to Disclose Costs of Historic Bump in Pension Benefits?

How would you feel if someone told you they’d just increased your retirement benefit by 50%, took five years off the age you’d have to be when you could retire and collect this benefit, and then told you there would be almost no additional cost because the stock market was roaring? In California, that’s what happened in December 1999. “You” were “ALL PUBLIC AGENCIES,” and their countless thousands of public employees, and “someone” was the biggest public employee retirement system in the state, CalPERS. Click here to read the agency’s 12/23/1999 analysis.

Then how would you like it, two years later, after the market had “corrected,” you were told, via a CalPERS board resolution, that an “exception” had been made to generally accepted actuarial accounting standards, and you could choose to value your savings that had been set aside to pay for your retirement benefits at a value 10% greater than the actual market value of those assets at the time? That’s what happened in June 2001. Click here to read that 6/06/2001 letter.

Did CalPERS comply with the law when they did this?

Today, we’re left to wonder whether those actions violated state law. California Government Code Section 7507 requires that an enrolled actuary notify elected officials of the actual costs of any benefit increase.

Here is an excerpt from Section 7507:

The Legislature and local legislative bodies shall secure the services of an enrolled actuary to provide a statement of the actuarial impact upon future annual costs before authorizing increases in public retirement plan benefits. An “enrolled actuary” means an actuary enrolled under subtitle C of Title III of the federal Employee Retirement Income Security Act of 1974 and “future annual costs” shall include, but not be limited to, annual dollar increases or the total dollar increases involved when available.

The California Policy Center recently re-released a policy brief entitled “Did Your Agency Comply with the Law When Increasing Pension Formulas?” That policy brief provides clear instructions to any local elected official or local activist who would like to gather and view for themselves possible evidence of 7507 violations in their city or county.

The stakes are high. Senate Bill 400, enacted in 1999, increased pension benefit formulas by roughly 50 percent for California Highway Patrol officers. Over the next five years or so, nearly every state agency, city, and county in California followed suit, not only for their police and firefighters, but for all public employees regardless of their job description. The ongoing financial impact of this on civic budgets has been severe, and there is no end in sight.

Back in 1999, pension expenses as a percent of total operating budgets in California averaged around 3 percent. Today they average over 11 percent. Depending on how fast agencies are required to pay down the unfunded liabilities on their pension obligations, and depending on how pension investments perform over the next several years, pension expenses as a percent of total operating budgets in California could rise to over 30 percent.

With rare and incremental exceptions, all attempts so far to reform pensions – and so restore financial sustainability and robust services to California’s public agencies – have been thwarted. Reformers continue to challenge these special interests in court, but progress has been slow and expensive, with no rulings of any significance.

Did CalPERS comply with the law when they offered their agency clients the option to greatly increase pension benefits? Did they comply with California Government Code Section 7507?

Using Pacific Grove as an example of CalPERS’ followup, here’s the “Contract Amendment Cost Analysis – Valuation Basis: June 30, 2000,” in which a CalPERS actuary presented to Pacific Grove’s elected officials three distinct values for the assets they had invested with CalPERS, and gave them the liberty to choose which one they’d like to use. The higher the value they chose for their existing assets, the lower the cost from CalPERS to pay for the benefit enhancements they were contemplating.

Option 1: “No increase in actuarial value of pension fund assets.”

Option 2: “Actuarial value of assets increased by twice the increase in the present value of benefits due to this amendment, limited to 100% of market value of assets.”

Option 3: “Actuarial value of assets increased by twice the increase in the present value of benefits due to the amendment, limited to 110% of market value of assets.”

In plain English, the CalPERS actuary is inviting the elected officials to pick from three differing calculations of how much money they’ve already set aside to cover future retirement payments. The difference between “actuarial value of assets” and “market value of assets” is what creates this wiggle room. While the pension fund investments may have a well-defined market value at any point in time, in order to avoid having to continually adjust how much needs to be contributed into the fund by the employers each year, a “smoothing” calculation is applied that takes into account the market values in previous years.

