California high court sets stage for major pension ruling

SACRAMENTO – The battle over reforming California’s underfunded system of pension benefits does not involve any particular legislative proposal or initiative idea at this time but is centered on a coming state Supreme Court battle over an arcane legal concept.

Legislators have largely avoided the pension issue since passage of a reform law that went into effect in 2013, and reformers have struggled to settle on an initiative strategy to take to voters. That’s unlikely to change. But last week the high court agreed to review a union appeal of a decision involving an obscure concept known as the California Rule. The decision could change everything.

The California Rule is not actually a rule, but a legal doctrine that emanated from a 1955 court case. Essentially, it states that no vested public-employee benefit such as a pension can be reduced unless public employees are granted another benefit of equal or greater value. Unions claim that a 2013 state law unfairly deprives them of vested benefits.

The rule remains the stumbling block for most efforts to reduce pension costs, given that it severely limits public agencies’ efforts to slice current pension costs. Hence, pension reformers and unions alike are eager to get a final verdict on the matter.

In the private sector, companies that offer defined-benefit pension plans – those plans that guarantee a pension payout based on a formula, as opposed to 401(k)s – are free to reduce the benefits going forward. In other words, employees must be made whole through today, but may start receiving lower benefits tomorrow. By contrast, in California and other states that follow this rule, government workers must be paid the full amount of the promised benefits until they (and their spouses) pass away.

The accepted interpretation has been that a benefit hike, once approved by a government agency, is permanent. It can never be rolled back. As a result, most pension reform proposals deal only with shaving benefits for new hires, who won’t start retiring for 25 or 30 years. That leaves service cuts and tax hikes as the only way to deal with increasing pension debt.

Some localities have tried to take on the rule. In 2012, for instance, San Jose officials put a pension-reform measure on the ballot that required current city employees to choose between new pension plans that offered fewer benefits than current plans. It passed with 70 percent of the vote, but the courts later gutted that measure. They relied on the California Rule.

But now the California Supreme Court is ready to address the issue, at least around the margins. Last week, the court, without comment, agreed to a union challenge of a San Francisco appeals court that put limits on the application of the rule. Last summer, unions appealed a similar Marin County case, in which an appeals court also put some limits on the rule’s application.

At issue is the California Public Employees’ Pension Reform Act, which went into effect in January 2013. Most analysts viewed the law as a modest attempt to get control of the state’s growing unfunded pension liabilities, or debt. Most of it applied only to newly hired state workers. But it did include a handful of provisions that affect current workers.

On Dec. 30, the First District Court of Appeal in San Francisco rejected a challenge by a state firefighters’ union claiming that PEPRA’s elimination of a 2003 benefit that let firefighters purchase up to five years of additional credits (airtime) before retiring was in violation of the rule.

“The unions argued that their members had a legal right to the pension benefits that were in effect when they were hired and that the state broke its contractual promise to them by eliminating those benefits,” according to a San Francisco Chronicle analysis. The 3-0 written opinion found that public employees have a right to a “reasonable pension” but they aren’t guaranteed “fixed or definite benefits immune from modification or elimination.”

“(P)laintiffs assert a vested contractual right to purchase up to five years of airtime service credit that is not subject to elimination or destruction by legislative amendment or repeal ‘even before the benefit has been accessed or the time for retirement has arrived.’” The court said plaintiffs “disregard the fact that, when amending the statutory scheme governing pension rights, the Legislature in fact provided (eligible public employees) … a several-month window in which to purchase the airtime service credit before the option terminated.”

The high court could uphold the rule or overturn it, or put certain limits on its application and deal narrowly with the “airtime” issue. In that separate Marin County case, five unions challenged PEPRA’s limitation of various ways that public employees enhance, or spike, their end-of-career salaries (bonuses, unused leave, etc.) to boost their lifetime retirement pay.

Unions argue that the reform reduced their vested pension benefits and was therefore in violation of their constitutional rights, as upheld by – you guessed it – the California Rule. “(W)hile a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension – not an immutable entitlement to the most optimal formula of calculating that pension,” ruled Justice James Richman, in language similar to the San Francisco ruling. He wrote that the Legislature may “prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension.”

As reporter Ed Mendel has explained in Calpensions, “The high court will wait until an appeals court rules on three similar spiking ban suits consolidated from Alameda, Contra Costa and Merced counties.” That might take some time, but this issue is definitely coming to the state’s high court in one form or another, sooner or later.

