This is one in a series of CPC profiles of members of California’s $100k Pension Club. Learn about the elite members of this club in our new video.
Vigilant as always, Lady Liberty keeps a keen watch over the republic, representing the opportunity and freedom that is America. She stands tall, with her eternal torch beckoning the poor, the tired, and the huddled masses … of El Monte, California.
Donated by a local physician in 1986, there is a 23-foot replica of the Statue of Liberty outside El Monte’s Civic Center. She may lack the commanding presence of the original, but the location of statue is surprisingly fitting, as over half of El Monte’s population is foreign born, and over a fourth of El Monte’s residents live in poverty. The poor, huddled masses are numerous here.
Among public-sector workers, however, poverty is unlikely.
Retired City Manager James Mundessen told the LA Times that he personally receives $216,000 a year in retirement – an amount that finances a lavish lifestyle that includes golfing trips in Scotland.
Mundessen is one of eight city officials collecting over $200,000 per year. He is even granted two pensions; the traditional CalPERS and a private supplemental pension known as PARS. This adds an additional 50% to retirement checks, equalizing their benefits with the unusually high pensions enjoyed by El Monte police.
One of the most amazing aspects of this is that these employees do not pay the typical employee contribution – the city of El Monte’s taxpayers pay everything. That means that not only do the taxpayers foot the entire bill for the pension itself, they pay the legally required share that employees are supposed to pay into their own pensions. This is unheard of in the private sector, where employees are partially responsible for their 401k contributions.
Predictably, El Monte is strapped with one of the highest pension burdens in any California city – $16.5 million in 2016, which is over 28 percent of the city’s general fund expenditures.
That unusual feature is reflected in the taxes El Monte citizens pay. The sales tax in El Monte is 9.5 percent, above the LA County minimum of 9 percent, and way above the statewide minimum of 7.5 percent. Mayor Andre Quintero believes that without his city’s unusually high property taxes, El Monte would have already gone bankrupt. Homeowners in El Monte pay an extra 0.15 percent tax based on the assessed value of their property for the purpose of paying the pensions.
Even that won’t be enough. While the property tax surcharge generated over $9.4 million last year, the total sum of El Monte’s pension obligations for the year was a staggering $16.5 million. The portion left unpaid by the property tax had to come from the general fund. According to El Monte’s 2016 budget, the city’s longterm debts total $244 million.
Pension debt is crowding out spending on other line items in the city budget, including public safety, infrastructure and social services.
The city has taken steps to curb its inflated pensions. In 2008, it closed off the plan to new employees, and the city council later eliminated the possibility of reinstating such plans.
But the benefit is written into collective bargaining agreements with unions, and California courts have concluded that employees are entitled to the benefits that they were offered when hired. Negotiations with unions are potentially dangerous, as any changes to the policy would almost certainly lead to costly lawsuits.
Throughout California, legislators are beginning to address the issue with series of minor fixes, but these tweaks don’t seem to be enough. In 2015, despite minor reforms, California was still overwhelmed with $78.9 billion in unfunded benefits for public employees.
El Monte is just a single example of a failing system that incentivizes government workers to use public funds to get rich. There is no penalty, only a shrug – and a golfing trip to Scotland.