<![CDATA[Citizens For Sustainable Pension Plans - Blog]]>

<![CDATA[Citizens For Sustainable Pension Plans - Blog]]>Fri, 08 Jan 2021 22:24:45 -0800Weebly<![CDATA[Bad Math and a Coming Pension Crisis]]>Fri, 10 Jul 2015 04:23:29 GMThttp://marincountypensions.com/blog/bad-math-and-a-coming-pension-crisis

By MARY WILLIAMS WALSH
JULY 8, 2015
When Jim Palermo was serving as a trustee of the village of La Grange, Ill., he noticed something peculiar about the local police officers and firefighters. They were not going to live as long as might be expected, at least according to pension tables.

After Mr. Palermo dug into the numbers, he found that the actuary — the person who advises pension plan trustees about how much money to set aside — was using a mortality table from 1971 that showed La Grange’s roughly 100 police officers and firefighters were expected to die, on average, before reaching 75, compared with 79 under a more recent table.

The four years are significant beyond any interest in macabre statistics. When actuaries calculate the numbers for a pension plan, mortality rates are a powerful hidden factor. If an actuary predicts the workers will live to an old age, it means they will be drawing their pensions for more years. That, in turn, means the employer should set aside more money up front, to keep from running out later. Read Article

]]><![CDATA[Pension legal costs need to be public]]>Fri, 30 Jan 2015 21:20:18 GMThttp://marincountypensions.com/blog/pension-legal-costs-need-to-be-publicMarin IJ
Letter to the Editor
January 20, 2015

Nels Johnson's article regarding legal costs to support the Marin County Employees' Retirement Association pension board highlights another taxpayer obligation resulting from unsustainable pension liability and abuse.

Public pension plans use our tax dollars to fund pensions for which participants pay no taxes on their disability pensions (unlike private pension disability pensions which are taxable) and then pay their plan trust fund attorneys millions of dollars in the determination of those disabilities.

Private plans use independent third parties (such as Social Security Disability determination or an independent third-party medical evaluation firm instructed with the plan disability standard) to review disabilities, rather than closed-door determination by parties-in-interest, which often leads to litigation.

Of course, the main reason for extensive disability appeals is the excessive tax-free benefit amounts that are at stake on these public disability pensions.

Citizens for Sustainable Pension Plans intends to contact all governmental entities that maintain pensions for their employees to request similar information as the MCERA pension board has encountered on legal costs.

It would be helpful and responsible of them to provide that information to all taxpayers as part of transparent good government and to facilitate our discovery process leading to a report that will be published, as has been our custom.

Some have criticized CSPP for becoming a taxpayer watch group. Pensions and taxes go hand in hand.

The IJ's article is a perfect example of why someone needs to engage in aggressive oversight of elected officials.

As CSPP begins 2015, we recommit to our core mission of forcing transparency of pension obligations to promote taxpayer awareness and understanding. This will lead to aggressive reform — enabling pensions to become sustainable.

— Michael J. Lotito, San Rafael — Bob Bunnell, Kentfield Citizens for Sustainable Pension Plans]]><![CDATA[Public Sector Pay: Transparency and Perspective]]>Fri, 30 Jan 2015 21:15:39 GMThttp://marincountypensions.com/blog/public-sector-pay-transparency-and-perspectiveFrom Union Watch
January 29, 2015

Public sector labor leaders in California would rather that the public remain relatively ignorant about how well their members are compensated. But they are fighting a losing battle.

Because of California’s massive unfunded pension liability and other scandals, the public is demanding answers. Interests as diverse as taxpayer groups, business organizations, the media and some elected officials have moved aggressively, not only to address these problems, but also to ensure that there is much greater transparency about public sector compensation than we have seen in the past.

For example, attorneys at Howard Jarvis Taxpayers Association won several Public Records Act lawsuits against government interests — mostly at the local level — who were attempting to shield their compensation data from the public. And PensionTsunami.com is a website which for years has been a clearinghouse for articles on pension abuses.

But it is not just conservative interests who are shining the light. Left-of-center newspapers like the Sacramento Bee and San Jose Mercury News, have fought very hard to expose the truth on employee compensation. Self-styled progressive John Chiang developed a powerful data base open to the public about state worker pay when he was California’s Controller. He is now the State Treasurer and we hope he continues his efforts. Read More.]]><![CDATA[The Truth about “The Truth About Firefighter Retirement Benefits.”]]>Sat, 06 Dec 2014 19:57:46 GMThttp://marincountypensions.com/blog/-the-truth-about-the-truth-about-firefighter-retirement-benefitsOn its website the Marin Professional Firefighters Association has a page called, “The Truth About Firefighter Retirement Benefits.” (http://www.iaff1775.org/the-truth-about-firefighter-retirement-and-pensions). The truth of their truth deserves scrutiny.

“Firefighters do not receive social security.” This may or may not be true. The governor’s Public Employee Pension Reform Act of 2012 (PEPRA) includes language specifically for those firemen who do receive social security. It also includes higher pensionable salary caps for those who do not receive Social Security, making the above claim somewhat moot. In any case, it is a red herring. The benefits firefighters receive far exceed those offered by Social Security, whose maximum benefit today for retirement at the full retirement age of 66 is $31,704 per year.