Battle lines are drawn. The unions claim that state and local agencies may not reduce any pension benefits. Pension reformers – and the courts, in recent decisions – say that while a reasonable pension remains a right, that doesn’t stop localities from reducing some things. These cases deal with pension-spiking enhancements and the purchase of airtime – controversial and somewhat limited practices. But the future of pension reform is on the line.

Steven Greenhut is Western region director for the R Street Institute. Write to him at [email protected]

54 comments

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  1. Ronald Stein
    Ronald Stein 18 April, 2017, 09:31

    It’s unfortunate that future generations, unable to vote today, will bear the costs of many enacted pension programs, entitlements and boondoggle projects, requiring them to pay higher taxes and work later into their lives to pay for these promises. It’s the inmates running the pension Asylum that are loading up system with lucrative packages for themselves, to be paid for by taxpayers.

    The international business world is intelligent enough to know that DEFINED BENEFITS, neither capped nor precisely quantifiable in advance, financial disasters to any business, thus all businesses focus on the known, i.e., defined CONTRIBUTIONS alone.

    Stealing from the young who have no votes, but silently shoulder the costs and bear the burden of unfunded promises of these programs to enrich the old seems to describe the Governments expansion of entitlement benefits and other government services, along with the taxes young people will have to pay to support them, mostly to subsidize older Americans.

    The inmates know that debt for our future generations buys votes. Over the decades, the proven “concept’ practiced by voters is to defer as much financial responsibilities as possible from our current financial responsibilities to future generations, that have no votes on the subject. Simply stated, if we cannot afford it today, pass it off to the future generations to minimize any impact on our current lifestyles.

    Another insult to the taxpayers and future generations paying their pensions is that many of those early retirements collect their guaranteed pensions, and then take a second job.

    Virtually all elected officials are heavily financed by unions which are focused on entitlements for their current members. The unions, government, and other bureaucrats have been very successful in manipulating the system to enrich themselves. Thus, no changes can be expected in the foreseeable future for elected officials to ever abandon their source of votes.

    Even before those young folks can vote our Golden State schools are on track to force substantial budgetary cutbacks on core education spending, as public schools around California are bracing for a crisis driven by skyrocketing worker pension costs that are expected to force districts to divert billions of dollars.

    Reply this comment
  2. bob
    bob 18 April, 2017, 12:22

    The politicians will bleed the taxpayers white before they touch pensions in any significant way.

    Just look at the recent huge increases in the fuel taxes. Just the beginning of a tax increase orgy.

    Reply this comment
  3. michael
    michael 18 April, 2017, 13:08

    The Judges are public employees and have pensions as well. I suspect that will color their decisions. Regardless of their decision math is a bitch. That which cannot be payed will not be paid. Refusing to recognize that reality sooner rather than later means that when the pensions are cut it will be deeper.

    Reply this comment
  4. Queeg
    Queeg 18 April, 2017, 15:03

    Comrades

    Private industry offer crap jobs. Even a high tech job sucks in urban areas where you gased bY smog , taxed to the moon , and skin stripped by the released felons.

    The answer start kissing rings and live work government.

    Reply this comment
  5. Mike
    Mike 18 April, 2017, 17:38

    California courts won t touch this. The viewpoints will change when taxes are raised, food support is reduced, and illegals devour a porky SEIU nurse on the sidewalk in front of a shuttered Burger King. Empty ketchup, mustard, salsa, and salt and pepper packets are among the leftovers.

    Reply this comment
  6. Dude
    Dude 18 April, 2017, 18:21

    Wow. Who would’ve guessed that unions could be so callous and greedy. Oh wait, everybody knows unions are the great whites at the public feeding trough.

    Reply this comment
  7. Tough Love
    Tough Love 19 April, 2017, 06:05

    Public Sector pensions (AND benefits) should be set at a level (using appropriate and reasonable assumptions) such that expected Taxpayer contributions (expresses as a level annual % of pay) when added to wages …… giving “Total Compensation” ….. is very close to what Private Sector workers earn in Total Compensation in jobs with reasonably comparable risks and which require reasonably comparable education, experience, skills, and knowledge.

    It’s WAY past time to STOP unnecessarily overcompensating Public Sector workers.

