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Ignoring Public Sector Retirement Costs and History
By: Joel Fox

Newspapers continue to carry an array of stories on the cost of public employee retirement that chills taxpayers’ bones. The stories are constant reminders that the issue of public employee retirement costs is reaching a tipping point and must be addressed fairly by government or likely will be addressed by an angry electorate. In this way, the scenario is similar to the days that lead up to the Proposition 13 tax revolt. While government officials talked a lot about solving the excessive property tax problem, they did not act.

 

Governor Jerry Brown remembers those tax revolt days very well, which is why he is pushing the legislature for pension reform knowing that pension change initiatives are waiting in the wings.

 

There are plenty of stories that indicate reform is needed.

On Sunday, Daniel Borenstein’s column in the Contra Costa Times told of the retiring Berkeley city manager who will make more money per year in retirement payments than he made on the job. City manager Phil Kamlarz pulls down $250,000 in his post. Once he takes his nameplate and goes home the city will be sending him checks for $266,000 annually.

 

As Borenstein points out, “It shows how absurdly lucrative some public employee pension programs have become. While Kamlarz’s salary was more than those of other city workers, the pension formula is the same for most other Berkeley employees. Indeed, about one-fourth of agencies covered by the giant California Public Employees’ Retirement System are at least as generous.”

 

Someone will replace Kamlarz as city manager. He or she will be making roughly the salary paid to the former employee. It seems like Berkeley taxpayers are getting one city manager for the price of two.

 

According to the Los Angeles Times, 3900 county workers got $48 million in 2010 to pay for unused time off. The time consists of unused vacation time, sick time, and comp time. But when it goes out all at once the county budget takes a big hit.

Caps have been created at the state level to prevent large payouts but exceptions to the caps make them meaningless. The caps far exceed anything workers in the private sector have.

 

The Riverside Press Enterprise reports that Riverside County’s elected officials and 2000 county employees receive a supplemental retirement benefit in addition to the CalPERS pension. The county contribution to this supplemental fund, a 401 (a) plan, is made up of employer contributions asking nothing from the employees. For government entities, that means that the taxpayers pay. Other counties offer 401 (a) benefits.

 

A cautionary tale: Kevin Yamamura in Sacramento Bee’s Capitol Alert reports that Moody’s Investors Service has dropped Illinois to it lowest credit rating because of unresolved pension liabilities.

Yamamura cites the Moody announcement which stated: “The downgrade of the state’s long-term debt follows a legislative session in which the state took no steps to implement lasting solutions to its severe pension under-funding or to its chronic bill payment delays. Failure to address these challenges undermines near- to intermediate-term prospects for fiscal recovery.”

 

As the examples continue to pile up that public workers enjoy all kinds of retirement benefits that the taxpayers who pay for them do not have, a simmering anger or resentment or both likely will turn into political action unless something is done to turn down the pressure.

 

The scenario is eerily similar to what occurred in 1978 on taxes. As the saying goes, those who ignore history are doomed to repeat it.

 

Joel Fox,  Editor of Fox & Hounds and President of the Small Business Action Committee

 

 

 





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