California proposal for pension reform

[samclem]

Yep. Fully agree. Double dipping is simply another version of having something both ways.

Just to take the other side:
Why shouldn't the public sector be able to hire the most qualified person for an opening (i.e. why should the person not be hired, or be paid less, if he/she happens to be a retiree from the state system).

Conversely, if a state employee has earned a pension and chosen to retire, why should those retirement benefits be reduced if the individual subsequently takes another public sector job? The benefits wouldn't be reduced for a private sector job, right?

 

[Leonidas]

The worst that I heard (and do not know how it works) was a Chief of Police got a big pension increase when the mayor gave him a salary increase just before he retired... it cost the pension plan millions of dollars.. he only got ONE paycheck at that higher rate but it was enough for the much higher pension... I think they have fixed that... but am not sure...

I know that case you mention (know the man in question as well), and we've discussed it here in the past. He will have to live to about 125-years-old before the extra money that last minute pay raise will cost the pension system the first million.

The raise means an extra $1,054 for the chief, before taxes, and brings his annual salary to $154,024. Paperwork processed Wednesday says the raise started Aug. 30. More significant is how the raise improves Bradford's pension. Retirement benefits for all Houston police officers are based in part on their peak pay. The change automatically hikes Bradford's annual pension by about $9,000 to $95,630, city Finance and Administration Director Philip Scheps said.

Bradford carried some serious heat and weight for the mayor, ("Crime Lab Fiasco", or Operation E-Racer ring any bells?) and this was the mayor paying him off for catching bullets that could have should have hit the mayor. Plus there was a significant drop in crime during his tenure - some might call it a performance bonus.

Was it wrong? Most definitely, but Lee Brown was famous for this kind of abuse of the pension system. Talk about Pension Holidays, that man tried to put the city on a permanent Pension Vacation. At the same time he was using increased future pensions to convince about 35% of the police department to stay on the job during a time in which the labor market was very competitive and the city's efforts to hire new officers were a miserable failure. He didn't care because all the pension costs were rigged to take place right after he was mandated to leave office due to term limitations. The pension system eventually straightened it all out with the next administration - it took a lawsuit against the city - but things are fixed now for the most part.

 

[GregLee]

$1250/household less debt obligation,

As I understand it, the state's current plan is to increase taxes/fees/employee contributions over 30 years to achieve full funding of the pension fund, probably assuming 7.75% earnings on the portfolio. So maybe you could estimate how much each household will save each year through the anti-spiking bill if passed? I admit I haven't worked it out, but my intuition is that it is not real money.

 

[Chuckanut]

I think a 3 year average to avoid spiking is probably fine. My state has 5 year averaging which in inflationary times (OK, not to worry at the moment) can punish a retiring worker quite a bit. Also, if the spiking is employee chosen that is one thing. On the other hand if the employer simply requires a lot more work than normal and is willing to pay for it in extra dollars, is that really spiking, or just a way of paying the worker what he/she should already be earning? just a thought.

 

[Chuckanut]

I should note that in my state, most public employeers are covered by a reasonable but certainly not extravigent pension system. However, public safety people (police, firemen, sheriffs) have a much sweeter deal with earlier retirement at a higher percentage of pay. I think prison guards are required to retire after 20 years. I am not sure how I would handle this issue.

 

[youbet]

I think a 3 year average to avoid spiking is probably fine. My state has 5 year averaging

5 year averaging is a good number, fair to both the employee and the tax payer (or private employer).

Also, if the spiking is employee chosen that is one thing. On the other hand if the employer simply requires a lot more work than normal and is willing to pay for it in extra dollars, is that really spiking, or just a way of paying the worker what he/she should already be earning? just a thought.

If the employee works overtime or receives large bonuses in the final years, good for him! But these payments should not be part of the pension calculation.

 

[youbet]

As I understand it, the state's current plan is to increase taxes/fees/employee contributions over 30 years to achieve full funding of the pension fund, probably assuming 7.75% earnings on the portfolio. So maybe you could estimate how much each household will save each year through the anti-spiking bill if passed? I admit I haven't worked it out, but my intuition is that it is not real money.

Sounds like the anti-spiking bill should be passed immediately! In these tough times, tax payers will appreciate the savings even if they are modest and the employers and employees who have been gaming the system using spiking won't mind because "it is not real money."

It's a win-win!

 

[Indigo Mule]

For PERS (Public Employees Retirement System) and STRS (State Teachers Retirement System), only base salary is subject to the contribution. Vacation payoffs, overtime, extra pay, longevity--these are split out on a separate line and are not part of the annual salary.