    Reply this comment
  8. O'moore
    O'moore 19 April, 2017, 08:27

    It is important to understand that in the Marin case, the court reviewed all past pension case rulings and concluded that the California Rule never prohibited reasonable reductions in pensions in order to maintain the viability to pay reasonable pensions. A careful reading of Kern and Allen v. City of Long Beach makes that clear. If a pension system is financially viable, reductions require off-sets. If a pension system is financially unable to continue to pay nominal pensions, reductions are allowed so that reasonable pensions can be paid.
    There is one sentence in the Allen decision that has been taken out of context and referenced over and over by Bloggers and govt. agency lawyers that has create the false reading of the California Rule, because it did not qualify the financial integrity part of the rule in that sentence, but did so twice in the entire decision.

    Reply this comment
  9. Hermit of Livry
    Hermit of Livry 19 April, 2017, 09:26

    “The trade unions will be one of the agencies that will bring upon this earth a time of trouble such as has not been since the world began.” Country Living p.10

    Free book call 1-800-THE-TRUTH

    Reply this comment
  10. showmethemoney
    showmethemoney 19 April, 2017, 10:08

    Solution is NOT to cut the pensions of hard-working government employees. But to raise taxes so that these employees can receive what they were promised and deserve. Anyone who suggests otherwise is simply suffering from a case of Pension Envy.

    Reply this comment
    • bob
      bob 19 April, 2017, 10:53

      hard-working government employees You misspelled sleeping. HTH.

      Reply this comment
    • Tough Love
      Tough Love 19 April, 2017, 12:43

      Why, are you “special” and deserving of a FAR greater pension (than comparable private Sector Taxpayers) simply because your Unions successfully bought it with BRIBES (disguised as campaign contributions and election support) paid to our Elected Officials?

      If you’re non-safety losing HALF is the MINIMUM you should lose. If a Safety worker, bringing your pension all the way down to what Private Sector workers typically get (when factoring in not just the richer “formulas”, but also the richer “provisions” such as very young retirement ages and COLA increases would require losing 3/4 of your promised pension …….. because Safety pensions almost ALWAYS have a value upon retirement 4+ times greater than those of comparably situated Private Sector workers.

      Reply this comment
      • SeeSaw
        SeeSaw 19 April, 2017, 13:00

        The DB public pension systems in CA existed, respectively, 50+ and 30+ years before the unions existed so don’t go blaming the unions for everything TL. Many public agency groups are not and have never been represented by professional unions–my own former employee group is on its own right now, and they are all members of the same plans. Unions can be both good and bad–same thing exists in the private sector–some good-some bad. Nobody ever said we are special. If you want to go on with your, “blah, blah, blah” be my guest if its the only attitude that keeps you alive.

        Reply this comment
        • Tough Love
          Tough Love 19 April, 2017, 18:29

          SeeSaw,

          One of the biggest contributor to CA’s pension mess is the RETROACTIVELY granted pension increases that arose from SB400 (and follow-up changes complimenting similar changes for Local Plans).

          The UNIONS along with Union-controlled CalpPERS pushed for this outrage and suppressed CalPERS chief actuary’s report showing the really bad outcome that would arise if the market didn’t keep rising at the high rate it had in the years leading up to SB400.

          Sure, sure ….. the Unions are blameless.

          Reply this comment
        • JenniferHu
          JenniferHu 22 April, 2017, 14:23

          Very true we have always provided a retirement program for public employees. It wasn’t until the Dill’s act that unions were allowed to bargain for benefits. And no I have never been overpaid for the work I did. Where else can you work and be beaten, kicked, hit, bitten, shoved, slapped, knocked out cold on the job. I made 773.00/month for this job and I held onto it because I knew my retirement would not be stolen or invested in a crap table 401k. Don’t forget the CalTrans workers people kill every year, some on purpose. Your just hateful and never walked in our shoes.

          Reply this comment
          • Tough Love
            Tough Love 22 April, 2017, 18:35

            Quoting JenniferHu ……

            “I made $773.00/month”
            Let’s see, you had wages of 12x$773=$9,276/yr. ?

            Couldn’t be anywhere near full time.

            Part-time Public Sector workers should get pensions & benefits EQUAL to what part-time Private Sector workers get ….. typically NOTHING.

            You are NOT “special” and deserving of ANYTHING more than your Private Sector counterpart.

