California pension votes

[Texas Proud]

OK, I will admit that I have not done ANY research on this... but was surprised that I did not see any posts about it...

I think it was last night (or the night before) where they had a piece on the national news where there were two cities in Cali that voted to reduce the pensions on their workers.... they were making it out to be a big game changer...

Does anyboby have info on what actually occured? Was the vote close or a landslide

I know it has been debated back and forth as to what might happen, but now it seems like things are starting to happen...

Also, they did talk about a very small city that came to an agreement with their retirees.... their lawyer said that they got a better deal in negotiations than they probably would if they went to court... so for at least one town it has happened...

 

[MasterBlaster]

OK, I will admit that I have not done ANY research on this... but was surprised that I did not see any posts about it...

I think it was last night (or the night before) where they had a piece on the national news where there were two cities in Cali that voted to reduce the pensions on their workers.... they were making it out to be a big game changer...

Does anybody have info on what actually occurred? Was the vote close or a landslide

I know it has been debated back and forth as to what might happen, but now it seems like things are starting to happen...

Also, they did talk about a very small city that came to an agreement with their retirees.... their lawyer said that they got a better deal in negotiations than they probably would if they went to court... so for at least one town it has happened...

The two cities in question are San Diego and San Jose both measures passed by wide majorities. Landslide ? I don't know Call it what you want.

As I recall, In San Diego's case the measure disallowed new employees entering the pension plan and removed many of the worst (spiking and other) features. In San Jose's case the measure let the employee decide whether or not to stay in the pension plan with significantly increases in contributions or to drop out altogether.

In both cases it came down to either cutting needed (even critical) city services or keeping very generous benefits for those in the system.

 

[clifp]

The San Jose case is even more interesting in that actually allows San Jose to suspend cost of living rise to current retirees. While San Jose is running a deficit it isn't in particular dire financial straits, since the Silicon Valley economy is doing just fine.

I've read a number of articles about before and after the vote. Unfortunately most of them were on WSJ and I think require a subscription. It is definitely worth a google and is worth discussing, assuming we can keep politics out of the discussion.

 

[donheff]

I read an article in the Post. At first I thought it implied that retirees would be hit but they are not. It does impact current as well as prospective employees. It wasn't clear but it sounded like they would freeze earned benefits as is and employees could opt to drop out or continue in the program with reduced benefits for future periods of employment with higher deductions from pay. Not a happy situation but no worse than has happened to many private sector employees.

 

[ziggy29]

Neither the San Diego nor the San Jose initiatives impact current retirees much. In San Jose, current employees will have a watered down future benefit accrual unless they pay a significant amount (up to 16%) to keep their current pension formula in place. New hires in San Jose would all be in the watered-down pension plan and would pay more to be in it. The only provision affecting current retirees in the San Jose initiative is that they can suspend a COLA when the city declares a fiscal crisis.

New hires in San Diego are being herded into a 401K and wouldn't have a DB pension.

The unions in San Jose have already filed suit to block it.

 

[haha]

It is possible that Scott Walker's win in his recall election is news equal to or greater than the San Jose and San Diego news. The public unions and other unions too went all out to get him, and failed.

Ha

 

[flyfishnevada]

I don't know much about it, but one thing I read stuck out. Basically the voters were a little miffed that their tax rates were so high in part to pay for the kick-ass retirements of public employees. Obviously, I'm paraphrasing.

I get it and I'm living on a public pension. Then again, a lot of these places have some really silly rules like spiking and employees not contributing while still making a high salary. Again, not sure about the specifics of these cities pensions.

 

[meekie]

San Diego definitely has issues with their pension program costing way too much. The bill is supposed to fix the spiking that allows people to use their highest year pay (including bonuses) to determine their pension, and forces all new employees into a 401k.

There's a lot of talk about if it's legal, and the unions are going to fight it, and the costs of the 401k plan sound like they could wipe out a lot of the savings. There's a lot of news articles if you search for San Diego Prop B.

I don't like what the pension program is costing the city, but I don't like who prop B was written either. I wish the unions would have compromised more.

 

[clifp]

Neither the San Diego nor the San Jose initiatives impact current retirees much. In San Jose, current employees will have a watered down future benefit accrual unless they pay a significant amount (up to 16%) to keep their current pension formula in place. New hires in San Jose would all be in the watered-down pension plan and would pay more to be in it. The only provision affecting current retirees in the San Jose initiative is that they can suspend a COLA when the city declares a fiscal crisis.

I didn't dig too deeply (perhaps some Silicon Valley forum members know) but who gets to define a "fiscal crisis". Certainly San Jose has been making major cut backs and is running a deficit is that a crisis, or do you need to reach the level of Vallejo?

 

[Indigo Mule]

I didn't dig too deeply (perhaps some Silicon Valley forum members know) but who gets to define a "fiscal crisis". Certainly San Jose has been making major cut backs and is running a deficit is that a crisis, or do you need to reach the level of Vallejo?