There are countless examples of firefighters receiving pensions in excess of $100,000. Under PEPRA the maximum pensionable income for a safety employee not receiving Social Security is $136,440. Even a firefighter retiring under the least generous PEPRA plan (2% at 57) could receive a pension of $81,864 after 30 years, plus cost of living adjustments.

“Firefighter typically work 56 hours per week and earn 40% less per hour.” This is only true if you count 100% of the time that a firefighter is on duty as time spent working. Firefighters work 48-hour shifts during which, in addition to their more heroic duties, they sleep, eat, cook, shop, work out and drive to kids birthday parties. Is it really accurate to call all of this “on-call” time “working?” No, it is not. No more so than it would be accurate to go to the other extreme and say that the only time a firefighter is working is when the truck is rolling to a fire or medical emergency. If one took that approach one could say that firefighters only work five or ten hours a week.

An analogy: Are members of our military “working” 24 hours a day for two years when they enlist? Of course they aren’t. The truth, as is often the case, is somewhere in the middle. But for the purposes of calculating an hourly wage it is certainly not accurate to say the firefighters “work” 100% of the time they are on duty and therefore earn 40% less per hour.

Firefighters have a “Shorter Life Expectancy.” This is something that many firefighters believe in their hearts to be true. Fortunately for them and their families it isn’t. To begin with, the study cited on the Marin IAFF website to back up this statement has absolutely nothing to do with life expectancy. Period. It is a study of the likelihood of a job related fatality. Yes, firefighters on average have more on-the-job fatalities than the average worker in the United States. This is to be expected. But they also have fewer on-the-job fatalities than truck drivers, farmers, cab drivers, construction workers, miners, roofers and other jobs held by millions of Americans.

In any case, this too is a red herring. The statistics cited on the IAFF1775 website are national figures. They are heavily skewed by large urban fire departments. The real question is this: What is the life expectancy of a firefighter in Marin County, a wealthy, suburban community where the majority of calls are not for fires but for medical emergencies and the like? Another way to phrase the question is this: Would you rather be a firefighter in the South Bronx or Belvedere, California? A good, but still conservative, place to start would be to use California-only data. A 2010 study from the CalPERS Actuarial Office found that “the life expectancy of safety members is slightly higher than the life expectancy of miscellaneous members.”

“Firefighter Overtime is Not Included in Retirement Benefits … and Retirement Benefits NEVER Include Any … Other Wages That Are Not Part of Base Compensation.” The first part of this statement is true. Hallelujah. The second part is demonstrably false as shown by the recent kerfuffle over the inclusion by CalPERS of 99 different types of compensation in pensionable earnings. For firefighters this extra pay includes: Fire inspectors who inspect, fire investigators who investigate, and rank-and-file firefighters who are asked to inspect, investigate or administrate during their normal work schedule.

“Retirement Savings Goes Back Into the System When a Firefighter Retiree Dies.” This is true of any pooled retirement system. It is also true that when a firefighter lives longer than actuarially expected he draws excess funds from the system. This should surprise no one. It is the nature of insurance. Risks are spread across large numbers of participants with diverse outcomes.

“Firefighters are at Much Greater Risk for Many Cancers.” The NIOSH study cited on the IAFF website was based on data from the following fire departments: Chicago, San Francisco and Philadelphia, all of which are dense urban environments. One of the “Next Steps” highlighted near the end of the study is this: “Compare cancer risk in higher-exposed to lower-exposed firefighters.” (Again, would you rather be a firefighter in Chicago or Tiburon?) Data for California retirees has repeatedly found that safety workers have a similar lifespan of those of non-safety workers.

“Retirement Savings Are Paid by the Employee.” There is some truth to this statement. Employer and employee NORMAL contributions are, in effect, both paid by the employee. However, any unfunded liability generated by a shortfall in earnings is paid for by only the employer;

otherwise known as the taxpayer. Where the rubber really meets the road is that both employer and employee contributions are kept artificially low by assuming stock market-like returns for what is essentially a guaranteed annuity. This results in a large transfer of risk to the taxpayer and chronic underfunding.

“Firefighters Contribute a Minimum of 8-16% of Their Salary Towards Retirement Savings … No Different than a 401k in the Private Sector”. The first part of this statement is true and may even be conservative if you include the employer’s normal contribution, which in economic terms, is paid in lieu of salary. But it is completely inaccurate to compare a defined benefit pension plan to a 401k. There would be no problem if the 8-16%, or more, went to a 401k. The costs would be known and transparent, the plan would always be fully funded and the firefighter would undergo the same investment risks that his taxpayer-employer does. This is not the case. Currently the firefighter gets a high, guaranteed rate of return on his contributions, one that any taxpayer would gladly take if it were available. That is very unlike a 401k.

“New Firefighter Retirement Age: 57.” True under PEPRA, but this only applies to new hires as of January 1, 2013. Every firefighter in the system before that date is governed by his or her prior existing pension formula. Many can still retire as young as age 50 or 55. The financial impact of PEPRA is 20 to 30 years away. In any case, even full retirement at 57 probably doesn’t sound too bad to the average person who must wait until 65 (or 67 in the case of Social Security) for full benefits. The dollar value of paying into the system for eight or 10 fewer years while withdrawing from it for eight or 10 more years is astronomical.