I work for a K-12 school district. In our district, for PERS, the employee has a 7% deduction and the employer makes a 13.02% contribution (they also have the 6%/6.2% Social Security deduction/contribution). For STRS, it's 8%/8.25% (with no Social Security).

Most of the proposed reforms are sensible and needed. It's going to take several years, though, to see these approved and implemented.

 

[youbet]

Just to take the other side:
Why shouldn't the public sector be able to hire the most qualified person for an opening (i.e. why should the person not be hired, or be paid less, if he/she happens to be a retiree from the state system).

I think you and I have different definitions of "double dipping." If an accountant for the Illinois Dept of Motor Vehicles retires at 55 yrs old and takes a job as a truck mechanic for the Village of Naperville, that would be fine with me. But if the accountant retires from his job on Friday with a hefty pension (thanks to a generous formula and spiking ) and returns to his desk as a well compensated contractor on Monday, that's double dipping. Here in Illinois, I'd assume that situation isn't because he's the most qualified person but rather because he's politically connected, has done past favors for someone or is paying off someone.

Conversely, if a state employee has earned a pension and chosen to retire, why should those retirement benefits be reduced if the individual subsequently takes another public sector job? The benefits wouldn't be reduced for a private sector job, right?

If the person wants to retire from his job, he should. But that retirement shouldn't be based on also returning to and continuing the same job the following Monday. If he wants to go find a job in another public organization (under another public pension system), fine. In fact, I endorse that. If he wants to work in his current organization, rather than retire he should just stay on.

The double dipping common here in Illinois involves returning to your old job, or a similar job under the same pension system, immediately after retiring. Frequently, it involves being "connected" to the right people.

 

[clifp]

If the person wants to retire from his job, he should. But that retirement shouldn't be based on also returning to and continuing the same job the following Monday.

The double dipping common here in Illinois involves returning to your old job, or a similar job under the same pension system, immediately after retiring. Frequently, it involves being "connected" to the right people.

This is pretty much my definition of double dipping. I actually think there is reasonably easy (although politically unpopular) solution, which is the same as Social Security uses for older workers, namely defer their current social security benefits on prorated basis based on their wages. Although this pisses off older workers, everybody I've heard form SS says that the system treats everybody fairly.

The bottom line is that pension system should be designed so the lifetime cost to the state should be the same regardless if the person retires at 55 and then works as contractor for a couple year, or stays working.

 

[Chuckanut]

I don't know about other states, but once retired, I cannot return to any job covered by the state pension system for 30 days. After that, there is a limit to the number of hours on can work before losing pension dollars. So for most of us, once retired, that's it except for some possible part-time work to help with things like medical expenses.

 

[harley]

I highlighted that last sentence in bold because presumably it's OK for police, firefighters, and military to be "double dipping". I don't think the pension start date is too early-- I think the occupational hazard is too high.

I don't want to PO the various LEOs on the forum, but I'm not sure this works if you really run the numbers. Law enforcement isn't in the top 10 most dangerous professions, and over half of the police deaths are from traffic accidents. And most of those were not the result of chasing a criminal or rushing to the cene of a crime, but just standard driving while in their "offices". It's mostly a result of their not being required to wear their seat belts. The fatality rate for police would be basically the same as the average American if they wore their seat belts.

Most dangerous jobs - Aug. 16, 2006

The New York Times > Health > Vital Signs: Safety: Unbelted and at Risk

I'm not picking on cops, but I think these issues need to be looked at generally and using facts, not anecdotes. Just like the general complaints about public servants and double dipping and spiking. If it is all looked at clearly, a fair, equitable, and sustainable pension system for everyone might be the result.

Edit: I'm certainly excluding military from this "most dangerous jobs" factoid. Counting death in combat military jobs are definitely in the most dangerous job category. At least during the current war du jour stage. I don't know about firefighters, but I'm sure there are meaningful statistics out there for them too.

 

[Finance Dave]

CA definitely needs to do something to stop the bleeding...this seems like a good start.

 

[GregLee]

Sounds like the anti-spiking bill should be passed immediately! In these tough times, tax payers will appreciate the savings even if they are modest and the employers and employees who have been gaming the system using spiking won't mind because "it is not real money."

It's a win-win!

I think it is a win-win. It might be real money to a few employees near retirement if it applied to them, but the proposed bill affected only new hires.

 

[youbet]

I think it is a win-win. It might be real money to a few employees near retirement if it applied to them, but the proposed bill affected only new hires.

Hopefully for the citizens of Calif, the anti-spiking measures will apply to all employees. Then, the employees can all recieve the full pension benefits they've earned and deserve but not "extra" derived from payola, corruption, patronage and "good ole boy" spiking schemes.

Even here in politically corrupt Illinois, most of the new anti-spiking measures apply to all employees. It's amazing the new rules passed the state legislature but I suppose the extreme budget shortfall we have helped that.