The City Council would have a docket item placed on the agenda for a City Council meeting and allow public comment, then the Council would vote.

 

[Chuckanut]

I don't know much about it, but one thing I read stuck out. Basically the voters were a little miffed that their tax rates were so high in part to pay for the kick-ass retirements of public employees. Obviously, I'm paraphrasing.

Public safety workers often get a significantly more generous pension deal than other public workers such as office clerks, accountants, teachers, engineers, etc. The idea is they put their life on the line and deserve more. Is that realistic? Do we want to change that? We need to have that discussion.

 

[donheff]

Public safety workers often get a significantly more generous pension deal than other public workers such as office clerks, accountants, teachers, engineers, etc. The idea is they put their life on the line and deserve more. Is that realistic? Do we want to change that? We need to have that discussion.

As do the military. Do we need that discussion as well? I don't think so. Firefighters and police also generally have mandatory retirement ages that limit their careers. It makes sense to me to have an accelerated pension program. It would also make sense for their employers to increase employee and employer contributions to fund the pensions which is already done in many places including the Federal Government.

 

[ziggy29]

Public safety workers often get a significantly more generous pension deal than other public workers such as office clerks, accountants, teachers, engineers, etc. The idea is they put their life on the line and deserve more. Is that realistic? Do we want to change that? We need to have that discussion.

The San Diego measure that put all new hires on a 401K exempts police.

Having said that, many CA municipalities offer the "3 at 50" plan for public safety workers that can provide a 90% pension with COLA and health insurance for life as early as age 50 with 30 years of service. Even if one believes these people should still receive pensions, there is room for discussion as to whether this is too generous to be sustainable.

Hopefully we can generally agree that the ban on spiking is a good thing, however.

 

[Texas Proud]

San Diego definitely has issues with their pension program costing way too much. The bill is supposed to fix the spiking that allows people to use their highest year pay (including bonuses) to determine their pension, and forces all new employees into a 401k.

There's a lot of talk about if it's legal, and the unions are going to fight it, and the costs of the 401k plan sound like they could wipe out a lot of the savings. There's a lot of news articles if you search for San Diego Prop B.

I don't like what the pension program is costing the city, but I don't like who prop B was written either. I wish the unions would have compromised more.

I have read a bit since posting the question... I do not remember which one had this in it, but I think it is San Diego... here is what I read (might be a bit off)

IF the courts rule that the pension changes are not legal, then salaries are to be reduced for the people affected at the amount their pension costs would have gone down.... IOW, you either take lower pension or lower salary...

I think this was an interesting alternative.... someone was thinking ahead when they drafted the plan...

 

[Texas Proud]

It is possible that Scott Walker's win in his recall election is news equal to or greater than the San Jose and San Diego news. The public unions and other unions too went all out to get him, and failed.

Ha

I think that we will have to see if Scott Walker gets re-elected...

One of the news outlets that I was watching said that a good number of people voted for him because they felt he should not have been recalled... using my words.... it was a cheap stunt to recall him so they voted for him even if they did not like him...


But I do see the tide turning on these pensions... now we will see what happens in the courts...

 

[MichaelB]

We should probably try to stay on topic and away from politics.

 

[Bimmerbill]

Any idea of the median salary for public employees in those two towns?

I know here in NH in my field of IT the NH state jobs are woefully under paid. I always considered the pensions as deferred pay. So if the state is paying $50K and you end up with a $25K pension it's sort of like making $75K a year while working.

Without the decent pension the jobs just don't pay well at all. Wonder if it is like that in CA?

 

[jerome len]

Public safety workers often get a significantly more generous pension deal than other public workers such as office clerks, accountants, teachers, engineers, etc. The idea is they put their life on the line and deserve more. Is that realistic? Do we want to change that? We need to have that discussion.

Should public workers, ie: police, firepersons, have a more lucrative retirement than the soldiers serving in the middle east? I think not! If you read the LA Times, you'll see that some of the retirement benefits were nuts. On the other hand, many were fairly lucrative but not nuts.

I believe the problem is when ciy employees have better benefits than city residents......who are then asked to pay increased taxes although, on average, their incomes haven't gone up.

It's not easy being fair to all when the situation becomes unafordable. We really need to blame the city and union leadership of many years, ago, that approved these packages. They should have been more responsible and not saddled us with these problem benefits of today.

I think you'll see more cities and States rebelling against exhorbitant benefit packages. the average person, working hard but not seeing income increases, will vote these generous benefits down almost every time.

 

[Hamlet]

This is really the way to go. The city officials and unions can negotiate for salary and any match that gets put in the 401k.

This avoids issues with making promises that can't be kept down the road.

If you want to provide great retirement benefits, you have to do it out of the current budget with real money going to a 401k match, not with promises that may be impossible to keep 20 years down the road.

New hires in San Diego are being herded into a 401K and wouldn't have a DB pension.

