We need to tell our public employees to pay their own pensions – NO MORE FREE RIDERS

26 May

Did you know, the California State Teachers Retirement System has come up short some $74 billion? That’s B-B-B-BILLION!

I wondered when we’d hit the B-word.

CalSTRS is the CalPERS for teachers. $74 billion. Just for teachers. 

That is the “unfunded pension liability” we been hearing about. I remember when Brian Nakamura started feeding us that word, like a little bit of cod  liver oil. We should thank him, really, except, I don’t think  most of us were paying attention.

This unfunded pension liability, which I will from here on refer to as “The Big Li”, is the amount of money our public workers have been  contractually guaranteed in retirement, that hasn’t been paid for yet. As Dan Walters explains, CalPERS (and CalSTRS), by way of legislators who also receive pensions, sold the California taxpayers a big wad of hooey.  

“The more egregious error was the cowardly failure of politicians to pay for the benefits they were so eager to provide, pretending that high-flying investment earnings would cover them with no cost to taxpayers. The classic example was Senate Bill 400, the 1999 measure that sharply expanded pensions for state workers – retroactively. Then-Gov. Gray Davis and legislators found political cover in assurances, later proven false, from CalPERS that the new benefits would cost taxpayers nothing. That scenario was repeated hundreds of times in cities and other local governments as unions pressed their governing boards to match the state. But CalPERS’ assurances collapsed when its investments were hammered in the recession and it raised mandatory contributions to cover its losses.”

Months ago Walters told us about the CalSTRS mess, and predicted it would hit the schools hard.

“Ignoring pensions’ long-term costs has consequences, as illustrated by what it’s taking to close a $74 billion shortfall in the State Teachers Retirement System. Governors and legislators dithered for years as the gap widened by millions of dollars a day. Finally, however, Assembly Bill 1469 was enacted this year, boosting contributions into STRS by school districts, teachers and the state to close the gap over 32 years. However, because of the long delay in confronting the issue, and the decades-long closure plan, covering a $74 billion gap will actually cost $237.7 billion, according to a table drawn up by STRS. And school districts will pay over 70 percent of it as their pension costs ratchet up from 8.25 percent of payroll to 19.1 percent. By design, the payments will phase in slowly, thus softening the political impact. School districts will see only a tiny increase this year but by the end of the decade, the STRS chart shows, they will be paying nearly $4 billion a year extra into the trust fund, and the bite will eventually climb to as much as $9.4 billion a year. Gov. Jerry Brown and legislators have overhauled school finance to sharply expand per-pupil spending, particularly on poor and ‘English-learner’ students.”

Teachers only pay 8 percent of their own pensions,  so that burden is going to fall heavily on the “school districts” – meaning, local taxpayers.  I’ve read nothing about this in Chico Unified agendas, or seen anything in the local  papers, but here’s a recent article from the LA Times:

http://www.latimes.com/local/education/la-me-schools-pensions-20140521-story.html 

The article details the progression by which school districts will pay more, at the expense of students. 

“To make matters worse, officials said, the highest contribution rate takes effect after the expiration of a temporary tax increase that is now boosting school revenues.

The school districts will just be the first entities to go. This will play  itself out in city chambers and county meeting halls all over the United States. This pension scam has been going around like the infamous Pyramid Scam for a few decades now. 

I haven’t sat in on a discussion about the city of Chico’s Big Li since Nakamura left, so I wrote a note to city finance staffer Frank Fields, asking for a current figure. The figures I received:

  • $51.8 million for miscellaneous employees
  • $47.8 million for sworn police and fire

About $99 million total – Nakamura gave a figure around $98 million. 

That is the money we owe to people like ex-city manager Tom Lando, who takes a pension of about $149,000/year, but we haven’t paid it into CalPERS. CalPERS allowed public entities to go along for years without paying, as explained above, and now they are demanding we up our ante. When I started looking into this issue the total payment for the city, including city and employee contributions, was less than 20 percent of the total cost of the pension, and now it’s over 30. Employees who were paying NOTHING to 9 percent, are now paying 9 to 12 percent, but management and public safety workers have been given generous salary increases to cover their payments – how stupid is that? We – the employer – are paying a bigger percentage of the pensions, as well as  bigger salaries. We pay one way or the other, while management and public safety, particularly,  are lining their pockets. 

They will ask  us for tax increases. We have to be firm but polite, cause they have the guns, but we have to tell them to buck up and stop being leeches and pay their own fare.

NO MORE FREE RIDERS.

 

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