  11. BeenThereDoneThat
    BeenThereDoneThat 19 April, 2017, 10:46

    I hope that O’moore’s comment here is the closest to what happens. It is more logical than either the blind defense of the California rule by unions or the teeth gnashing and wailing of those who want to destroy one of the last remaining decent defined benefit systems for the working person.

    I agree that it is doubtful that the legislature and governor will engage in additional serious reform. An initiative is too much of a wildcard – all they have to do is get too extreme, or not understand the mechanisms of a viable pension system and get one thing just wrong enough, and it will likely go down. Plus, the voters may not really understand the implications of a complex initiative, or just not show up to vote in large numbers.

    The lower courts have shown in their rulings that they understand the issues here, as well as the reality of the math, IMO. I think they want a viable system to be sustained going forward, after all, they’re part of it too.

    Not every jurisdiction is in trouble with the pensions and their payment obligations. But many cities, especially, will be more and more in coming years, as the safety workers’ pensions are becoming such a large component of their budgets.

    I hope the outcome is a ruling that future pension earnings can be reduced, but on a case by case basis through negotiations, instead of statewide by fiat. Then, when real trouble becomes apparent, the cities can renegotiate future pension accrual rates to spare their budgets and save them from bankruptcy.

    The other thing that I think is wrong is applying final pension levels based on salary without a cap, as well as excessive pension calculation rates for safety employees. There have been some modifications to these from the 2013 act in my understanding that make them more reasonable. I’m not sure if the maximum cap is active only for new employees after 2013, but my recollection is that it applies a salary max. of around 120-140k upon which a pension can be calculated. Thus, most highly paid employees would earn at most 60-80% of that with a long career.

    Many current highly paid employees under the pre-2013 formula can pull in 100k, 150k, 200k, etc in pensions with long careers in these higher level positions. That is excessive for sure.

    If lower level employees are getting 30-50k per year in pension after a long career, mid level maybe 50-80k among those retiring recently, then I think it should top out around 100-120k per year max for the very highest level employees. This probably can’t be made retroactive to pre-2013 employees, but needs to hold for the future to maintain a hope of solvency without more hits on the taxpayer.

    Reducing accrual rates for current employees going forward via contract negotiations may be the best way to maintain solvency of the system, along with the eventual impact of the 2013 revisions.

    Reply this comment
    • Tough Love
      Tough Love 19 April, 2017, 12:48

      Quoting ….

      “If lower level employees are getting 30-50k per year in pension after a long career, mid level maybe 50-80k among those retiring recently, then I think it should top out around 100-120k per year max for the very highest level employees”

      Wrong. Public Sector pensions at EVERY (yes EVERY) income level should be no greater than those of comparable Private Sector workers unless those workers can demonstrably show materially lower wages.

      Reply this comment
      • SeeSaw
        SeeSaw 19 April, 2017, 13:10

        The problem TL is that DB pensions are not available to much of the private sector–so why want to punish public workers by insisting on apple/orange comparisons? What would you rather have–a public sector pension or one from the private sector? My spouse’s private sector pension would have been very good if the private sector employers had not broken the residential carpenters’ union when they hired the illegals for a quarter of the union pay. That pension from the private sector does not pay enough now to buy PPO medical insurance, secondary to Medicare. Now there was an issue for you in the 80’s TL. Where were you then!

        Reply this comment
        • Tough Love
          Tough Love 19 April, 2017, 15:42

          Quoting SeeSaw ….

          “The problem TL is that DB pensions are not available to much of the private sector–so why want to punish public workers by insisting on apple/orange comparisons?”

          Balony ……. the musings of a self-interested Public Sector retiree.

          Because 85% of all workers are employed in the Private Sector, it is THAT sector that rightfully determines “market rate compensation” … whether coming from wages, pensions, or benefits.

          And with a LARGE majority of Public Sector workers making equal or greater “wages” (than their Private Sector counterparts), there is simply ZERO justification for ANY greater pensions and/or benefits at Taxpayer expense.

          Reply this comment
          • S Moderation Douglas
            S Moderation Douglas 20 April, 2017, 00:59

            “And with a LARGE majority of Public Sector workers making equal or greater “wages” (than their Private Sector counterparts), there is simply ZERO justification for ANY greater pensions and/or benefits at Taxpayer expense.”

            Totally refuted by every major study.