 

[Texas Proud]

I know that case you mention (know the man in question as well), and we've discussed it here in the past. He will have to live to about 125-years-old before the extra money that last minute pay raise will cost the pension system the first million. Bradford carried some serious heat and weight for the mayor, ("Crime Lab Fiasco", or Operation E-Racer ring any bells?) and this was the mayor paying him off for catching bullets that could have should have hit the mayor. Plus there was a significant drop in crime during his tenure - some might call it a performance bonus.

Was it wrong? Most definitely, but Lee Brown was famous for this kind of abuse of the pension system. Talk about Pension Holidays, that man tried to put the city on a permanent Pension Vacation. At the same time he was using increased future pensions to convince about 35% of the police department to stay on the job during a time in which the labor market was very competitive and the city's efforts to hire new officers were a miserable failure. He didn't care because all the pension costs were rigged to take place right after he was mandated to leave office due to term limitations. The pension system eventually straightened it all out with the next administration - it took a lawsuit against the city - but things are fixed now for the most part.

Thanks for the update.... I just remember all the news reporting back when... I think I read a few articles about it, but could not remember them since it was a long time ago... the reporting made it sound like a lot more...

And yes... Brown was horrible... he raised the pension % for city workers to an amount that was not sustainable... it has since been fixed... but at a cost to the city.... but, I am not in the city so it really does not hit my pocketbook...

 

[utrecht]

I don't want to PO the various LEOs on the forum, but I'm not sure this works if you really run the numbers. Law enforcement isn't in the top 10 most dangerous professions, and over half of the police deaths are from traffic accidents. And most of those were not the result of chasing a criminal or rushing to the cene of a crime, but just standard driving while in their "offices". It's mostly a result of their not being required to wear their seat belts. The fatality rate for police would be basically the same as the average American if they wore their seat belts.

Most dangerous jobs - Aug. 16, 2006

The New York Times > Health > Vital Signs: Safety: Unbelted and at Risk

I'm not picking on cops, but I think these issues need to be looked at generally and using facts, not anecdotes. Just like the general complaints about public servants and double dipping and spiking. If it is all looked at clearly, a fair, equitable, and sustainable pension system for everyone might be the result.

Edit: I'm certainly excluding military from this "most dangerous jobs" factoid. Counting death in combat military jobs are definitely in the most dangerous job category. At least during the current war du jour stage. I don't know about firefighters, but I'm sure there are meaningful statistics out there for them too.

That study is non sense. First of all the story was written in 2005 and covered a period up to 2001. Attitudes have changed dramatically in the last decade in regards to cops wearing seatbelts.

Also, it refers to "people" riding in police cars. It doesnt even say if they are talking about cops, prisoners, or civilians riding along.

Every cop I know wears his seatbelt at all times, up until a few seconds before he needs to jump out. Ive never seen or heard of anyone I know getting a seatbelt tangled in their gun and Ive never heard anyone say "Im tired of putting my seatbelt on and taking it off all day".

 

[vttlarry]

Sounds fair to me. As pensions are underfunded, it is mandatory that fixes be found. I am a pensioner from Minnesota and the employee and employer had their contributions increased recently, and COLA's were limited to 1% until things improve. That is reasonable.

It is also reasonable to look at changes in the future, but it makes they should really not change the rules on those who worked under the old system and made life changing decisions to retire. What you thought you were getting should be what you get.

Minnesota allows you to be employed, but if it is in another public job, you can only earn $14,000 a year.

 

[kyounge1956]

After mulling this over a few days, I think the prohibition of retroactive increases should instead be prohibition of unfunded increases. Legislation passed in 2001 or thereabouts automatically increases the floor COLA of Seattle's pension system whenever the funding level hits 100%—but doesn't mandate any corresponding change in the employer/employee contribution level. Since the legislation passed, there have been two stock market bubbles, both of which brought the system to 100% funding, triggering an increase in the floor COLA, and then burst not too long afterwards. ISTM that this must be at least partly responsible for the scarily underfunded condition of the pension system at this time. I'm pretty sure the change applies to everyone in the system whether already retired or not, and if so it is retroactive, but IMO the real problem is that contributions don't change when benefits rise. I don't object in principle to a pension system increasing benefits retroactively, provided the contribution level is also changed as required to pay for the increase.

 

[clifp]

Sounds fair to me. As pensions are underfunded, it is mandatory that fixes be found. I am a pensioner from Minnesota and the employee and employer had their contributions increased recently, and COLA's were limited to 1% until things improve. That is reasonable.

It is also reasonable to look at changes in the future, but it makes they should really not change the rules on those who worked under the old system and made life changing decisions to retire. What you thought you were getting should be what you get.

