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Silock
08-30-2010, 06:32 PM
http://online.wsj.com/article/SB10001424052748703447004575449813071709510.html

By ARNOLD SCHWARZENEGGER

Recently some critics have accused me of bullying state employees. Headlines in California papers this month have been screaming "Gov assails state workers" and "Schwarzenegger threatens state workers."

I'm doing no such thing. State employees are hard-working and valuable contributors to our society. But here's the plain truth: California simply cannot solve its budgetary problems without addressing government-employee compensation and benefits.

As former Speaker of the State Assembly and San Francisco Mayor Willie Brown pointed out earlier this year in the San Francisco Chronicle, roughly 80 cents of every government dollar in California goes to employee compensation and benefits. Those costs have been rising fast. Spending on California's state employees over the past decade rose at nearly three times the rate our revenues grew, crowding out programs of great importance to our citizens. Neglected priorities include higher education, environmental protection, parks and recreation, and more.

Much bigger increases in employee costs are on the horizon. Thanks to huge unfunded pension and retirement health-care promises granted by past governments, and also to deceptive pension-fund accounting that understated liabilities and overstated future investment returns, California is now saddled with $550 billion of retirement debt.

The cost of servicing that debt has grown at a rate of more than 15% annually over the last decade. This year, retirement benefits—more than $6 billion—will exceed what the state is spending on higher education. Next year, retirement costs will rise another 15%. In fact, they are destined to grow so much faster than state revenues that they threaten to suck up the money for every other program in the state budget. (See the nearby chart.)

I've held a stricter line on government employment and salary increases than any governor in the modern era (overall year-to-year spending has increased just 1.4% on my watch). Nevertheless, employee costs will keep marching upwards because of pension promises, and they will never stop doing so until we get reform.

At the same time that government-employee costs have been climbing, the private-sector workers whose taxes pay for them have been hurting. Since 2007, one million private jobs have been lost in California. Median incomes of workers in the state's private sector have stagnated for more than a decade. To make matters worse, the retirement accounts of those workers in California have declined. The average 401(k) is down nationally nearly 20% since 2007. Meanwhile, the defined benefit retirement plans of government employees—for which private-sector workers are on the hook—have risen in value.

Few Californians in the private sector have $1 million in savings, but that's effectively the retirement account they guarantee to public employees who opt to retire at age 55 and are entitled to a monthly, inflation-protected check of $3,000 for the rest of their lives.

In 2003, just before I became governor, the state assembly even passed a law permitting government employees to purchase additional taxpayer-guaranteed, high-yielding retirement annuities at a discount—adding even more retirement debt. It's as if Sacramento legislators don't want a government of the people, by the people, and for the people, but a government of the employees, by the employees, and for the employees.

For years I've asked state legislators to stop adding to retirement debt. They have refused. Now the Democratic leadership of the assembly proposes to raise the tax and debt burdens on private employees in order to cover rising public-employee compensation.

But what will they do next year when those compensation costs grow 15% more? And the year after that when they've risen again? And 10 years from now, when retirement costs have reached nearly $30 billion per year? That's where government-employee retirement costs are headed even with the pension reforms I'm demanding. Imagine where they're headed without reform.

My view is different. We must not raise taxes or borrow money to cover up fundamental problems.

Much needs to be done. The Assembly needs to reverse the massive and retroactive increase in pension formulas it enacted 11 years ago. It also needs to prohibit "spiking"—giving someone a big raise in his last year of work so his pension is boosted. Government employees must be required to increase their contributions to pensions. Public pension funds must make truthful financial disclosures to the public as to the size of their liabilities, and they must use reasonable projected rates of returns on their investments. The legislature could pass those reforms in five minutes, the same amount of time it took them to pass that massive pension boost 11 years ago that adds additional costs every single day they refuse to act.

And after they've finished passing those reforms, they could take another five minutes to pass legislation terminating the annuity give-away they passed in 2003 and ending the immoral practice of pension fund board members accepting gifts or even campaign contributions from lobbyists, salesmen, unions and other special interests.

Reforming government employee compensation and benefits won't close this year's deficit. It will, however, protect the next generation of Californians from overwhelming burdens. The same is true with respect to the other reform I'm demanding—the establishment of a rainy-day fund so that legislators can't spend temporary revenue windfalls.