Obviously, based on the above three choices, how assets get “smoothed” is a subjective exercise. Otherwise there would only be one option. So guess which option was chosen by the City of Pacific Grove? Evaluating the table on page 4 of the 6/30/2000 CalPERS cost analysis provides hints.

Option 1: Employer contribution will be 25.1% of payroll.

Option 2: Employer contribution will be 20.0% of payroll.

Option 3: Employer contribution will be 6.2% of payroll.

Pacific Grove selected option 3. Is that any surprise? Consider this absurdity: CalPERS left it up to these elected officials to enact their benefit enhancement, and then told them the cost to do so could vary by over 400 percent. Of course they picked the low payment option.

Did this disclosure comply with California Government Code Section 7507? Despite the presence of disclaimers dutifully included by CalPERS, arguably it did not. CalPERS offered Pacific Grove three alternative valuations for their pension fund investments, and then presented three very different payment requirements depending on which option they chose. The diligent reader will investigate these documents in vain for additional evidence that CalPERS offered Pacific Grove – or any of its other participating agencies – a usable “statement of the actuarial impact upon future annual costs.”

Even the actuary who wrote the analysis for Pacific Grove hedged his bets. In the “Certification” section on page 5, the actuary wrote, “The valuation has been prepared in accordance with generally accepted actuarial practice except that [italics added], under a CalPERS Board resolution, an increased actuarial value of assets may be substituted for the actuarial value of assets that would have been produced by the current and generally accepted actuarial asset smoothing method described in the annual report.”

What CalPERS did was to offer public agencies the option to “smooth” upwards the value of the assets they’d set aside to cover those enhanced retirement benefits they’d awarded during the stock market bubble. They persisted in these tactics to enable agencies that had not yet enhanced their benefits to do so, in order to “compete” with other agencies and retain employees.

Not only were these asset values smoothed, of course. The payments demanded each year by CalPERS were also smoothly increased. Smoothly and inexorably, with no end in sight.

REFERENCES

CalPERS notice to All Public Agencies, 12-23-1999 – “New 3% @ 55 and 3% @ 50 Formulas, and Change in Benefits Cap for Safety Members”
http://calocalelectedofficials.org/wp-content/uploads/CalPERS-December-23-1999-Letter-Regarding-3-at-50-to-Agencies.pdf

CalPERS notice to All Public Agencies, 6/06/2001 – “New CalPERS Board Resolution Concerning Value of Assets Used in Calculation of Cost of Contract Amendments”
http://calocalelectedofficials.org/wp-content/uploads/CalPERS-July-6-2001-Letter-to-Agencies.pdf

CalPERS analysis for City of Pacific Grove – “Contract Amendment Cost Analysis – Valuation Basis: June 30, 2000
http://calocalelectedofficials.org/wp-content/uploads/Pacific-Grove-CalPERS-3-at-50-Cost-Estimate.pdf

CLEO Policy Brief – “Did Your Agency Comply with the Law When Increasing Pension Formulas?”
https://calocalelectedofficials.org/determine-city-county-complied-law-increasing-pension-formulas/

California Senate Bill 400, enacted 1999
http://www.leginfo.ca.gov/pub/99-00/bill/sen/sb_0351-0400/sb_400_bill_19990929_chaptered.html

CLEO Policy Brief – “Coping With the Pension Albatross” – provides links to sources for historical and projected escalation of pension costs as a percent of operating budgets
https://calocalelectedofficials.org/coping-pension-albatross/

Court Pension Decision Weakens ‘California Rule’

The one thing some pension reformers say is needed to cut the cost of unaffordable public pensions: give current workers a less costly retirement benefit for work done in the future, while protecting pension amounts already earned.

It’s allowed in the remaining private-sector pensions. But California is one of about a dozen states that have what has become known as the “California rule,” which is based on a series of state court decisions, a key one in 1955.

