Friday, October 30, 2015

Robert Fellner: What’s really driving CalPERS contribution rates higher and higher

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Mod: Great article from our guy Robert Fellner that originally ran in the Los Angeles Daily News (link). There are those who think we want to jettison the Sierra Madre PD because we just don't like them. Nothing could be farther from the truth. Rather it is the high cost of keeping the SMPD that is driving events. At current rates they have become more than a small city of around 11,000 people can afford. It's just business and nothing at all personal. And perhaps the biggest reason for that is outrageously expensive CalPERS retirement benefits. Here Robert explains exactly how CalPERS is financially devastating for many cities, and in some cases driving communities to look at the same solutions being considered in Sierra Madre.

What’s really driving CalPERS contribution rates higher and higher

If public pensions are so modest, as the California Public Employees’ Retirement System (CalPERS) likes to suggest, why are taxpayer contribution rates continually being raised?

CalPERS insists raw averages — like the $46,100 pension the average Los Angeles-area retiree receives — is the clearest way to convey their value.

The implication — that pensions are comfortable, but not exorbitant — is hard to square with the dramatic rise in pension contributions currently impacting cities statewide.

Last year was the first of a six-year plan to hike cities’ rates by 50 percent, and now cities like Long Beach are considering slashing millions from police and fire services (link).

Full context provides clarity: Raw averages represent partial-career retirees, like the average 22-year career of Los Angeles-area retirees.

To compare, if a private-sector worker went to Fidelity Investments to purchase an annuity for that level of income at the CalPERS’ average retirement age of 60, it would cost $1 million. How many taxpayers have saved a million dollars after just a 22-year career, if ever?

Raw averages reveal more about CalPERS’ membership than its generosity — half retire with less than 20 years of service and more than a third had less than 15.

Just as one assumes a 40-hour work week when comparing salaries, any discussion of pensions implicitly assumes a full career.

When normalizing the data in that way — at least 35 years for regular and 30 years for safety retirees — the average full-career pension for all cities in Los Angeles County was over $75,000 for non-safety and over $100,000 for safety retirees, according to just-released 2014 CalPERS data from TransparentCalifornia.com (link).

Properly evaluating CalPERS’ benefits explains its soaring costs. While the median private employers contribute 3 percent of pay towards their employees’ retirement accounts, many cities in Los Angeles County pay over 10 times as much to CalPERS (link).

Glendale, for example, will send 30 cents per dollar of pay to CalPERS this year. El Monte’s 57 percent rate for safety employees means the City will spend an average $63,000 per employee just on retirement costs — nearly triple the $24,419 median earnings that full-time, working residents received last year, according to the Bureau of Labor and Statistics.

CalPERS projects that rate to hit 72 percent in 2019.

Sky-high public pension costs go beyond CalPERS. Los Angeles County pays a 19 percent contribution rate to the Los Angeles County Employees’ Retirement Association and Los Angeles City pays its two independent plans 23 and 35 percent of salary for non-safety and safety employees, respectively. Accounting for health benefits provided to city safety retirees increases the rate to 46 percent.

Clearly, the problem is the nature of public pension plans, not any particular administrator. In fact, even scholars at the left-leaning Brookings Institution asserted that, “It is obvious that the current situation is unsustainable financially … (link).”

Defenders of the status quo oppose reform because of the allegedly insufficient retirement income that a personal retirement-account plan would provide. Yet, there is nothing restricting governments from paying higher contribution rates than what private employers pay.

By offering personal retirement-account plans with an employer contribution rate starting at 10 percent, the Contra Costa cities of Danville, Lafayette and Orinda enjoy greater stability and control over costs than their neighbors, while successfully attracting and retaining quality employees, according to city officials (link).

Taxpayers work full careers before retiring and deserve to know the true value of a full-career public pension — particularly when it means they must now pay higher taxes, receive fewer city services or both.

Mod: One more thing. Sierra Madre's 2014 financial data is in. A quick glance didn't reveal too much out of the ordinary, overall employee compensation went up 3%, health costs came down a bit, but salaries and CalPERS offset it. 

The only 2 people with any real noticeable gain was City Manager Aguilar and Chief of Police Giannone, who saw their base pay increase by about 9 and 13 percent respectively. 

We'll have more on this in the next week or so.

sierramadretattler.blogspot.com

50 comments:

  1. The UUT increase to 10% is a tax to pay CalPERS. Vote no and hire the Sheriffs.

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    1. It is a Ponzi Scheme .Difference is ,we taxpayers are forced to fund it. No choice. Other than leave my hometown.