All of these reforms must be in place before I will sign a budget.

I am under no illusion about the difficulty of my task. Government-employee unions are the most powerful political forces in our state and largely control Democratic legislators. But for the future of our state, no task is more important.

Mr. Schwarzenegger is the governor of California.

The Mad Crapper
08-31-2010, 07:41 AM
No worries, Barry is going to print up another trillion.

healthpellets
08-31-2010, 07:54 AM
no, seriously. government unions are goooooooood i tell you.

BucEyedPea
08-31-2010, 07:58 AM
No worries, Bernanke is going to print up another trillion.

FYP

Amnorix
08-31-2010, 09:53 AM
Defined benefit pensions are the 800 lb. gorilla in the room when it comes to governmetn spending at all levels of government. The day they go away will be a great day.

2bikemike
08-31-2010, 02:04 PM
I have a buddy who retired at 50 and is drawing 100% pay from Calpers. With a retirement like that why would you continue to
work? It would be like going to work for free.

Brock
08-31-2010, 02:14 PM
Look at Arnold pretend to be a conservative. Maybe the best acting job he's ever done.

BIG_DADDY
08-31-2010, 02:41 PM
I was having some sushi Saturday night when the guy next to me started bragging about how he receives 150k a year in government pensions. I said, now you know why people are so angry here and starting to hate government employees. He thought about it for about 15 seconds and then started nodding before saying yes.

BIG_DADDY
08-31-2010, 02:42 PM
Look at Arnold pretend to be a conservative. Maybe the best acting job he's ever done.

Pretty much. He came in with good intensions but was beat up pretty quick. Same thing will happen to Meg in my best estimation.

ROYC75
08-31-2010, 02:47 PM
Pretty much. He came in with good intensions but was beat up pretty quick. Same thing will happen to Meg in my best estimation.

Too many west coast loons out there........ Ca. will always be in financial trouble.

BIG_DADDY
08-31-2010, 02:52 PM
Too many west coast loons out there........ Ca. will always be in financial trouble.

The truth of the matter is the very fact that government employees were allowed to unionize has killed us. The populace is just not angry enough yet, but it's coming.

BIG_DADDY
08-31-2010, 02:59 PM
How to become a multi-millionaire biger than many top executives. Work for a city, county or the state of California. Your unions hard at work.

(Reuters) - California Governor Arnold Schwarzenegger has state employees on the ropes.

Growing public outrage over their pay, benefits and pensions has helped the Republican governor put state workers and their unions on their heels.

Last week he declared a fiscal emergency and ordered three days a month off without pay for the workers, allies of Democrats who control the legislature and oppose his plan to slash spending to close a $19 billion deficit and balance the state's books, as required by law.

State workers should be screaming bloody murder as they did when furloughs were imposed last year. But public resentment at their compensation, including what analysts describe as "pension envy," has reined them in and muted their protests.

"Most Americans believe that federal employees and other government employees are paid more than comparable private-sector employees," said pollster Scott Rasmussen. "When we've asked about 10 percent pay cuts for public employees, people have overwhelmingly supported that."

A recent Rasmussen Reports poll found 69 percent of respondents nationwide opposed paying higher taxes to avoid public-sector layoffs. The response underscored a hardening of attitudes since early 2009, tied to rising pessimism among private-sector workers about personal finances and job security, Rasmussen said.

PENSION POLITICS

With the recession depressing revenue, states are struggling to keep up with pension costs, with New Jersey and Illinois opting to skip fiscal 2011 payments or issue bonds to raise cash for their retirement systems.

States collectively face a shortfall of at least $1 trillion in funding for employee pensions and retirement benefits, according to a Pew Center on the States report.

Local government pensions also face financial stress, and even in liberal San Francisco some say there are limits to how much the city can afford to spend on its retired employees.

A measure on San Francisco's November ballot aims to reduce the city's public pension costs. They currently account for one in five dollars of city spending, an amount that will swell over time due to generous contracts, said San Francisco Public Defender Jeff Adachi, who is pushing the measure.

"The idea of the public employee earning a paltry amount to do a public service is no longer true," he said, adding that a scandal in Los Angeles County has cemented public-sector compensation as a top issue in California's race to succeed Schwarzenegger.

The scandal, which has attracted national attention, is the "poster child of what's wrong with public-sector compensation," said San Diego City Council Member Carl DeMaio.