The pension offered at hire becomes a “vested right,” protected by contract law, that cannot be cut, unless offset by a new benefit of comparable value. The pension can be increased, however, even retroactively for past work as happened for state workers under landmark legislation, SB 400 in 1999. 

Last week, an appeals court issued a ruling in a Marin County case that is a “game changer” if upheld by the state Supreme Court, said a news release from former San Jose Mayor Chuck Reed, who wants to put a pension reform initiative on the 2018 ballot.

Mayor Chuck Reed considered it a “game-changer” when a Marin County Court rejected the rigid interpretation of the California Rule of vested rights, ruling that although an employee has a vested right to a pension, their only right is to a ‘reasonable pension,’ one without benefit spiking

 

Justice James Richman of the First District Court of Appeal wrote that “while a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension.

“And the Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension. So long as the Legislature’s modifications do not deprive the employee of a ‘reasonable’ pension, there is no constitutional violation.”

The ruling came in a suit by Marin County employee unions contending their vested rights were violated by a pension reform enacted in 2012 that prevents pension boosts from unused vacation and leave, bonuses, terminal pay and other things.

These “anti-spiking” provisions apply to current workers. The major part of the reform legislation, including lower pension formulas and a cap, only apply to new employees hired after Jan. 1, 2013, who have not yet attained vested rights.

The California Public Employees Retirement System expects the reform pushed through the Legislature by Gov. Brown to save $29 billion to $38 billion over 30 years, not a major impact on a current CalPERS shortfall or “unfunded liability” of $139 billion.

Similarly, legislation two years ago will increase the rate paid to school districts to the California State Teachers Retirement System from 8.25 percent of pay to 19.1 percent, while the rate paid by teachers increases from 8 percent of pay to 10.25 percent.

The limited teacher rate increase followed the California rule. The new benefit offsetting the 2.5 percent rate hike vests a routine annual 2 percent cost-of-living adjustment, which previously could have been suspended, though that rarely if ever happened.

While mayor of San Jose four years ago, Reed got approval from 69 percent of voters for a broad reform to cut retirement costs that were taking 20 percent of the city general fund. A superior court approved a number of the measure’s provisions.

But a plan to cut the cost of pensions current workers earn in the future by giving them an option (contribute up to an additional 16 percent of pay to continue the current pension or switch to a lower pension) was rejected by the court, citing the California rule.

In a settlement of union lawsuits, Reed’s successor locked in some retirement savings but dropped an appeal of the option. Reed, a lawyer, thinks the California rule is ill-founded and likely to be overturned if revisited by the state supreme court.

He has pointed to the work of a legal scholar, Amy Monahan, who argued that by imposing a restrictive rule without finding clear evidence of legislative intent to create a contract, California courts broke with traditional contract analysis and infringed on legislative power.

“California courts have held that even though the state can terminate a worker, lower her salary, or reduce her other benefits, the state cannot decrease the worker’s rate of pension accrual as long as she is employed,” Monahan wrote.

In the ruling last week, Justice Richman describes the setting for the reform legislation: soaring pension debt after the financial crisis in 2008-09 and a Little Hoover Commission report in 2011 urging cuts in pensions current workers earn in the future.

He cites several court rulings in the past that conclude cuts in pensions earned by current workers are allowed to give the pension system the flexibility needed to adjust to changing conditions and preserve “reasonable” pensions in the future.

Some of the court rulings cited allowed changes in retirement ages, reductions of maximum possible pensions, repeals of cost-of-living adjustments, changes in required service years, pensions reduced from two-thirds to one-half of salary, and a reasonable increase in pension contributions.

“Thus,” Richman wrote, “short of actual abolition, a radical reduction of benefits, or a fiscally unjustifiable increase in employee contributions, the guiding principle is still the one identified by Miller in 1977: ‘the governing body may make reasonable modifications and changes before the pension becomes payable and that until that time the employee does not have a right to any fixed or definite benefits but only to a substantial or reasonable pension.’”

