State Sponsored Thievery Continues in Plain Sight
Teachers and other public employees use “air time” to pick your pocket. The California State Teachers Retirement System tries calming words. David Crane tells the truth and loses yet another job.
Saying that the state teachers’ retirement system is underfunded is the understatement of this or any year and now, CalSTRS is giving us specifics. On December 27th, it said,
“Recent media reports have suggested that to solve the unfunded liability the state will have to increase CalSTRS funding by $3.8 billion a year for 30 years for a total of more than $114 billion. Although this is an accurate statement based on current projections, achieving adequate funding can occur several ways that would be phased in over time. The CalSTRS $56 billion funding shortfall can be managed, but it will require gradual and predictable increases in contributions.”
In fact, saying that the shortfall has to be “managed” is like saying that World War II had to be managed. No, the reality is that there has to be major destruction and rebuilding, no matter how unpopular this will be with the beneficiaries of the theft, their unions and their kick-the-can-down-the-road buddies in Sacramento who are occasionally known as legislators. Tinkering around the edges and “managing” the problem will do little.
But even before we start dealing with the restructuring, we must stop the rampant gaming-the-system that continues to make a horrible situation even worse. We’ve all heard stories of public employees who retire, collect a big disability pension, but take another job at full pay displaying no signs of their disability. Even a healthy teacher can retire, still continue to work and collect $31,200 a year while receiving a full pension.
But there is one abuse that has received very little attention: purchasing service credit or “air time.”
Air time fleeces taxpayers in 21 states including California. It means very simply that public employees can plunk down some cash and purchase “years on the job” which can add a significant amount of money to their pension. In fact, pensions can be boosted up to 25% using this scam. Dan Pellissier, a adviser to California’s previous governor, Arnold Schwarzenegger, paid $75,000 in 2004 for five years of work credit. When he turns 55 in 2015, he will get a pension of $61,536 a year — almost $13,000 more than if he hadn’t bought air time. That’s $320,000 extra by the time he is 80.
For teachers, the results can also be dramatic. The CalSTRS website does a bang up job letting teachers know how best to game the system and screw the taxpayer…er, I mean, the website does an excellent job of explaining teachers’ “air time” rights. In a simple two page document, they explain just how it works for “Rick.”
“This year, if Rick purchases one year of service credit when he is 32 and his highest annual earnable compensation for the last three years is $35,000, his $100 extra a month will cost $5,950.”
So if Rick retires at 55, he will get a $100 extra a month for the rest of his life. The $5,950 he paid to buy air time will be recouped after just five years of retirement. So beginning at age 60, the taxpayer begins to pay Rick that extra $100 a month. If Rick lives to be 80, the taxpayer will be on the hook for an extra $24,000. Keep in mind that there are 755, 000 potential and actual abusers in CalSTRS and another 1.6 million in the California Public Employee Retirement System (CalPERS), where air time is also a reality. Hence while that $24,000 might not seem like an outlandish figure, there are over 2.35 million people in CA with the ability to take advantage of this state sponsored thievery. If just 10 percent of the states’ workers do what Rick does, the taxpayer is dinged for another $5.65 billion.
That the pension mess in California is spinning out of control is a given, but if you are in a position of power and dare to talk about it, be prepared to lose your job. David Crane, a Democrat, was appointed to the CalSTRS board by Arnold Schwarzenegger, but was denied confirmation in 2006 after repeatedly questioning the solvency of the system. He was told that the job of trustees is “only to protect members’ benefits,” not to worry about the long-term effects of the benefits on the state budget.
The nerve of Crane!
Then, a year ago, Crane was appointed as a University of California Regent but was just excused from that position because of his incorrect thoughts on the importance of curtailing some collective bargaining “rights” for public employees.
David Crane is a latter day Paul Revere. But if the American Revolution took place in modern Sacramento, he’d be tarred and feathered for essentially not minding his own business. Never mind the looming fiscal disaster that is around the corner for all of us in California. Let’s just not talk about it.
About the author: Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers with reliable and balanced information about professional affiliations and positions on educational issues.