ALARM BELL

The scandal erupted last month over reports that Bell, a city of 37,000 in Los Angeles County, had been paying its city manager $787,637 a year, or nearly twice U.S. President Barack Obama's salary, along with a pension that could top $30 million if he lives to age 83.

The California Public Employees' Retirement System, the nation's biggest pension fund, joined state Attorney General Jerry Brown to launch a probe into Bell's compensation practices, which included paying most members of its part-time city council $100,000 a year, while roughly a quarter of its residents live in poverty.

The outrage has been felt across California, where the jobless rate tops 12 percent, leaving millions struggling to make ends meet. Private-sector workers also are worried that 401(k)s retirement plans slammed in the crisis will never recover and can only envy public-sector workers their job security and guaranteed retirement benefits.

"The pay and benefits issue is really striking people," said Pete Peterson of the Davenport Institute at Pepperdine University's School of Public Policy. "If unemployment were back around 4, 5, 6 percent I don't think we would be seeing this level of citizen engagement."

Steven Falk, city manager of Lafayette, California, said on his town's website that Bell "effectively pours gasoline on the fiery and growing national movement that is disapproving of public workers and the unions that represent them."

The outing of salary levels in Bell has spurred searches for large public employee salaries in other states. The Chicago Tribune this week reported on a Chicago suburban park district official who pocketed $435,203 in salary and bonuses in 2008.

BIPARTISAN INTEREST

California's public employee unions worry that Republican Meg Whitman, former chief executive of eBay Inc, will succeed Schwarzenegger as governor and press hard on pension reform.

She has called for raising the retirement age, longer vesting periods and, of most concern to public-sector unions, putting new workers into 401(k)-style retirement plans.

Brown, the Democrats' nominee for governor, does not back reform that would "privatize," according to public-sector unions, public pensions.

But Brown has seized on the Bell scandal and proposed forcing public employees to chip in more for their pensions, having them work longer and basing pensions solely on salary. Last-minute promotions, bonuses and overtime can now be used to inflate pensions.

"A big part of the thinking behind it is that there is always only a certain amount of money and that anything you spend on 'A' means less money to spend on 'B,'" said Brown campaign spokesman Sterling Clifford.

Adachi's measure in San Francisco would require current city workers to put more of their money toward pensions and pay more for health care in retirement, saving the city about $170 million a year.

Adachi said his focus is on existing workers because their pensions already consume so much of the city's spending and pose a real threat to its finances. He noted that Vallejo, California's closely watched municipal bankruptcy two years ago had its roots in compensation for firefighters and police officers, which had forced the city to slash spending on nonemergency services.

"When you start looking at how these pension funds work and the promises that have been made, you see the pension funds are unsustainable in their current form," Adachi said.

San Francisco's pensions are based on fat paychecks, Adachi said, noting that the average San Francisco employee's annual pay is $93,000, versus $46,000 in the private-sector. A third of city workers make $100,000 or more a year.

FROM BAD TO WORSE

The $525 million San Francisco spends on employee pensions and health care will soar, Adachi said: "It's going to go up to about $818 million in five years, and as more money goes to the pension fund, the less money there is for essential services."

Local officials across California are responding to rising pension costs with a grab-bag of solutions: later retirement ages, increased personal contributions, less generous benefits. In San Diego, DeMaio anticipates buy-outs for public employees to reduce pensions and a move to hire part-timers who will not be eligible for pensions.

"You have to put everything on the table because this is such a momentous problem," said Joe Nation, a former Democratic lawmaker now at the Stanford Institute for Economic Policy Research. Nation this year oversaw an institute study that calculated that California's state pension funds face a combined unfunded liability of more than $500 billion.

There is no time to waste on reform, said former Redwood City, California, city manager Ed Everett: "City managers are looking out five years and saying that 'If I don't get a handle on pensions and health benefits, things are going to go from bad to worse'."

At the state level, Schwarzenegger is trying to coerce reforms by threatening to withhold his signature on any state budget unless it includes money-saving changes to California' pension system. He has called the system the single biggest threat to California's fiscal health.

2bikemike
08-31-2010, 03:24 PM
Pretty much. He came in with good intensions but was beat up pretty quick. Same thing will happen to Meg in my best estimation.