Richman’s ruling makes several references to a unanimous state Supreme Court decision in 1977 in Miller v. State of California. He said the foundation of the unions’ constitutional appeal is a “onetime variation” in one word in another ruling.

“To be sustained as reasonable, alterations of employees’ pension rights must bear some material relation to the theory of a pension system and its successful operation, and changes in a pension plan which result in disadvantage to employees should be accompanied by comparable new advantages,” the state Supreme Court said in Allen v. City of Long Beach (1955).

Richman said a 1983 state Supreme Court decision (Allen v. Board of Administration) changed “should” have a comparable new advantage to “must,” citing two other State Supreme Court decisions that said “should” and an appeals court decision that said “must.”

In a decision a month later, he said, the Supreme Court used “should” while referring to a comparable new benefit and has continued to use “should” in all rulings since then.

“It thus appears unlikely that the Supreme Court’s use of ‘must’ in the 1983 Allen decision was intended to herald a fundamental doctrinal shift,” Richman said, citing two rulings that “should” is advisory or a recommendation not compulsory.

The 39-page decision written by Richman and concurred in by Justices J. Anthony Kline and Maria Miller makes other points in its rejection of a rigid view of the California rule and pension vested rights.

“The big question for pension reformers is whether or not the California Supreme Court will agree,” Reed said in a news release from the Retirement Security Initiative. “If it does, the legal door will be open for Californians to begin to take reasonable actions to save pension systems and local governments from fiscal disaster.”

There was no immediate word from the Marin Association of Public Employees and other county employee unions last week about whether the appeals court decision will be appealed to the Supreme Court.

About the Author: Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. He is currently a Publisher for CalPensions.com.

Pensions and Taxes Increase While Labor Unions go Unchallenged

In January 2015, the Manhattan Institute’s Steve Malanga, writing in the Wall Street Journal about public pension costs gulping down tax raises, quoted me saying that no matter what local politicians tell voters, when you see tax increases, think pensions.

To paraphrase Ronald Reagan: Here I go again!

Recent accounts indicated that the California Public Employees’ Retirement System (CalPERS) unfunded pension liabilities have increased because CalPERS investment revenue has dropped. Yesterday on this site, David Kersten cited the dramatic increase of CalPERS unfunded liabilities rising from $93 billion two years ago to $150 billion today.

More to the point, Sacramento Bee columnist Dan Walters wrote, “CalPERS has been demanding hundreds of millions of dollars in additional contributions from state and local governments – hitting cities particularly hard…”

 

Despite a 42% growth in California’s general fund budget compared to 2011, the state continues to propose new tax increases and extensions.

 

With the obligation for more local taxes going to cover pension costs is it just a coincidence that so many tax increase measures are popping up on local ballots?

I don’t think so.

Sure, there will be specific reasons that local governments say they need more tax revenue. More for police or transportation or the homeless, they will say. The governments would have more revenue for those services if they did not have greater obligations for underfunded pensions.

It’s not like revenues have declined recently in government coffers. The state general fund budget is up 42% since Jerry Brown came into office in 2011. Local governments also are enjoying revenue increases, but the call for more taxes keep coming.

Take San Francisco, which could see 8 different tax increases on the November ballot. We just learned that property tax collections in the City by the Bay dramatically increased 9%. And, the city government still needs all that revenue from 8 new tax increases?

Money in government budgets is fungible to some extent. If you cover specific agency costs with a targeted tax increase, that frees up general fund money for other items, including pensions.

 

Nathan Brostrom, Chief Financial Officer for the University of California, told the Sacramento Bee that tuition hikes could be avoided if the state would assist in funding its retiree costs. He explained that the school believed it was not getting what was promised from the Prop. 30 tax hikes.

