All Government Employees and Retirees are Not Equal

Overlooked in the Pacific Grove government employee pension reform discussions is that employees and retirees are real people. In Rhode Island, many retirees who had been promised a modest $25,000-per-year retirement had that sum reduced to $10,000 per year. Their plight is tragic.

The discussions in Pacific Grove lump employees and retirees together. The clerk who is to retire at $30,000 per year has been subjected to the same type of criticism as the 52-year-old fire chief who may retire at age 52 at $125,000 to $250,000 per year.  I do not want to have the $30,000-per-year retiree cut to $10,000.

In Pacific Grove, from 2001 to the present, the highest-paid safety officers and elite staff have feasted with increased salaries and pensions, those at the middle have survived, and those at the bottom have been treated like throw aways.

Many Pacific Grove retirees receive modest retirements. It would be cruel to subject them to austerity at this stage of their lives. If the illegal enactment of 3%@50 (up to 90% of salary after age 50) is not repealed, bankruptcy is a certainty for Pacific Grove. Pension debt and the annual costs of pensions is the dominant factor in the financial fall of Pacific Grove; therefore, it will need to modify pensions in bankruptcy.

In bankruptcy, Pacific Grove should not favor the highest paid–the category of employees most responsible for the city’s demise. The reason city managers and city attorneys are paid so well is because they were to be the guarantors of expertise to prevent the fall of cities like Pacific Grove. They failed. They should not be rewarded by impoverishing retirees who receive modest retirements.

In a Chapter 9 (bankruptcy), only the city can propose a plan for the adjustment of debt and contract obligations.  It will be given flexibility in suggesting a plan of pension modification. Pacific Grove should divide retirees and employees into three groups: the rich, the middle, and the bottom. The rich should take the greatest reduction of pension promises in a Chapter 9. In my view, a pension exceeding $7,000 per month is rich and should be cut accordingly.

A successful Chapter 9 should assure that the city comes out of bankruptcy with a reasonable level of services. The city’s revenue will be enhanced by larger pension and salary cuts for the rich and powerful employees and retirees. That will allow the middle and bottom retirees to survive.

Bond holders must be treated fairly. The Stockton bankruptcy proposes dramatic cuts in bond obligations, but leaves pensions of $175,000 per year untouched. Cities need to retain the ability to borrow for long-term improvements like roads, sewers, and water. It can’t have it both ways.

New taxes, like those proposed in Salinas, Monterey, and Stockton, propagate a pension system that has failed. Unless new taxes are used exclusively to reduce unfunded pension obligations, new taxes will only serve to perpetuate and enhance the size of the unfunded deficits by feeding excessive pensions.

The pension administrator CalPERS claims that as a state-sponsored entity, it can’t be touched in bankruptcy. While I doubt that (federal law is supreme), the employees of a city or county are not a state-sponsored entity, and a bankruptcy court can cut pension promises made to those employees as long as the cuts are fair.

If PG is to go through bankruptcy, it should protect retirees and employees at the bottom by reducing pensions for the rich and powerful–those who brought the fall.

*   *   *

Read “THE FALL OF PACIFIC GROVE,” also by John Moore, published earlier this year.

The Fall of Pacific Grove – How it Began, and How City Officials Fought Reform
 – Part 1, January 7, 2014

The Fall of Pacific Grove – How City Thwarted Reform, and CalPERS Squandered Surpluses
 – Part 2, January 14, 2014

The Fall of Pacific Grove – CalPERS Begins Calling Deficits “Side Funds,” Raises Annual Contributions
 – Part 3, January 21, 2014

The Fall of Pacific Grove – Outsourcing of Safety Services Causes Increased Pension Deficits
 – Part 4, January 28, 2014

The Fall of Pacific Grove – Anti-Pension Reform Mayor Claims to Favor Reed Pension Reform
 – Part 5, February 3, 2014