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    2. it's a unchecked and uncontrollable Ponzi scheme that the Unions gravitated to because unlike the private sector, there isn't anybody in the public sector to counter them - the union has complete control

      the employees who vote in and control the pension plan can't be fired or held accountable, especially in Sierra Madre because our Council refuses to challenge the system and the employees are the ones that profit from CalPERS - it's a never ending cycle

      Our city whines and threatens us with reduced services and the propaganda is sold to us over and over again (we'll close the library...no police on Allegria..blah blah blah) when the real drain on our city and across California is a union held and managed pension plan that is flat out a Ponzi scheme

      I'm voting NO on the UUT and will every time. I'm sick of our City Manager, so-called civic leaders and local newspapers spreading complete lies and scare tactics about the UUT

      the UUT was supposed to be about repairing the water infrastructure but it's being marketed as a public services campaign and that's a lie - nothing but a lie

      so, why do we have a city manager and civic leaders lying to us?

      why listen to them?



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    3. The UUT was never meant to repair our water infrastructure. It was always sold as help to pay first for the paramedics, then for public safety.

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    4. I must be mistaken because the UUT started with the rusty pipe tour and Buchanan selling us on a tax to repair the infrastructure

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    5. The 2008 measure specifically stated that it should go to public safety. The 2012 measure said "in order to maintain general City services such as public safety services, including paramedic programs, and to reflect technological advances in communications, . . .." That was the one that was voted down. On that 2012 ballot, there was also an Advisory Vote only measure 12-2 which said ". . .should the additional revenue generated by that tax be used to fund public safety services, including paramedic programs.

      I don't have the 2008 ballot measure but in a City Manager's report to the UUT Committee re: the UUT Committee purpose it states, "The voters intent was provided by the passage of Measure U in 2008, which stated that the increased UUT revenues should be used for Public Safety Services." It goes on to say, "Similar to Measure UA that was passed in 2008 with Measure U, Measure 12-2 allows voters to ask that the City Council use the additional tax generated by the UUT to fund the General Fund's Public Safety Services' budgets, including maintaining the Paramedic Program."

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  2. Pay increases? Of 9% and 13%? Seriously? Tell me again why I should vote to raise the UUT.

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    1. Pay Raises are not the worst of it.
      They want to hire more Police and more Employees!

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    2. the inmates are running the asylum

      last thing we need are more SMPD officers on the street

      I still haven't heard Elaine or the Mt Wilson Trail Race Committee explain why the event was charged and paid over 700 staff hours on the pre-event planning of the event - for at least two years in a row - same event same everything but the city spends 700 hours planning the event

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    3. Hey folks that equals a full time staff person working 88 days or 22 weeks. Remember they only work 4 days a week. All the City events are no different ... Huck Finn...4th of July etc.

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    4. The city employees are working every other Friday, but the city offices are closed on those days. Elisa told some of us who questioned the costs for the MWTR that there is a special fund that the money comes out of, not the General Fund, but has yet let us know how much or where the special fund is.

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  3. I'm wondering who is running these programs and what is the costs to the taxpayers, employer and the employee. My experience has shown that when ever you have a chunk of money sitting in the fund everyone is trying to get their hands on it. I know you will find a big story when you look at the costs to running that program.

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  4. The public employees should be prosecuted under the RICO statute because it is like a criminal conspiracy. There is so much collusion involved which is why the salaries and pensions go up and up and up. All the unions have to do is achieve a "break-out" in one city where that city pays overly exorbitant salaries and pensions. All the unions in surrounding cities support that effort because then they can't point to that City's pay and benefits as the new going rate, that all other cities now have to emulate if they want to remain "competitive". That's how these salaries and pensions keep leapfrogging ahead. This is also why each individual city is at such a disadvantage. Not only are they facing the collective power of their own public employee unions, but they are also going up against surrounding city unions who also want to support their union friends.

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  5. After all of Elaine's screw ups she got a raise? The secrets she must know.

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  6. I wish the Chief would at least smile and be outgoing when he is out and about during the parades and events around town. He, being the face of the PD, should be way more friendly in my opinion. I know other local chiefs are that way, and it would go a long way in helping their cause.

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  7. At Tuesday's city council meeting the Chief was bemoaning his low pay. Somehow he neglected to bring up his raise.

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    Replies
    1. low pay for doing what?

      please, the Chief comes across as a bully brat

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  8. He used to smile when diving into a plate of pasta at Briganti for lunch.

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  9. Has the chief offered to forgo his pay raise to save his Department?

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    Replies
    1. No, he made it clear that if we opted for the Sheriff's we get to keep him at full pay for some BS position

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  10. 7:21. it's not the employees. Have you ever heard of anyone turning down money or a raise? People have to support their families and costs of living, toll roads and medical costs. All things in life are costing more and with Sacramento pushing for higher density in construction southern California can not sustain itself just with the water problem alone. Our costs of living will not be the problem but the cost of food will eventually be over the ability of us commoners to pay. SO, with that said the problem is the managers are not managing the employees cost very well and are the real problems, like the manager of Sierra Madre, these managers are not trained to handle these negotiations. Then you throw into the mix of police officers suing the city, what do you do. As you can see 7:21 it's not the employees, it's the management.