 

When the University of California declared a shortage of money a couple of years ago much angst surrounded the need to raise already high tuitions. What was the money needed for? As I wrote at the time, the UC’s chief financial officer told the Sacramento Bee that tuition hikes could be avoided if the state helped with retirement costs.

It wasn’t only the university system that saw money diverted for retirement costs. The aforementioned article by Steve Malanga in the Wall Street Journal was subtitled: Remember that ‘temporary’ tax hike for California schools? Most is now going to public worker retirements.

Ironic that the extension of those temporary taxes, Proposition 55, is on the ballot while the retirement system sputters—or is it?

As David Kersten pointed out in his column, “California Democratic politicians are too tied to their base which is the public employee unions, and are unable to make decisions that will benefit the state’s future and prevent financial catastrophe.”

That’s consistent with what I heard from one prominent Democrat who wondered with a state budget increase of more than a third over five years why so many state agencies say they don’t have enough money. The politician answered the question by saying it was because of pension and health care costs and that the majority Democrats would not take on the unions over that issue.

Too bad. That means it falls to the taxpayers. Either they pay up or reform the system on their own.

About the Author: Joel Fox is Editor of Fox & Hounds and President of the Small Business Action Committee. This article originally appeared in Fox & Hounds and appears here with permission.

California Pensions Take Above-Average Tax Bite

California pension funds take a bigger share of tax revenue than the national state average, a research website shows. Why the growing costs are outpacing the norm is not completely clear.

A prime suspect for some would be overly generous pensions, particularly what critics say is an “unsustainable” increase for police and firefighters widely adopted to match a big increase given the Highway Patrol by SB 400 in 1999.

The Public Pension Database does not have information on the formulas that determine pension amounts, like the Highway Patrol’s “3 at 50” or three percent of final pay for each year served at age 50.

One problem is the wide range of pension formulas, made even more complex by a recent national wave of cost-cutting reforms. Under a California reform three years ago, most new hires must pay more toward their pensions and work longer and retire at an older age to earn the same pension as workers hired before the reform.

 

Keith Brainard is the Research Director for the National Association of State Retirement Administrators (NASRA)

 

“Trying to compare plan benefits in one state with another state has become complicated,” said Keith Brainard, research director for the National Association of State Retirement Administrators.

Brainard started the database now operated jointly by NASRA and the Center for Retirement Research at Boston College and the Center for State and Local Government Excellence.

Several web-based seminars have been held to show how the “big data” can be used by researchers, government officials, media, and others. Trends and patterns can be identified, comparisons made, and the findings displayed in charts.

A chart on the database shows the amount of tax revenue taken by California public pensions was slightly below the national average in 2001. Then from 2003 to 2005 the California pension tax bite climbed well above the national average, maintaining a gap that by 2013 was about a third higher.

In rough terms, the public pension share of California tax revenue in fiscal 2013 was 8 percent by fiscal 2013 compared to a national average of 6 percent.

 

Source: Public Plans Database and Census of Governments.

Source: Public Plans Database and Census of Governments.

 

 

In an interview, Brainard mentioned two factors for the above-average share of tax revenue taken by California pensions. Most California government workers, including teachers and many police and firefighters, do not receive Social Security.

Only 40 percent of state and local government employees in California receive Social Security, according to the database. The Social Security coverage in some other large states: New York 99 percent, Florida 95 percent, and Texas 47 percent.

The cost of using the federal Social Security program to provide part of the retirement benefit (6.2 percent of pay each from the employer and the employee) would not show in data about the share of tax revenue taken by state and local pensions.

Another factor: The period covered by the research begins around 2000 when the three big state pension funds were spending a “surplus” from a stock-market boom not only on increased benefits but on lower employer contributions.

The California Public Employees Retirement System, which covers about half of all non-federal government workers in the state, sponsored the retroactive SB 400 rate increase for all state workers and dropped employer rates to near zero in 1999 and 2000.

Then as the stock market dipped, CalPERS had to begin raising employer rates not only to cover pension increases (AB 616 in 2001 authorized a bargaining menu for local government employees) but also to regain funding lost by the big employer rate cuts.