I agree when Ahnold stepped in he was ready to kick ass and instead got his ass kicked. Now he just bow to the whims of the liberal majority. The final nail in his coffin for me was signing the Ammo bill.

IMHO he has been moderately conservative fiscally but way to liberal on many other fronts.

What Meg keeps saying is almost verbatim what Ahnold was saying in the beginning. It won't take long for the Unions and special interests to wear Meg down.

BIG_DADDY
08-31-2010, 03:39 PM
I agree when Ahnold stepped in he was ready to kick ass and instead got his ass kicked. Now he just bow to the whims of the liberal majority. The final nail in his coffin for me was signing the Ammo bill.

IMHO he has been moderately conservative fiscally but way to liberal on many other fronts.

What Meg keeps saying is almost verbatim what Ahnold was saying in the beginning. It won't take long for the Unions and special interests to wear Meg down.

I noticed people are starting to move out of the state again. It was bad then it kind of came back and now we're back to people just taking off.

2bikemike
08-31-2010, 04:03 PM
I noticed people are starting to move out of the state again. It was bad then it kind of came back and now we're back to people just taking off.

I think I may be here about 10 more years and then I am outta here. I am sick of the politics and crowds. Its gotten to the point the only good thing about this place is the weather. Maybe I'll head up Bwana's way for the summers and somewhere warm for the winter.

BIG_DADDY
08-31-2010, 04:26 PM
I think I may be here about 10 more years and then I am outta here. I am sick of the politics and crowds. Its gotten to the point the only good thing about this place is the weather. Maybe I'll head up Bwana's way for the summers and somewhere warm for the winter.

I moved the family to Southern Oregon in the mountains. My business isn't going to move unfortunately. I have a 10 year time horizon max. I hate being away from my family. I will spend the first year just catching up. It could happen sooner, we shall see.

Stewie
08-31-2010, 04:33 PM
This is why we're going to Quantitative Easing Part II. The Fed is mulling more stimulus, but we all know that means the plan is going to launch. Too many states, cities and municipalities are bankrupt. Not to mention the U.S., but hey, the U.S. can print money via the Fed.

BTW, did anyone see the story about the head of the China Central Bank has gone missing? The Chinese don't fuck around and it's rumored his loss of billion$ in US Treasuries put him underwater, so to speak. It's common for high gov't officials in China to be killed for major mistakes.

BIG_DADDY
08-31-2010, 04:40 PM
This is why we're going to Quantitative Easing Part II. The Fed is mulling more stimulus, but we all know that means the plan is going to launch. Too many states, cities and municipalities are bankrupt. Not to mention the U.S., but hey, the U.S. can print money via the Fed.

BTW, did anyone see the story about the head of the China Central Bank has gone missing? The Chinese don't **** around and it's rumored his loss of billion$ in US Treasuries put him underwater, so to speak. It's common for high gov't officials in China to be killed for major mistakes.

You will know when the US is really ready for change when the violence begins here. "Bring the violence, it's significant."

orange
09-21-2010, 06:07 PM
ALARM BELL

The scandal erupted last month over reports that Bell, a city of 37,000 in Los Angeles County, had been paying its city manager $787,637 a year, or nearly twice U.S. President Barack Obama's salary, along with a pension that could top $30 million if he lives to age 83.

The California Public Employees' Retirement System, the nation's biggest pension fund, joined state Attorney General Jerry Brown to launch a probe into Bell's compensation practices, which included paying most members of its part-time city council $100,000 a year, while roughly a quarter of its residents live in poverty.

The outrage has been felt across California, where the jobless rate tops 12 percent, leaving millions struggling to make ends meet. Private-sector workers also are worried that 401(k)s retirement plans slammed in the crisis will never recover and can only envy public-sector workers their job security and guaranteed retirement benefits.

"The pay and benefits issue is really striking people," said Pete Peterson of the Davenport Institute at Pepperdine University's School of Public Policy. "If unemployment were back around 4, 5, 6 percent I don't think we would be seeing this level of citizen engagement."

Steven Falk, city manager of Lafayette, California, said on his town's website that Bell "effectively pours gasoline on the fiery and growing national movement that is disapproving of public workers and the unions that represent them."

The outing of salary levels in Bell has spurred searches for large public employee salaries in other states. The Chicago Tribune this week reported on a Chicago suburban park district official who pocketed $435,203 in salary and bonuses in 2008.