The Fall of Pacific Grove – Privately Owned Real Property are the Only Assets to Pay for Pensions
 – Part 6, February 11, 2014

The Fall of Pacific Grove – The Cover-Up by the City After the Hidden Actuarial Report Surfaced in 2009
 – Part 7, February 18, 2014

The Fall of Pacific Grove – Conclusion: The “California Rule” Cannot Stand
 – Conclusion, February 24, 2014

*   *   *

About the Author:  John M. Moore is a resident of Pacific Grove, Ca. He is a licensed member of the California State Bar and a member of the “Public Law” section of the State Bar. John graduated from San Jose State College with majors in Political Science and Economics (summa cum laude). He then received a JD from The Stanford School of Law and practiced business and trial law for 40 years before retiring. In 1987, he was the founding partner of a Sacramento law firm that he formed in 1987 to take advantage of the increased bankruptcies brought about by the Tax Act of 1986. Although he did not file and manage bankruptcy cases, he represented clients in numerous litigation matters before the bankruptcy court, including several cases before judge Klein, the current judge of the Stockton bankruptcy case. He is an admirer of Judge Klein, for his ability and accuracy on the law. As managing partner, he understood the goals of bankruptcy filings and its benefits and limitations.

43 replies
  1. Avatar
    Tough Love says:

    John, While I understand your point, some food for thought …

    Excessive pension generosity should be determined NOT by comparing one group of PUBLIC Sector workers to another set of PUBLIC Sector workers, but by what the Public Sector worker’s pension likely would have been under the typical formulas and provisions afforded Private Sector workers in a comparable job (or if not directly comparable, a job with reasonably comparable risks, education and experience requirements, and skill sets).

    Take ANY CA Public Sector worker and find a Private Sector worker doing a reasonable comparable job and with the SAME pay, SAME age at retirement, and the SAME years of service ….

    When you compare their pensions, the value at retirement (considering BOTH the richness of the pension “formula” and the generosity of it’s “provisions” such as COLA increases and young full retirement ages) of the Public Sector worker’s pension will always be AT LEAST 2x greater than that of the Private Sector worker, MOST OFTEN 3x-4x greater, and for safety workers, 4x-6x greater.

    My point is that the Public Sector worker with the “modest” COLA-adjusted $30K pension (which makes it equivalent to a $40K pension with no COLA increases … which Private Sector pensions don’t include) would likely have received a pension half (or less) in a comparable Private Sector job. Yes, the richest safety worker pensions should come down more than the lowest, but it’s the PRIVATE sector who has been screwed FAR MORE that ANY Public Sector worker when it comes to pensions. ALL Public Sector pensions are excessive.

    And lets not forget, all $30K Public Sector pensions are not “equal” …..

    Perhaps the $30K pension to (modest-salaried) 35 year service worker retiring at age 62+ should come down minimally, but not so for the $30K pension granted to a high-earning retiree with only 10-15 years of service or retiring at age 55. My point being that if a graded scale of reductions is to be implemented, the scale of cuts should be based on the richness of the pension formula & provisions, and not on the dollar amount of the pension.

  2. Avatar
    john m. moore says:

    Pacific Grove is well past the type of reform that you describe as far as reform is concerned. But, your model may well be a reasonable model to modify pensions in PG’s Chapter 9 plan. Ultimately, the city must suggest a reasonable level of municipal services. The cost of the services will dictate the sum of money available to pay creditors, including current and future pensions. John M. Moore

  3. Avatar
    SeeSaw says:

    You write as though it is a foregone conclusion that PG is going to declare bankruptcy. Shameful! You are putting forth a “Divide and Conquer Strategy”, so you can watch the current and future retirees of your City fight to the death.

    PG is not a poverty stricken area. Your City sits on the most beautiful landscape in the State of CA–lower-middle class-poor people cannot afford to live there.