In addition to CalPERS, the California plans in the database include the California State Teachers Retirement System, the University of California Retirement System, the Los Angeles County Employees Retirement Association, and 11 other local systems.

The data covers most of the public pension members in California, but far from all of the pension systems. An annual report from the state controller lists 131 separate California retirement systems, many of them relatively small.

California systems in the database, with two major exceptions, paid their full Annual Required Contribution (ARC) to cover the annual or “normal” cost of pensions earned each year and the large debt from previous years, the “unfunded liability.”

Debt often is created when pension fund investments, expected by big California funds to earn 7.5 percent a year, fall short of the target, which critics contend is overly optimistic. Among other factors that can create debt is longer than expected life spans.

The California State Teachers Retirement System is listed on the database as paying only 50.9 percent of the ARC in 2013. Unlike other systems, CalSTRS could not raise employer rates. Now long-delayed legislation two years ago to pay the full ARC will more than double school rates by 2020, cutting deep into budgets.

CalSTRS spent its small and brief “surplus” around 2000 on several benefit increases and rate cuts. The pension fund was shorted when a quarter of the teacher contribution, 2 percent of pay, was diverted for a decade into a supplemental 401(k)-style individual investment plan for teachers with a guaranteed minimum return.

Three years ago, a Milliman actuarial report said if CalSTRS had kept its 1990 structure without the rate and benefit changes around 2000, pensions would have been 88 percent funded instead of 67 percent. A much smaller rate increase could have closed the funding gap.

The UC Retirement Plan is listed on the database as paying 63.9 percent of the ARC. A large surplus prompted the plan to give employers and employees a remarkable two-decade contribution “holiday.”

Most made no payments to the UC pension fund from 1990 to 2010. The surplus, driven by investment returns and other factors, peaked with a 156 percent funding level in 2000.

As painful rates were set to resume in a time of tight budgets, a UC task force said in 2010 that if normal cost contributions had been made during the two decades, the system would have been 120 percent funded instead of 73 percent.

CalPERS has not calculated how much of its current funding gap results from the pension increases and rate cuts during the surplus years. But a CalPERS chart showed that SB 400 accounted for 18 percent of the state worker employer contribution increase between 1997 and 2014.

Nearly half of the state worker contribution increase, 46 percent, was due to investment gains and losses, demographic and actuarial changes, and higher employee contribution rates. Payroll increases accounted for 31 percent of the change.

Critics say the SB 400 “3 at 50” formula has the most impact in local government, where police and firefighters are a major part of the budget. The big cities (Los Angeles, San Francisco, San Diego, San Jose, and Oakland) have their own pension systems and are not in CalPERS.

Public pensions have not recovered from huge investment losses during the recession. The Center for Retirement Research reported last monththat the 160 plans in the Public Pension Database were 74 percent funded last year, 72 percent under new accounting rules.

The Center’s report showed that from 2001 to 2015 the CalPERS funding level dropped from 111.9 percent to 74.5 percent. During the same period, the CalSTRS funding level fell from 98 to 67 percent and UC funding plunged from 147.7 to 81.7 percent.

About the Author: Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. He is currently a Publisher for CalPensions.com.

Union Greed Drives California to Bankruptcy

Few non-local people pay much attention to the goings-on in Stockton, a hard-pressed Gold-Rush-era industrial city of 300,000 that sits in the agriculturally rich San Joaquin Valley at the eastern edge of the California Delta. But bondholders, taxpayers and government officials throughout the country will be listening to U.S. Bankruptcy Judge Christopher Klein’s expected ruling on Monday as he decides whether the city may remain in bankruptcy and pursue a plan that stiffs its bondholders.

If Klein sides with the city, then municipalities will face a disturbingly low bar for pursuing bankruptcy. They will be emboldened to choose Stockton’s course — i.e., using bankruptcy as a strategic policy tool to offload debts without having to confront the main reasons that they went bankrupt in the first place, such as lush pay and pensions. Bankruptcy will no longer be a policy of last resort. This should have an impact on bond markets.