          • Tough Love
            Tough Love 20 April, 2017, 22:18

            SMD, You’ve read them “ALL” ?

            Tell us the conclusions from EACH such study that you have read……LOL

          • JenniferHu
            JenniferHu 22 April, 2017, 14:09

            Where do you get your facts? It appears your just a hateful person spewing junk out there. PEPRA 2013 is required reading if you wish to continue to be heard. There are now 30% of state employees cover under this law. Bashing a DB rather than insisting it be available to every Californian is just elder abuse.

          • JenniferHu
            JenniferHu 22 April, 2017, 14:13

            Where do you get your facts? It appears your just a hateful person spewing junk out there. PEPRA 2013 is required reading if you wish to continue to be heard. There are now 30% of state employees cover under this law. Bashing a DB rather than insisting it be available to every Californian is just elder abuse. By the way as a retiree at 65 my pay is 1,750. A month get a life.

          • Tough Love
            Tough Love 22 April, 2017, 19:58

            JenniferHu

            With few exceptions PEPRA 2013 only impacted NEW Public Sector workers hired AFTER PEPRAs effective date.

            Notwithstanding CA’s laws, Regs, Constitutional provisions, Case Law or the decisions of CA’s self-interested/conflicted Judges, it SHOULD HAVE applied to the futures service of all CURRENT workers ……. just as is both LGAL and ROUTINE when it comes to pension changes in PRIVATE Sector Plans.

            You are NOT “special” and deserving of a better deal on the Taxpayers’ dime.
            *******************************

            P.S. The $ amount of your pension (by itself) no matter how small is no relevant. The APPROPRIATE question should be…… what would your pension likely be if working in the Private Sector making the SAME pay, retiring at the SAME age, and having the SAME years of service.

            I little doubt that YOUR pension is AT LEAST 2x greater in value upon retirement (4X if a safety worker).

            It WAY past time to put an END to the Public Sector THEFT of Private Sector taxpayer wealth.

          • S Moderation Douglas
            S Moderation Douglas 22 April, 2017, 20:46

            ………………………………..
            Tough Love22 April, 2017, 19:58

            JenniferHu

            With few exceptions PEPRA 2013 only impacted NEW Public Sector workers hired AFTER PEPRAs effective date
            ………………………………….
            Probably, if you made a contract to purchase a new car for$30,000 and when you came to pick it up you were told you still get the same exact car, but you will now have to pay $60,000 you would consider that a (significant) impact.

            My workmates, legacy employees, were contributing approximately $2,000 a year before PEPRA. After PEPRA, their contributions increased to $4,000. That is impact, and it has already saved the state hundreds of millions of dollars.

          • Tough Love
            Tough Love 22 April, 2017, 21:53

            Quoting SMD…….

            “My workmates, legacy employees, were contributing approximately $2,000 a year before PEPRA. After PEPRA, their contributions increased to $4,000. That is impact, and it has already saved the state hundreds of millions of dollars.”

            Big Whoop, so now instead of paying roughly 10% of an ACCURATE measure of the Total Cost of their extraordinarily generous pensions, they’re paying 20% …………….. with the Taxpayers (who get FAR FAR FAR less from their employers) responsible to pay the other 80% of the Total Cost of the PUBLIC Sector workers’ pensions.

            Like I said, you’re a Public Sector pension/benefit “moocher”.

      • BeenThereDoneThat
        BeenThereDoneThat 19 April, 2017, 20:18

        Well, you just saying this doesn’t make it so. Sounds like you’re making a socialist argument here, TL. All should be subject to enforced equality, eh?

        I’ve noticed your posts for years on almost all the websites related to pensions, mostly making the same point over and over, but getting more strident with each passing year and wanting even more cuts after any changes to the pension systems that embolden you such as the 2013 CA rollback for new employees. Your posting on almost every pension website at all times of the day makes me wonder on whose behalf you are posting these. If it’s your own personal time and project, you sure seem to have an obsession.

        Private sector employees get social security plus they should be getting a 401k with a healthy employer match, given that many of the large previous employers took away their pensions and replaced them with…that? Not nearly as much, for sure. That is not something to aspire to, but was another tactic of the 1% to consolidate their wealth further. That summed amount of SS plus 401ks is what you should compare to pensions, because most Calpers pensioners do not get SS or any DC match. The 401k results will vary wildly for private sector employees, so it’s pretty difficult to do that comparison – and since many employees ignore or forego the discipline to grow and maintain their 401k, it is another reason that a well structured and managed DB pension works out better. While it’s clear that this won’t be coming back in the private sector, the public sector version should be maintained but modified (reasonably, that is) further.