    You keep making the case that the retroactive pension increase of 1999 was adopted illegally by PG. Did a judge declare the increase illegal in a court of law? If so, you have an argument. If not–stop and get to work on a solution to keeping PG solvent.

  4. Avatar
    john m. moore says:

    Pacific Grove has raised taxes and fees to the maximum. The council wants to set aside Prop 13 at the state level. It has reduced city employees from 234 to about 70(some part time). It is a residential city with low revenues.
    Pacific Grove has a pension deficit of about 48 million dollars and a pension termination deficit of about 120 million dollars. It owes about 29 million dollars for pension bonds(1.6 million a year thru 2029).Its’ pension liability just jumped by 20 million dollars in one year. It has a 15 million dollar budget and pension expense of about 20% of that. A 50 % increase in pension expense is in place over the next five years.
    No court has ruled whether the 2002 pension increase is legal or not; although a committee composed of three council member did declare it illegal after weeks of hearings. FYI, even if the 2002 increase is set aside, Pacific Grove would require a lot of hard work by a motivated city council to stay out of Chapter 9. The present council follows the CaLPERS and employee unions line, so it will be impossible to avoid bankruptcy with this council. Also, if the City was forced into Chapter 9 with this council, it would not request a modification of pensions and would come out of bankruptcy in terrible financial shape(like Vallejo and possibly Stockton).
    I am not running for office. Dr. Dan Davis(Phd math Cal Tech), who was on the 2002 council that was deceived into adopting the 3%@50 pension increase, and I have worked since 2008 to save Pacific Grove from its’ present hopeless mess. So I don’t appreciate the cheap shot. No one has worked harder than me to avoid the Fall(over 1500 legal hours of research). And if bankruptcy is in the cards, I will work my tail off to make sure that it is a meaningful and fair plan of re-organization. John M. Moore

  5. Avatar
    Tough Love says:

    SeeSaw, take the time to read the 8 links in Mr. Moore post above. It’s an education into the greed and ave race of the Public Sector Union/workers and the complicity of Pacific Grove’s elected officials.

    Reneging on the pensions through bankruptcy is little more than just comeuppance for this greed and betrayal of their Taxpayers.

  6. Avatar
    Ha Hah says:

    Save yourself some time and energy and ignore SeeSaw who will defend public sector pensions no matter the underlying math and reality. Cheap shots is all she is capable of.

  7. Avatar
    Howard Beale says:

    SeeSaw, the truly “Shameful” thing about this situation is your shameful attitude, and the shameful attitude of all government workers and retirees who think it was perfectly fine and, in fact, laudable for publicly elected officials to take money from POAs, Firefighter Unions, CTA, AFSCME, SEIU, etc., etc., etc., then repay them all by approving pension enhancements retroactively without ever putting the money aside to cover the increase costs of it all (the reason: they could not afford, neither then nor now, to properly fund those retroactive enhancement promises).

    Your attitude is so typical of the government worker and erstwhile government worker crowd, “get to work on a solution to keeping _________(fill in the blank of the public agency involved) solvent.” Well, Sugar Pie Honey Bunch, we the private sector workers and retirees are not interested in your idea of how to keep a public agency solvent, which is, of course, to make us all pay more and get less (higher taxes, fewer services). So, continue to be delusional in thinking everything will be fine “because after all they promised us, didn’t they, and they have to keep their promises to us?” Well, sometimes promises have to be broken, especially those based on greed, lies, and an odiously perverse system of permitting government workers to, in essence, hire their own bosses.

    So, continue to dream on, especially continue dreaming that any of this has little, if any, negative impact on your children, and their children and their children. You are in a word, SHAMEFUL.

  8. Avatar
    Tough Love says:

    Wow, Nice reversal of you congratulations/apology (in a comment to SeeSaw a month or two ago) on her 40 years of service.

    Perhaps you’re starting to see why I said (in that same earlier string of comments) that my attitude in dealing with the Public Sector Unions, their minions, and this subject is … “Take no Prisoners”.