Minnesota allows you to be employed, but if it is in another public job, you can only earn $14,000 a year.

One of the interesting things I've observed is that virtually all of the problems with public pension have a reasonable fixes already in place in some states. So the problem with public pension double dipping is nicely solved by Minn. Wisconsin, and the new proposal by Rhode Island, and other states tie future pension increases for retirees to the performance of the pension fund. Spiking is solved in many states with 3-5 year averages.
An increasing number of states are passing laws which outlaw the legislator taking pension holidays (or worse). (If I was in a public employee union preventing pension holidays would be a top priority.) And of course many states are rethinking a pure defined benefit plan for new employees.


I believe that combining best practices actually would put all but the worse plans in reasonable shape.

 

[Nords]

I don't want to PO the various LEOs on the forum, but I'm not sure this works if you really run the numbers. Law enforcement isn't in the top 10 most dangerous professions, and over half of the police deaths are from traffic accidents. And most of those were not the result of chasing a criminal or rushing to the cene of a crime, but just standard driving while in their "offices". It's mostly a result of their not being required to wear their seat belts. The fatality rate for police would be basically the same as the average American if they wore their seat belts.

Most dangerous jobs - Aug. 16, 2006

The New York Times > Health > Vital Signs: Safety: Unbelted and at Risk

I'm not picking on cops, but I think these issues need to be looked at generally and using facts, not anecdotes. Just like the general complaints about public servants and double dipping and spiking. If it is all looked at clearly, a fair, equitable, and sustainable pension system for everyone might be the result.

Edit: I'm certainly excluding military from this "most dangerous jobs" factoid. Counting death in combat military jobs are definitely in the most dangerous job category. At least during the current war du jour stage. I don't know about firefighters, but I'm sure there are meaningful statistics out there for them too.

I think we'd also have to include "wear & tear" in those studies, not just fatalities. I bet that most front-line firefighters and police officers have a chronic joint injury (or even worse, respiratory syndrome) that relates to a specific (and clearly remembered) incident on the job.

 

[Leonidas]

I think we'd also have to include "wear & tear" in those studies, not just fatalities. I bet that most front-line firefighters and police officers have a chronic joint injury (or even worse, respiratory syndrome) that relates to a specific (and clearly remembered) incident on the job.

Or age related issues. Like one of my friends, who got promoted late in career/life and became the sergeant over a tactical squad. Every night they were in the projects chasing crack dealers and gang bangers. As he said, "I'm a 45-year-old working with 25-year-olds who are in phenomenal shape, and we're all chasing 17-year-olds who sprint like Olympians and jump fences like gazelles. I'm just too damn old to be doing this." Six-months later he transferred to Homicide where it's a lot less physical. But we only have a certain number of jobs that are less physically demanding.

Plus, I think we all become more risk-averse as we get older. I know I started to get smarter about such things in my 30's. and by my 40's I was positively thrilled about a promotion that just about guaranteed I would not have to be on the streets every night. Two weeks before I got promoted, age 43, we got into a gunfight with a couple of gang-bangers who tried to rob our undercover. I still went toward where all the shooting was happening, but you would not describe me as moving with alacrity.

Or as someone pointed out later, "Man, all the sarge kept saying all night long was, 'I'm too old for this #$%!'"

At a certain age the body becomes less capable of meeting the demands of the job, and the mind and spirit start to agree.

 

[MichaelB]

Firefighters, Police and other public safety jobs need to be assessed separately. Double dipping, as discussed above, isn’t the problem because most are not hired back into other public service jobs. If we want their young arms and legs but not the older ones we shouldn’t deny them the opportunity to work elsewhere. We should probably encourage and enable it by funding outplacement services and retraining.

 

[Gatordoc50]

There must be a philosophical reason for DB plans. Certainly, it would be easier to increase salaries and have employees be responsible for their own retirement. My hunch is the philosophy is to avoid transparency. There is no other reason that I can come up with.

 

[Mulligan]

There must be a philosophical reason for DB plans. Certainly, it would be easier to increase salaries and have employees be responsible for their own retirement. My hunch is the philosophy is to avoid transparency. There is no other reason that I can come up with.

Maybe Im blinded from the fact that I have DB, but I dont think it is that sinister. I believe that things just move slower as far as change at the government level ( many reasons for that, as we all know). Reform is definitely occurring, and some plans are going hybrid or defined contribution already. I wouldnt be surprised that 10 years from now, there will be significant change mirroring more the private sector. The percentage of private DB plans is shrinking fast and soon a lot of those receiving pensions will start to die off from old age. My humble guess is the percieved, if not actual, imbalance between private and public will force change.