If the city wins the case, argued March 25-27 in the Sacramento federal courthouse, then the public-sector unions and the scandal-plagued California Public Employees Retirement System are right. No matter what problems befall a city, public services and taxpayers suffer first while union members and public retirement systems are protected.

Granted, no one should feel too sorry for the lenders (and their insurers) who provided the pension-obligation bonds to the city. They knew the risks when one lends money to a city — especially one controlled by the unions. But their argument is strongest. A city shouldn’t use bankruptcy as a means to get rid of uncomfortable debts. It should use this tool only when it has slashed its costs but still can’t get out from under the load.

On Tuesday, a Stockton management consultant called at the trial stated that the city would have a $100 million budget deficit in a decade if it does not take the bankruptcy route, in an attempt to show that it had no choice but to declare Chapter 9. But how hard has the city tried to deal with its debts?

As the attorney for the bond insurer noted in his closing comments on Wednesday, the city intended, from the outset of this process, to shortchange the bond holders. It has refused to address its biggest debt—the payments that it owes to CalPERS to pay for its pension obligations. It only modestly pulled back compensation from rates far above the market to somewhere near the average for public-sector workers in California.

Essentially, the city plan has put pension debt off the table, arguing that pension payments and benefits cannot legally be touched. A bankruptcy would be the place to challenge that assumption, but Stockton officials have no interest in doing so, figuring it’s easier to go after Wall Street than the unions. If Stockton gets its way, then cities can spend anything on pensions and there is no way to ever get out from under that debt.

Some of the most telling testimony came Wednesday morning, when bond-insurer Assured Guaranty’s attorney Guy Neal questioned city councilmember Kathy Miller about a July 2012 video that explained the fiscal situation to city residents. Here are some of her statements from the video:

In the 1990s, Stockton granted its employees some of the most generous and unsustainable labor contracts in the State of California.… Safety employees could now retire at the age of 50.… Many safety retirees today earn 90 to 100 percent of what they made when they were still on the job.

That’s common. But Miller noted that:

Stockton went even further than most other cities and granted things like unlimited vacation and sick time that could be cashed out when an employee retired, and added pay categories for almost everything imaginable.… Our public safety employees were costing us on average more than $150,000 a year each. That’s three times more than most of us in Stockton make in a year.

She described the “Lamborghini” health plan the city’s employees received:

This was free medical care for a retiree and a dependent for the rest of their lives. No co-pays, no generic requirements, no HMOs, and no premiums. See any doctor, stay in any hospital, purchase any drug, and just send the bill to the city of Stockton.

Absurd pay and benefits are common, and not just in Stockton. San Francisco Chronicle columnists Matier and Ross revealed recently that an Alameda County executive receives a $423,000 a year pay package for life. Compensation for California firefighters is in the $175,000 a year range. Some Newport Beach lifeguards receive $200,000 a year pay packages. As a friend of mine joked, revolutions have been fought over lesser instances of public pilfering.

Stockton pulled back on some abuses, but has left the main problem in place. Why is it OK that Stockton residents have to put up with closed parks, reduced policing and other cutbacks to protect outrageous pension and pay levels?

Currently, Stockton leaders are floating a tax increase plan to fund police officers. But money is fungible so this should be viewed as a tax designed to pay for past boondoggles. Whatever the court decides, it’s time for the public to stand up to these misshapen priorities.

About the Author:  Steven Greenhut is vice president of journalism for the Franklin Center for Government and Public Integrity. Previously, Greenhut was the founding editor-in-chief of Cal Watchdog, an independent, Sacramento-based journalism venture providing original investigative reports and news stories covering California state government. Greenhut was deputy editor and columnist for The Orange County Register for 11 years. He is author of the book, “Plunder! How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation.”