“Firefighters Gave Up Pay and Benefits to Negotiate Better Retirements.” True … but. This was addressed earlier. The amount of pay given up does not include the amounts required to cover any unfunded liabilities. These fall exclusively on the backs of taxpayers and were not negotiated in lieu of salary during collective bargaining.

“Can a Firefighter Qualify for a Mortgage?” The median household income in Marin County is about $83,000. The homeownership rate is 63%, both according to the US Census. Somehow many of these people manage to own homes. I suspect there aren’t very many full time firefighters in Marin County earning less than $83,000, far more including benefits.

The choice by 274 out of 387 active professional firefighters to live outside the County is not a financial one. It is one of lifestyle. Essentially, one of how big a house they want to own. This decision is facilitated by their two-days-on and four-days-off schedule. When the IAFF says, “Young firefighters often commute two to three hours to work” you are led to believe they suffer through a long daily commute. They do not. They commute only once every six days.

“Firefighters Pay Taxes.” Not in Marin they don’t, at least not the 274 of 387 actives who live outside the County. Sorry, you can’t have it both ways. You can’t claim firefighters can’t afford to and don’t live in Marin while at the same time claiming they pay taxes here.

“The Majority of High Pensions (+$100,000) Are Received by Top Level Management.” Perhaps, but only if you include the top-level management of the fire and police agencies. Many of the largest pensions are received by exactly those folks.

“The average public employee retirement benefit in California is $24,000 a year. 75% of all retirees earn less than $30,000 a year.” This is one of the most abused statistics in the pension debate. These numbers include those who retired many years ago when salaries were much lower and those who may have worked and paid into the system for only a very short time. These pensioners are not the source of the problem.

The average pension benefit for a recently retired MCERA retiree who worked a full career of at least 30 years was $86,960. The data does not allow for identifying which retirees were firefighters, but given the greater pension benefit formula applied to safety workers, it is a safe bet that the average firefighter’s pension is even higher. Those who cite these average pension amounts are being disingenuous.

In the debate about pensions, facts matter. And the truth matters.
]]><![CDATA[East Bay Fire Chief Says $380,000 In Salary, Benefits Is ‘Outrageous’ . . .]]>Thu, 13 Nov 2014 19:29:29 GMThttp://marincountypensions.com/blog/east-bay-fire-chief-says-380000-in-salary-benefits-is-outrageous1

Please review this report by CBS. If you are shocked by the news, then visit the databases below that show that some Marin firefighters are paid even more!
At a minimum, these salaries and benefits are not affordable to taxpayers. In our view, they are also overly generous and a true threat to the financial health of our county, cities and towns.

Novato Fire Protection District Data
Marin County Data
Kentfield, Tiburon, Southern Marin Data

]]><![CDATA[Bankruptcy in San Bernardino More Important Than Stockton]]>Sat, 08 Nov 2014 21:18:10 GMThttp://marincountypensions.com/blog/bankruptcy-in-san-bernardino-more-important-that-stocktonFascinating news out of San Bernardino and potentially very important.   The bankruptcy of San Bernardino may turn out to be more important than the Stockton bankruptcy.

In the Stockton bankruptcy Judge Klein ruled that pensions can in theory be impaired but he then approved a restructuring plan that does not in fact impair pensions.     He approved this plan because he was convinced by the City’s arguments that the City of Stockton cannot maintain adequate police and fire staffing if pensions are impaired.     This highlights a fundamental problem.   The continued very generous compensation and pensions for public safety workers is sustained both by law (the California Rule) and also by economics.    So, the Reed Initiative may become law and cancel the California Rule but the generous pensions of safety workers will continue to be sustained by economics.

There are two structural economic supports for these generous pensions. First, our safety workers are monopoly providers.   Local governments believe there is no alternative but to rely on their existing police or fire departments.   The only alternatives considered are local consolidation of police or fire departments.    Local examples are the Central Marin Police (Larkspur + Corte Madera + San Anselmo) or Southern Marin Fire District (including Sausalito and parts of southern Marin County.) Local consolidation can yield operational efficiencies.   But local consolidation does not change the fact that consolidated safety departments are still monopoly providers.

The second structural economic reason that supports continued very generous pensions is that fact that public safety unions are organized on a statewide and even national basis while local governments have no effective statewide or national organization. This allows the public safety unions to force local governments to compete with each other for public safety workers.

Local governments can create competition for local police and fire departments.   Even police services can be contracted out.   In the UK the government contracts out for police services.   (This was done by the last Labour government so that they could spend more money on social programs.)   One of the contractors used in the UK is G4S Corporation; they have offices in California and I’m sure would be happy to speak with the City Manager of San Bernardino.

The fiscal position of San Bernardino is so dire that they may be forced to do the “unthinkable” and contract out safety services.   It will be difficult but would set a very powerful example. It might be even more important than Judge Klein’s ruling that pensions can be impaired in bankruptcy.
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