  9. Avatar
    john m. moore says:

    Howard and Tough Love: There is one true principle of Pension Reform: elect a legislative majority who will hire non-conflicted managers and attorneys and order them to take the steps necessary to allow the city/county to provide reasonable services at a reasonable cost. The experience in Pacific Grove has proven that without that legislative majority, reform is not possible. There is no bottom to what pro-union, pro CaLPERS, city legislative bodies will do by allowing the city/county managers/attorneys to thwart every citizen attempt at even the smallest pension/salary reform.Pacific Grove’s council is a perfect example of a council that has sold out its citizens. John M. Moore

  10. Avatar
    Howard Beale says:

    Mr. Moore, thank you for your considerable efforts on behalf of all the citizens (and actually, all the residents) of the Great State of California. If our State is to remain great, relief must be provided from the excessive pensions and benefits of government employees/retirees. I am certain that your efforts, and others like yourself such as Mayor Chuck Reed, will eventually produce positive results to our beleaguered cities and counties.

    My comments directed at SeeSaw, and others like her, are the result of my prodigious frustration with government workers/retirees who absolutely refuse to acknowledge that the future of California, and for that matter many other states in America, is at great risk if this issue for the ages is not dealt with. Their self-absorption, greed, and stubbornness at failing to understand the consequences that await their own families if changes do not occur, is appalling.

  11. Avatar
    Tough Love says:

    I couldn’t agree more.

    Witness my numerous postings of clear mathematical demonstrations of the HUGE and unjustified excess of Public vs Private Sector pension … and nobody seems to care (or perhaps understand the math).

    It’s indeed very frustrating. Such clear demonstrations (see example below) should rightfully shock Taxpayers into action. And mainstream journalist should (after verifying my calculations) run with it and demand change.

    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.

  12. Avatar
    SeeSaw says:

    There was a world-wide economic collapse in 2008. Blaming employees, union members or not, for the results of that collapse is what is appalling! The closest any, respective, public sector union member ever got to a public official, was casting a vote on the proposed MOU at the association meeting every year. A special committee meets with council candidates, at the local level, and selects who to endorse–sometimes they make no endorsement. The ones who are endorsed, in my municipality, get approximately three-hundred dollars for their own campaigns. There is never any quid-pro-quo discussed regarding salaries and benefits–its about what they plan to do for the city. Lot’s of corruption there? We current and retired public employees are in the same tax-payer category as you–so you can just step down off your high horses! We are all in this together, whether you believe it or not! I, personally, am under no threat of losing any portion of my own pension. I go on these threads and take your verbal abuse, because I care about those who are.

  13. Avatar
    Tough Love says:

    Howard, SeeSaw and others riding this gravy train will never change (see her latest 4/15 comment below found here …, which is why I say “take no prisoners”, by which I mean that taxpayers MUST find a way to implement very material pension reductions for the future service of all current workers, and where financial circumstance dictate, for the past service of actives and retirees as well.

    I passionately wait for a city leader with some guts to finally tell CalPERS …. NO, we can’t pay you this year, and likely won’t for quite time because we only have sufficient revenue for “essential” services, and funding these excessive pensions & benefits is not essential.


    SeeSaw says:
    April 15, 2014 at 10:38 am

    The State Legislature needs to act now! I don’t see any reason why any particular pension plan should be underfunded. Funding for budgets should include line-items for payments to the pension plan–period!

  14. Avatar
    Tough Love says:

    Stop twisting the issue. No one is “blaming” the employees, but as the BENEFICIARIES of these grossly excessive promises (the CLEAR result of collusion between the Public Sector Unions and the elected officials granting them), THAT’S is where Taxpayers must go to right this wrong … by very materially reducing these pension and benefit promises for all CURRENT (and perhaps retired) workers.

  15. Avatar
    SeeSaw says:

    My comment regarding the State Legislature has been lifted from a thread on Calwatchdog. I made that comment after an article on CW, related to CalSTRS funding.