 

[FUEGO]

I wish my government employer would get rid of our pensions! As a prospective early retiree who switched to government employment mid career, I will never reach the point where I will be vested in any pension of any useful value (ie worth more than withdrawing the lump sum). In the mean time, I have 6% taken out of each paycheck and will only receive it back without interest if I leave before 5 years, and then with nominal interest after 5 years. But I am losing out on getting a 401k match like at private employers or some govt employers. And my employer puts in around 9-10% of our salaries into the pension plans, but the benefit of that only accrues to those who stay in the system to full retirement age. Unfortunately the pension plan is relatively sound and well funded, so my odds of the plan going bust and them freezing pensions like I would prefer are low.

 

[2B]

Any idea of the median salary for public employees in those two towns?

I know here in NH in my field of IT the NH state jobs are woefully under paid. I always considered the pensions as deferred pay. So if the state is paying $50K and you end up with a $25K pension it's sort of like making $75K a year while working.

Without the decent pension the jobs just don't pay well at all. Wonder if it is like that in CA?

What I've noticed is that government work doesn't pay any better for someone with technical skills in demand by the private sector than for a liberal arts graduate. That's why in many areas there are shortages of secondary science and math teachers but all the art, English, elementary ed., etc. you could want. The Feds have no problems finding bureaucrats to manage the Dept of Energy but they are chronically short of people with the technical ability to inspect/review actual operations.

 

[Chuckanut]

I believe the problem is when city employees have better benefits than city residents......

And how do we figure that out? Whom do we compare the public employees to? The people from Mega-Corp who get fat severence checks, medical care reimbursement, full early retirement, etc? Or the guy working a low wage job who gets nothing but a kick in the rear when he leaves? Or my friend who earns six figures a year and stands to make $250,000 when the company she works for goes public? Or, another friend who saw his defined benefit pension, reworked into a 401K that will pay a fraction of what he though he would get?

One has to compare the total compensation package (not just the pension) for the skills and talent needed. That, I think, would be a huge effort.

If accurate comparisons were easy, everybody would be doing them. Maybe we should settle for making sure that pensions are fully funded each year using reasonable assumptions about growth and income. That alone would make everybody be more careful and honest.

Just my thougts on the matter. Those and $3 will buy you a latte.

 

[Texas Proud]

And how do we figure that out? Whom do we compare the public employees to? The people from Mega-Corp who get fat severence checks, medical care reimbursement, full early retirement, etc? Or the guy working a low wage job who gets nothing but a kick in the rear when he leaves? Or my friend who earns six figures a year and stands to make $250,000 when the company she works for goes public? Or, another friend who saw his defined benefit pension, reworked into a 401K that will pay a fraction of what he though he would get?

One has to compare the total compensation package (not just the pension) for the skills and talent needed. That, I think, would be a huge effort.

If accurate comparisons were easy, everybody would be doing them. Maybe we should settle for making sure that pensions are fully funded each year using reasonable assumptions about growth and income. That alone would make everybody be more careful and honest.

Just my thougts on the matter. Those and $3 will buy you a latte.

Not to get to political here.... but we can also not have a DB plan and just have a 403... with matching contributions.... or just contributions from the gvmt entity... that would eliminate most of the complaints that people have with these pensions... you do not have a potential liability bomb...

Just add the same comment about the latte.... but I do not drink coffee, so I will get a DP...

 

[ERD50]

And how do we figure that out? ....

One has to compare the total compensation package (not just the pension) for the skills and talent needed. That, I think, would be a huge effort.

If accurate comparisons were easy, everybody would be doing them.

'We' can't, and shouldn't. There is this thing called the 'free market' that works pretty well at setting values. It does play into your second part:

Maybe we should settle for making sure that pensions are fully funded each year using reasonable assumptions about growth and income. That alone would make everybody be more careful and honest.

Better yet, just fund a 401K-like instrument - no future promises/assumptions whatsoever. That would put everyone on more equal footing when comparing job opportunities, and the true value of that job would become apparent through the laws of supply and demand.

-ERD50

 

[landis207]

A couple other considerations. In San Jose, something like 70-80% of the Firemen/Police retire with a "disability". This allows them to pay no state taxes for life. Guess who reviews their disability request ... a board of other Firemen/Police. There was an article in the Mercury News a couple weeks ago that tracked several disabled retirees. One was collecting a tax free pension from one police department and working for another. A second gentlemen collecting a disabled pension was running his own SCUBA dive school.
Last year in the Mercury Newspaper, they found that 11 of the 15 highest paid public employees were in the Fire Dept. Each of these folks were making in excess of $180K/yr. Granted, these are Captains who supervise 10-15 firemen. I would equate that level of responsibility to a Staff Sgt in the Army who pulls down about $39K/yr (with 10yrs of active duty). Plus room & board.
I'm not against fair pay/pension, just some financially responsible oversight.