        The issue here is that the Calpers (and CalStrs) DB pensions have gone somewhat out of bounds, and no doubt more so than the 2013 modification can fix in time. Nobody is going to sweep in and gut these pensions to equal whatever private sector average you invent. It’s not going to happen unless we decide to throw out any meaningful legal contracts and precedent upon which we base our government.

        Initiatives are likely to fail to. While they can whip up public sentiment, they do not have a good track record, and whatever might pass is likely subject to years of court challenges.

        But there is a realistic chance to modify and save the system while bringing it more back in line through these court case implications and a ruling that would allow future earnings to be addressed prospectively in jurisdictions where the alternative is seriously impactful, or even leading toward bankruptcy at a city or other jurisdictional level. Also, all of these pension spiking tactics and airtime should be done away with accross the board immediately. That is the most realistic scenario, until the 2013 provisions kick in 25-30 years from now with additional substantial savings.

        If it makes you feel better to rant continuously about all of this, please proceed. It’s not going to matter much. The courts will, we can hope, address it legally and logically through our time tested processes.

        You really did not address any of my ideas for evolving the system, other than to come back with chop chop chop everybody should get screwed like today’s private sector workers who have been taken to the woodshed with virtually no power to resist that involuntary reaming they’ve received on retirement security (let’s look at CEO pensions and see how they’ve done, shall we)?

        Weak sauce, mate.

        Reply this comment
        • Tough Love
          Tough Love 19 April, 2017, 21:55

          BeenThereDoneThat ……..

          I might call my strongly advocating for Public Sector reform a “passion”, but certainly not an obsession.
          I’m VERY knowledgeable in pension design and funding and knew this pension nightmare would arise even 15 years ago. And I post strictly as a taxpayer fed-up with what I consider to be huge abuse.

          Based on your comments, I’m sure that either you or a family member is (or will be) retired on a Public Sector pension and doesn’t want it reduced. That’s understandable, but it doesn’t justify your pension.

          If you’re non-safety, it’s easy to demonstrate that your pension is 2 to 4 times greater in value upon retirement than that of comparably situated Private Sector worker (in wages, age at retirement, and years of service) …. with that 2 to 4 times rising to 4 to 6 times if you’re a Safety worker.

          Quoting …

          “That summed amount of SS plus 401ks is what you should compare to pensions”

          That’s correct, and it proves my point. Private Sector workers get their employers 6.4%-of-pay Social Security contribution on their behalf plus (typically) a 3%-of-pay “match” (hardly what I would call a “healthy employ match” …. as you also stated). Total the two %s and Private Sector Taxpayers typically get 6.4%+3%=9.4% of pay towards their retirements from their employers.

          Public Sector DB pensions are MUCH MUCH more costly. In fact, it’s also easily demonstrated that (when valued using the SAME assumptions and methodology that the Gov’t REQUIRES of Private Sector Plans in their pension valuations) the Total Level Annual Cost for non-safety worker pensions is in the 25% to 40% of pay range, rising to 40% to 60% of pay for Safety workers …… and California, granting some of America’s RICHEST pensions is on the higher end of those ranges.

          Subtract the Workers own contributions and the remainder ….. being the responsibility of Taxpayers …. is 4 to 5 times (yes 4 to 5 TIMES) greater than the 9.4% of pay that they get from their employers. And some of CA’s wokers do indeed get Social Security, make that multiple far higher for them.

          What makes Public Sector workers so “special” that Taxpayers should fund such ludicrously GENEROUS, and hence ludicrously COSTLY pensions?

          Quoting …….

          “The issue here is that the Calpers (and CalStrs) DB pensions have gone somewhat out of bounds, and no doubt more so than the 2013 modification can fix in time.”

          THAT you got right….. but not “somewhat”, but by a HUGE amount (and especially the SB400 RETROACTIVELY-increased pensions). Not only must additional reductions be far greater, but they must also apply to the Future Service of all CURRENT workers.

          Hopefully the CA Supreme Court’s recent decision to hear several CA Appeals Court decisions effectively negating the “California Rule” will result in allowing just such Future Service reductions for CURRENT workers.