  16. Avatar
    SeeSaw says:

    “No one is, “blaming” the employees, but……………….”

    Look who is doing the twisting now. It is also useless to remind you that refusing to pay your taxes is a crime, punishable by fine or imprisonment.

  17. Avatar
    Tough Love says:

    Yes Seesaw, spare no amount of taxation, no matter how excessive or unjust … just so Public Sector workers can get “theirs”, no matter how excessive or fraudulently negotiated the promises.

    See what I mean Howard ?

  18. Avatar
    SeeSaw says:

    My own pension is not excessive, nor was it obtained due to collusion with any elected officials. It was obtained by following the rules set before me by my employer and CalPERS. I am a taxpayer and there is no “we” or “you” category when it comes to taxation! I retired prior to the collapse of 2008–I had no participation in, or knowledge about that collapse–but the Wall Street guys did! I think that is the Private Sector, is is not TL?

  19. Avatar
    Howard Beale says:

    SeeSaw, why is it that because a person takes the position that government worker pay/benefits and pensions need to be changed that your crowd instantly takes out the “you’re blaming the ’08 crisis on government workers” card? I don’t believe I have ever read anyone say that. I mean we all know the crisis was caused by the likes of Goldman Sachs, Lehman Bros., Washington Mutual, etc. In this regard, if you haven’t already, see the 2010 documentary narrated by Matt Damon, “Inside Job”, the 2011 motion picture, “Margin Call”, starring Jeremy Irons (as the evil CEO)and Kevin Spacey, and finally the 2012 four part PBS documentary, “Money Power and Wall Street.”

    Of course, it didn’t help that because of the hyper generous defined pensions that government workers were promised that CalPERS, CalSTRS, the retirement systems of LA, SD, SF and SJ, had to invest heavily in stocks and real estate as opposed to safer bond and U.S. Treasury investments that are less volatile. So in that sense those retirement systems did help fuel the sub-prime disaster and the Great Recession(although, please take note that I didn’t say public employee pensions caused the Panic of ‘O8 and its aftermath).

    As to your description regarding the innocuous manner in which public employees and their unions exert a modicum, if not exiguous, amount of influence when it comes to California politics, well laughable does not even begin to describe your foregoing portrayal of the minor political influence exerted by government workers.

    As to the abuse you say you take from us, well if you could analyze these issues with even a modicum of facts and sense, then articulate your position in a reasonable and logical manner, then maybe you would not be abused in the manner you feel you are being abused.

    In one of my posts above, I said you were “shameful”, how wrong I was to describe you as such. Actually, in a word, you are “shameless”.

  20. Avatar
    SeeSaw says:

    Howard, I saw both “Inside Job” and “Margin Call” when they were released. I am not as stupid as you think. I intend to continue defending my positions just as you will continue to defend your own. I do not care, one wit, how you characterize me.

  21. Avatar
    Howard Beale says:

    SeeSaw, not for a moment do I think you are stupid. What I think is that you are stubborn; you refuse to acknowledge the power and influence that government workers and their union wield, you refuse to acknowledge that there is not enough money to pay career admins, maintenance workers, teachers’ aides (actually called para-educators) the equivalent of million dollar 401Ks (the old 4% rule), to say nothing of the mega six figure pensions received (or to be received) by career government administrators and professionals, the equivalent of multi-million dollar 401Ks.

    I understand that in the interests of self-preservation that you feel the necessity to defend to the death, that which is indefensible, but without people like you out there what would TL and I do with all the free time on our hands?

  22. Avatar
    SeeSaw says:

    No, I am fighting to preserve the current rule of law. My own pension is not in danger. I am not wallowing in any self-preservation syndrome. I want those public sector workers, who come later, to have the opportunity for a better life in their later years, than they would have, if the DB pensions did not exist. According to the latest press release from CalPERS, the economy in CA is 30 billion dollars stronger than it would be if the retirees weren’t drawing their pensions and putting them back into the market place. I’m sure you don’t read those releases though. At least you will have TL to commiserate with, over the fact that you did your best to tear the public sector apart in CA.