8 arrested in Calif. city salary scandal
Prosecutor on Bell investigation: 'This is ... corruption on steroids' updated 2 hours 29 minutes ago

The mayor and ex-city manager of the Los Angeles suburb of Bell were among eight current and former city officials arrested Tuesday in a corruption scandal that authorities said cost the blue-collar city more than $5.5 million in excessive salaries and illegal personal loans.

The district attorney's office said several former and current City Council members were taken into custody along with ex-city manager Robert Rizzo and Mayor Oscar Hernandez.

"This, needless to say, is corruption on steroids," District Attorney Steve Cooley said at a news conference, standing next to a display of pictures of the suspects.

Rizzo, who was making nearly $800,000 a year, was booked on 53 counts of misappropriation of public funds and conflict of interest. He was expected to be arraigned Wednesday, with officials seeking bail of $3.2 million.

Rizzo could face several years in prison if convicted, Cooley said. Messages left at Rizzo's home and with his attorney were not immediately returned.

Others taken into custody were former assistant city manager Angela Spaccia, Vice Mayor Teresa Jacobo, council members George Mirabal and Luis Artiga, and former council members George Cole and Victor Bello.

Requested bail amounts ranged from $377,500 for Spaccia to $130,000 for Cole, based on the amounts each was accused of misappropriating in the city where one in six people live in poverty.

Former Police Chief Randy Adams, who was also scrutinized in the salary scandal, was not arrested.

Cooley, who knew Adams when he was the police chief in Glendale, said Adams was paid $457,000 a year but there was no evidence he obtained that salary illegally.

"Being paid excessive salaries is not a crime," Cooley said. "Illegally obtaining those salaries is a crime."

Prosecutors allege the suspects misappropriated more than $5.5 million.

The complaint said Rizzo made $4.3 million by paying himself through different employment contracts that were not approved by the City Council, and that council members paid themselves a combined $1.25 million for what Cooley called "phantom meetings" of various city boards and agencies.

Rizzo also was accused of giving $1.9 million in loans to himself, Spaccia, Hernandez, Artiga and dozens of others, authorities said.

Cooley said his office had been investigating the officials since March -- four months before the public learned they were paying themselves huge salaries to run the city of 40,000 people.

"They used the taxes of the hardworking citizens of Bell as their own piggy bank, which they looted," the district attorney said.

He added that his investigators have pored over more than 60,000 pages of documents and more people could be charged.

Robert Rizzo, former Bell city manager, is taken into custody outside his Huntington Beach, Calif., home. Most of the arrests went smoothly, though police briefly used a battering ram at the home of Hernandez before he responded and opened the door. The door was not knocked down.

The suspects were booked into county facilities and will be kept away from other inmates for their protection, sheriff's spokesman Steve Whitmore said.

The arrests were the latest twist in a scandal that emerged in July with the disclosure that Rizzo was paid almost twice the salary of President Barack Obama.

It also was revealed that Adams was making $150,000 more than the chief of the Los Angeles Police Department, and Spaccia was paid $376,288. Four of the five City Council members paid themselves nearly $100,000 a year for their part-time service.

Rizzo, Adams and Spaccia resigned and the council members reduced their salaries to about $8,000 following the disclosures and angry public reaction.

The four council members are currently the target of a recall.

Bell's interim chief administrative officer Pedro Carrillo said the arrests marked a sad day for the city.

"It is clear that Rizzo and Spaccia were at the root of the cancer that has afflicted the city," he said.

Last week, Attorney General Jerry Brown sued eight current and former officials of Bell, accusing them of defrauding taxpayers by granting themselves salaries he said were far higher than warranted for the jobs they were doing.

Artiga was not named in the lawsuit but Adams was.

Earlier this month Bell officials confirmed the city was also the target of a racial profiling investigation by the federal government for allegedly targeting young Hispanic drivers for traffic stops to raise revenue.

© 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

http://www.msnbc.msn.com/id/39291038/ns/us_news-crime_and_courts/?GT1=43001

Taco John
09-21-2010, 08:55 PM
Defined benefit pensions are the 800 lb. gorilla in the room when it comes to governmetn spending at all levels of government. The day they go away will be a great day.

Hear, hear...