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    1. So fire the Management?
      This is a huge and growing unfunded liability.It is not just going away like Pfft !
      Fix it now or let BK do it.

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  11. He is not the most charming of chiefs.

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  12. Looking at the Chief is kind of frightening.

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  13. Why is it the Sierra Madre Police Department never volunteers for anything? They get $150 an hour or something to stand around in their blues. That is a lot for what is basically security guard work.

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    1. But they can write some serious parking tickets

      anything else has to be farmed out to Pasadena or the Sheriff's Dept

      what we are paying for is a glorified Post Alarm with the scary ability to shoot people in the back

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    2. Their Union won't let them volunteer. That would take away a job from someone else. Go figure.

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    3. Good, let's fire their union as well.

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  14. If they got paid for each crime they solved they would starve or, we would all be in jail for something like not making a complete stop at the stop signs.

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  15. 8:03,, laws against having employees volunteering for certain levels of work for employers, work for free or loose your job kind of problems. These types of actions have created the need for unions. As an example a Dr. may volunteer across borders but may be restricted to how many hours he can be in surgery, etc. etc. at his place of employment subject to the laws of the Doctors state.

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    1. Nonsense. When cops are off duty they can volunteer their time/.

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    2. Not according to their contract. Can volunteer in our city. Pasadena or Arcadia is ok.

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  16. I am interested in all the police matters that are referred to the Detectives. Who are these detectives and to whom do they report? Does anything ever go to court? Are findings ever published? And I also find it interesting that if we do go with the sheriff the chief gets to keep his job. Why is this?

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    1. I suspect that the chief is close to retirement and wants to build on his retirement fund. To go elsewhere, he may not accrue such a hefty retirement. That's why he was given another added position , that is, to lock in a guarantee that he would be here in Sierra Madre if at some point the sheriff's were in and the P.D. was out!

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    2. don't laugh but one of the "Detectives" is the same blundering officer (Amos) who freaked out, pulled out his weapon and shot an unarmed man in the back - then got promoted to "Detective"


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    3. Doesn't the chief already have retirement benefits from Monterey Park? He wants more?

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    4. the beauty of the CalPERS system - it just keeps on layering pensions

      I'll be happy when it implodes

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  17. 9:47.... http://www.dol.gov/elaws/esa/flsa/scope/screen9.asp

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  18. This CalPERS info is so crucial to seeing the big picture. Occasionally the UUT argument becomes a bit linear, meaning people argue as though raising/extending the UUT=keeping the police and city services. But, that not only ignores the facts, it ignores our own city council members, who have expressly and very clearly been saying that extending the UUT at 10% (their impression of a compromised percentage) will do nothing more than temporarily stave off immediate financial emergencies. Not even a dent. There is clearly some beast behind this that cannot be fed enough, and without making some fundamental change, we can keep extending and raising the UUT, adding a parcel tax, etc. etc. etc., and we'll still keep coming up short. The pro-UUT group that shouts "just tax me because I am willing to pay for my services" seems not to be hearing their own city council saying it's not enough, and there is no end in sight. We'll pay the taxes, then more, and then more, and eventually still lose the police department, or library, or July Fourth parade, or whatever else we hold dear. The energy is better focused on why nothing is sustainable anymore. Some bleeding has to stop somewhere. CalPERS taking such a large slice is pretty eye-popping.

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  19. Very well said 10:45. The Fundamental change you recognize as necessary should be the replacement of the city manager. It always starts at the top.

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  20. What is the word used to describe doing things the same way over and over again and expecting a diiferent result?

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  21. Get more, Pay lessOctober 30, 2015 at 1:03 PM

    Excellent point 10:45. The UUT tax increase will not solve our problems. The 20/20 Sheriff's proposal will.

    In particular, it will increase patrol hours and save the City $800k annually. That will free up enough money to fix our run down little league facilities, add senior facilities, improve the library, and make a down payment on water infrastructure improvements. We would also be off the hook for future police related pension contributions.

    And, after doing all that we could still give our super awesome city manager a pay hike!

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    1. Doesn't the little league charge fees? Every team I have ever paid for has fees built in to take care of the fields, etc. The little league in SM doesn't do that? Is the league sponsored by the city? If not, they should pay their own way.

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    2. What specifically is needed for the Little League?

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  22. Dear mr. Cranky PantsOctober 30, 2015 at 4:17 PM

    Last I checked the city owned the park, the decaying grandstands, and doorless sub standard restrooms.

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  23. How about an $800k bonfire!October 30, 2015 at 5:03 PM

    We should focus on putting the city in a position in which we must decide how to spend our extra money. That discussion can only take place if we accept the sheriff's offer to reduce ou police costs by $800k a year. I would choose Heasley, seniors, and the library. Others may favor other projects. Great. The discussion will remain academic until we accept the sheriff's proposal.

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  24. There are so many dad's who love their little league-why don't they volunteer to fix it? The city may own it but they use it.

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