  23. Avatar
    Howard Beale says:

    Well SeeSaw, if you are in your mid-70s and live another 10 to 12 years your mantra of, “My own pension is not in danger” is probably correct. As for that spectacular piece of logic that public employee pensions are good for the economy, then I suppose unemployment benefits, workers’ compensation benefits and welfare benefits should all be substantially increased retroactively because, using the same brilliant logic, that would bolster the California economy (never mind, of course, where the money would have to come from for those retroactive enhancements).

    I am glad you recognize that TL and I are each one man wrecking crews. I can assure you that I have personally done much to bring this entire impending disaster to the attention of more than a few individuals (keep reading those articles on the subject that seem to be appearing everywhere these days). I am certain that I am speaking for TL when I say that we both will fight to the death until something meaningful is done on this subject. And at the very least, he and I will have one helluva good time creating havoc in the meantime.

  24. Avatar
    SeeSaw says:

    Well Howard, I certainly hope you don’t go so far as to fight to the death over this–its not worth it. Otherwise, you will most likely expire from natural causes before you ever succeed in cutting the pensions of public sector workers in CA. You might be part of a wrecking crew, but we outnumber you.

  25. Avatar
    Tough Love says:

    I am (and I’m sure Howard is) not looking to “wreck” Public Sector worker retirements.

    Because Public sector workers (in the vast majority of occupations) don’t earn less in cash pay than their Private Sector counterparts (and earn more in some occupations), and equal “Total Compensation” (cash pay + pensions + benefits) is a reasonable goal, I believe it is “fair” to all parties for Taxpayers to contribute toward Public Sector worker retirements an amount reasonably close to what Private Sector employers contribute to their employee’s retirements, that generally being the employer’s 6.2%-of-pay Social Security contribution on the worker’s behalf, plus typically 3%-5% of pay into a 401K plan.

    While ACTUAL Pubic Sector employer (meaning Taxpayer) contributions vary widely due to financial and political considerations, it’s not difficult to demonstrate (as I have done via comment numerous times) that to fully fund (over the working career of the employee) the common Public Sector Defined Benefit pensions (using appropriate assumptions consistent with what Moody’s now uses in it’s creditworthiness analysis) requires level annual %-of-pay TOTAL contributions of 30%-60% of pay depending on the richness of the Plan formula and “provisions” (i.e., inclusion of COLAs, young full retirement ages, etc.). Subtracting from that 30%-60% total, the typical 5%-10% of pay employee contributions generally leaves the Taxpayers with a 25%-50% of pay contribution “responsibility” … even if they have been lax in actually making such contributions.

    That 25%-50% TAXPAYER Public Sector pension contribution responsibility is DIRECTLY comparable to the typical Private Sector employer retirement contribution of 6.2%-of-pay into SS plus 3%-5% of pay into a 401K plan.

    There is simply ZERO justification for this CURRENT structure that unnecessarily (and by a very significant margin) overcompensates Public Sector workers via Taxpayer-funded Pensions that are many multiples greater in value (and hence cost) than what their Private Sector counterparts get.

    SeeSaw, while you likely consider bringing DOWN these pension to a level that results in equal Public/Private Sector “Total Compensation” to be “wrecking” public sector retirements, most reasonable people (not riding this Public Sector gravy train) would not. Take a deep breadth and look at it from the OTHER side of the table.

    It’s simply “fairness” … to ALL parties.

  26. Avatar
    Tough Love says:

    I should have added to the end of the next-to-last paragraph above the following ….

