Public workers' hefty pensions strain budgets
dailybulletin.com
At a time when government agencies are cutting back on law enforcement, health care for children and services for the poor, the number of public servants collecting $100,000-plus pensions - including one raking in nearly $500,000 a year - has exploded in recent years, in some cases tripling or even increasing sevenfold.
In Los Angeles County, the number of retired county employees receiving pensions of $100,000 or more has nearly tripled from 1,198 in 2004 to 3,096 today, the Los Angeles Daily News has learned through a series of Public Records Act requests.
Throughout California, the number of retired state workers collecting $100,000-plus pensions has mushroomed more than sixfold from 816 in 2004 to 5,115 now.
And the number of school administrators and teachers collecting six-figure pensions has rocketed more than sevenfold from 427 in 2004 to 3,088 now.
Los Angeles, excluding the Department of Water and Power, currently has 600 retirees collecting more than $100,000 a year.
The dubious honor of collecting the state's highest pension belongs to former Vernon City Administrator Bruce Malkenhorst, who receives $499,675 per year - even though he is currently facing two counts of misappropriating public funds for allegedly taking $60,000 in city money for personal use.
Malkenhorst's attorney did not return calls for comment.
As grand juries throughout the state are investigating pension systems, former Assemblyman Keith
Richman, president of CFFR, said these huge pensions are the result of a "corrupt pension system."
California, Richman said, is the only state in the nation that allows employees to use their highest year of salary - including unused vacation, vehicle allowances, bonuses and other compensation - in calculating their pensions.
"The bottom line is we have very extravagant pension benefits that taxpayers can't afford," Richman said. "Pension-spiking has played a large role in this. We have public employees throughout the state who are retiring at age 50 and collecting more than 100 percent of their salaries, getting annual cost-of-living raises and lifetime health benefits."
Union leaders bristle at the suggestion that most public workers receive extravagant retirement benefits.
Barbara Maynard, a consultant for the Coalition of LA City Unions and the Coalition of County Unions, said only a small percentage of retired public servants receive "these exorbitant pensions."
"It's really upper management who are receiving these benefits," Maynard said. "The rank-and-file workers are really struggling to get by on very meager pensions averaging $40,000 a year."
The revelations about the eye-popping pensions - a byproduct of what officials describe as a "Cadillac" pension system elected officials have created at the prodding of public employee unions - comes as Gov. Arnold Schwarzenegger, Los Angeles City Councilman Bernard Parks and others are calling on elected officials to roll back generous pension and retiree health care plans.
Schwarzenegger has estimated the unfunded retirement promises - the money the state has promised to pay over the lifetime of its employees and retirees without designating where the funds will come from - could be as much as $300 billion if investments don't meet projections.
Without reforms, officials say taxpayers will be saddled with more taxes and watch more of their hard-earned dollars going to finance the lavish lifestyles of retired bureaucrats.
When the state's first pension fund - the California State Teachers' Retirement System - was created in 1913, teachers who worked 30 years were paid a $500 annual pension, the equivalent of about $10,500 annually now. Over the years, other public pension systems were created and most were designed to pay public servants about half their salary in retirement.
In 1999 - at the height of the economic boom - labor unions aggressively lobbied state lawmakers to pass SB 400 - the "pension-boosting bill" - retroactively boosting pensions for state employees and allowing them to retire at younger ages with higher pensions.
Then in 2003, the California Supreme Court issued a ruling on a 1997 lawsuit allowing public employees to use bonuses, clothing and auto allowances, unused vacation and other income in calculating their pensions.
Since then, government agencies throughout the state have adopted similar plans, and public employees - whose pensions are usually based on the highest year's pay - have used a variety of methods to "spike" their pensions shortly before retirement.
Now, the pension systems charged with disbursing their checks have lost tens of billions of dollars in the stock and real estate markets.
As a result, the amount of taxpayer subsidies for these pension plans will have to be increased by billions of dollars in the years ahead, requiring more tax increases and cuts in public services.
The nation's largest public pension fund, the California Public Employees' Retirement System, has recently lost a third of its value, dropping from a high of $253 billion in December 2007 to $181 billion as of June 30.
Even before the historic stock market crash, the annual taxpayer contribution to the fund jumped from $4.2 billion in 2003-04 to $7.2 billion last fiscal year.
Fearing the costs will consume an ever-greater portion of state and local government budgets, CalPERS Chief Actuary Ron Seeling recently described the costs as "unsustainable."
CalPERS spokesman Ed Fong said in response the system is planning to meet with representatives from public employee unions and its 26,000-member government agencies to discuss ways to reduce costs to ensure retirees are paid the amounts owed them.
"There is a recognition by our board that this is an issue that needs attention," Fong said.
Despite failed efforts in recent years to reform the public pension and benefit systems, David Crane, special adviser to the governor for jobs and economic growth, said a growing number of Democrats and Republicans in Sacramento agree steps have to be taken or the snowballing costs will bury their pet projects and programs.
While existing pensions can't be renegotiated, Crane said the governor plans this week to propose several reforms, including less generous pension plans for newly hired workers and increased retirement ages.
"I think the Legislature increasingly understands the nature of this problem," Crane said. "They have been issuing general obligation bonds regularly without voter consent to pay these benefits. But now the programs they care very deeply about are being shut down because we have to pay off these past pension promises."
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