    Every $1 in taxes unjustly taken from Taxpayers to pay for excessive Public Sector pensions is $1 that the Taxpayers could have spent on current needs or saved and invested for their own (much smaller) retirements … both of which would offset by an equal amount any reduction in “economic benefits” resulting from a reduction in Public Sector pension.

  27. Avatar
    SeeSaw says:

    Wake up, TL. It is the private sector that is in the, “dark ages”. My private sector spouse is drawing a DB pension that has not been granted one penny of interest or one penny of COLA since it stopped growing in 1986, when the illegals came to CA and took over the construction industry. His pension does not even pay the cost of his medical insurance premium. My public sector pension on the other hand: My CalPERS COLA this year is less than 2%–high living? Exorbitant?

  28. Avatar
    Tough Love says:

    Your spouse’s pension is TYPICAL of what the 80-85% of PRIVATE sector worker’s get. It’s not THAT pension that is atypical, it is the pensions of all PUBLIC Sector workers.

    Please justify why Public Sector workers are entitled to greater “Total Compensation” via their MUCH MUCH greater pensions & benefits … 80-90% of which is on the Taxpayers’ dime ?

  29. Avatar
    Tough Love says:

    I was going to call them thieves, but the correct word is PIGS.

    Public Sector workers … as a group …. are PIGS, PIGS gorging at the Taxpayers’ wallet, and all enabled by self-interested elected officials (or their minions) bought-off with Public Sector Union campaign contributions and election support.

    With Public Sector worker pensions on average 3x-4x times richer (and hence more costly) than Private Sector Plans, Private Sector taxpayer should “fund” no more than 1/4-1/3 of these excessive promises (vs the 80-90% we are told that we are responsible for).

    I’d wager that Taxpayers have ALREADY funded MORE than that 1/4-1/3 and therefore should fund NO MORE.

  30. Avatar
    SeeSaw says:

    No one could eat if they only had what you say is the, “typical private sector pension”. I earned a wage for my services, and you pay for services, just like you pay the grocer for your loaf of bread. Someday, someone is going to come along and knock you off that high horse, mister high and mighty finance expert! Calling people you have never met PIGS?? What behavior and dignity you show on these forums. You must make Howard proud!

  31. Avatar
    Howard Beale says:

    SeeSaw, you are right about TL, he is a “mighty finance expert”. Maybe you should stop being so mule-headed and start taking seriously what this finance expert has to say; seems like he knows what he’s talking about.

  32. Avatar
    Tough Love says:

    No SeeSaw, You said you spouse’s pension started in 1986. Given it’s 28 years later, I’m guessing he was well below the normal retirement age of about 65+ (for most Private Sector workers) or had little savings (who’s fault is that?).

    You see, in the Private Sector, if workers (w/o a PUBLIC Sector spouse) expect to be able to survive in retirement, they have an OBLIGATION to save (mightily) and invest for 30+ years, and if they don’t, it’s THEIR problem (beyond a grudging welfare existence that Taxpayers might have to provide).

    It’s only in your PUBLIC Sector world where you EXPECT that personal savings in not really required and ALL or MOST of your retirement needs should be met and funded by Taxpayers,

    Well, due to your current mid-70s age, you likely will get away with it, but I guarantee almost all those (not near your age) who follow as public Sector workers will not … because the Taxpayers, have wised-up, are fed-up, and will not stand for it (the Piggishness) much longer.

    My Dignity ?

    Where is YOUR empathy for Private Sector workers (other than your spouse) forced to fund your MUCH richer pensions & benefits ?

  33. Avatar
    SeeSaw says:

    No, TL. My spouse’s pension stopped growing where it was in his account with his union in 1986 because the illegals came to CA and offered to build houses for $5/hr. From that time on there was no more union work in the residential construction sector. My spouse retired when he was 65 with his SS and the DB pension that he had growing when he worked in the private construction sector from 1957 to 1986 (he worked then until 2008, non-union). It was frozen when the contractors stopped signing with the unions and did not earn one more penny of interest since that time. I am certainly glad that the public sector does not hire illegals.

  34. Avatar
    Tough Love says:

    Howard, While SeeSaw is more vocal and freely exhibits that “stubbornness”, the masses of Public Sector workers (while less vocal), and especially their Unions, have no less resolve to keep this pig-fest rolling right along. Witness the 2 CA County Safety Unions suing to overturn recent laws restricting pay (and hence pension) “spiking”. Their justification …. everyone retiring before them got away with it, so they should too. Unbelievable !

    Now do you understand my description … “take no prisoners”. Pussyfooting around with the Unions will AT MOST get Taxpayers 5%-10% of the givebacks desperately needed … FROM THEM. Change MUST be forced upon them by whatever legal means Taxpayers can muster.

  35. Avatar
    SeeSaw says:

    A pretty hideous human being is what he is, Howard. He thinks that because my spouse lost his union pension, that we just sat down and stopped in place. My spouse and I saved diligently after he lost his union pension. We lived on what he made and I saved most of my salary in the 457 which feeds us. We do not have one penny of debt, and have lots of empathy for those in the private sector–those that need it–we give to others, sorry to disappoint you, TL. Many of my private sector friends and relatives make much more in that sector than I did in the public sector. You just never stop–I feel sorry for anyone who is personally connected to you. That poor thing!

  36. Avatar
    Tough Love says:

    With “legal” INCLUDING a City’s refusal to make CalPERS contributions because all available funds are need for “essential” service (of which funding of excessive pensions is NOT one). Cities in dire straits (or clearly heading that way) should be proactive, stop the pension contributions and let CalPERS chase them in the courts for money that is not available.

    And if (as I’ve read) Calpers can lay claim to City assets, then the City should FIRST mortgage such capital assets to the hilt and spend the money on infrastructure (e.g., roads) that will do CalPERS no good.

    The Cities must get down and dirty with tactics no less aggressive than those of CalPERS and the piggish Unions.

  37. Avatar
    Tough Love says:

    SeeSaw, you should be in the Guinness Book of Records for the most entitlement-minded, tunnel-vision human alive.

  38. Avatar
    Tough Love says:

    Howard, I would not expect SeeSaw to agree with you that I have any level of “financial expertise”. But perhaps she will (and certainly SHOULD) assign such expertise to Warren Buffet, who said …..

    “Citizens and public officials typically under-appreciated the gigantic financial tapeworm that was born when promises were made,” Buffett wrote in his annual report to shareholders of Berkshire Hathaway Inc. (BRK/A) released on March 1. “During the next decade, you will read a lot of news –- bad news -– about public pension plans.”

    Here ….

  39. Avatar
    SeeSaw says:

    I will just say, “likewise”, TL. Both you and Howard are lost causes. We even lost the topic in all of our back and forth. This article was about the City of Pacific Grove–one of the most beautiful places on the CA Coast. If it does go bankrupt, it will be that City and its citizens, employees, and retirees, who will be the losers. I hope it does not happen.

  40. Avatar
    Tough Love says:

    What’s important is the future of Pacific Grove and ALL of it’s residents, NOT just it’s employees.

    Unfortunately, the insatiable greed of the Public Sector Unions/workers and their elected officials’ betrayal of their Taxpayers has all but guaranteed a bankruptcy filing.

    If it does go bankrupt, they CAN make a new beginning IF they put ALL of their workers (current and future) into a DC Plan for FUTURE service, AND reduce PAST service pension/benefit accruals (for BOTH actives and those already retired) sufficiently to stabilize their financial future.

    Greed HAS consequences.

  41. Avatar
    SeeSaw says:

    If you will take a look at my post you will see that I said that, TL. You are always quick to think the worst about me. Of course if the city goes bankrupt, they will not automatically put all their workers into a DC plan. That is an entirely different situation and would require new legislation. If it does go bankrupt, there will probably be nothing left to even have a workforce.

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