          Without that, BOTH CA’s Taxpayers AND it’s Public Sector workers are doomed. The “productive” tax-paying segment of the former will revolt or leave, and the Public Sector workers will lose almost all that they have been unjustly “promised”.

          Remember, not the Laws, not the Constitution, not the Courts, but the “math” always governs in the end-game, and right now, the math doesn’t compute.
          *****************************

          The fact that CA Safety Unions have sued to be able to CONTINUE to “spike” their pensionable compensation, and other Unions have sued to CONTINUE to to buy AIRTIME (MUCH greater in incremental pension value than what they pay for those extra years of service) speaks volumes. The insatiable greed and disdain for the Taxpayers is palpable, and there will be little Taxpayer sympathy when the these Plans fail.

          Reply this comment
          • BeenThereDoneThat
            BeenThereDoneThat 20 April, 2017, 10:07

            Here’s the thing, TL. I believe that the best you can hope for (and I’m on board with it, too), is that the CA Supreme Court upholds the lower court rulings and enables jurisdictions that are in trouble to negotiate to adjust pension factors downwards going forward, for both current and new employees. I think you understand implicitly that this is the most likely feasible modification, even if you won’t say it publicly.

            I suspect that such a ruling would also allow the state to do this statewide for all employees as well, but what chance do you think that would have in our legislature? Current employees of these troubled jurisdictions may not like it, but as we’ve seen in places where this has happened, when the math strikes, they are smart to accept some adjustment vs. risking bankruptcy.

            I think that if this is how the ruling goes, that statewide initiatives will have even less of a chance of passing. Such a court ruling would be serious and reasonable reform. Then, when the employees working under the 2013 pension reduction formulas reach retirement age, they will be on a more equal footing that you desire – but at least not subject to the vast uncertainties of 401k fluctuations.

            As I said before, I also favor eliminating all spiking and airtime forever statewide as part of this court ruling.

            In fact, I wouldn’t be surprised if the legislature is crossing their fingers that the court rules in favor of allowing pension adjustments when solvency is an issue, because it will remove the legislature from the politically uncomfortable position of having to deal with it. You can be sure that cities who find themselves in a tight situation will not be hesitant to renegotiate pension formulas if their city services are suffering too much or bankruptcy looms on the horizon due to these expenses.

            Regarding the comparison of pensions to SS and 401k’s – I know you’re aware that neither SS or 401ks were designed to replace pensions. However, those who start making contributions to their 401ks from their early 20s and maintain it every year, especially with an employer match, can build their 401ks into the millions by retirement. That is more than comparable to pension level payments. The problem is, most either won’t sacrifice immediate desires to do this, or their income/cost of living ratio has gotten so out of whack these days that they cannot feasibly do it. This is not a good system.

            The only ones who can really seem to make it work are those who make good coin and have extra to contribute each year, or who are frugal and willing to sacrifice (sometimes extremely) and understand and think about retirement finances from an early age (which is not most people). So even raising the contribution limit on a 401k to make it a better system for saving for retirement would likely only help those who have higher incomes and who can afford to contribute more, or who genuinely think about and understand retirement planning from a young age.

            I do understand both math and politics, which is why I support a supreme court decision as I have described here. I do not know all the legal implications that such a ruling would bring, but from what I’ve read, it would likely be along the lines of what I’ve posited here. If I’m wrong about that (quite possible!), I look forward to reading about these proceedings as they occur, and learning what the detailed implications of such rulings would become.

          • Tough Love
            Tough Love 20 April, 2017, 18:50

            Quoting BeenThereDoneThat,

            “Regarding the comparison of pensions to SS and 401k’s – I know you’re aware that neither SS or 401ks were designed to replace pensions. However, those who start making contributions to their 401ks from their early 20s and maintain it every year, especially with an employer match, can build their 401ks into the millions by retirement. That is more than comparable to pension level payments. ”

            Yes, 401K Plan account balances can indeed grow VERY large with consistent high annual contributions over 40 years, often equaling in value the DB pensions granted those in the Public Sector, but why should Public Sector workers get to the SAME point (via their MUCH richer pensions formulas and provisions) in only 30, 25, or 20 years ?

            There is no justification for these MUCH richer Taxpayer-funded Public Sector pensions.
            ***********************************
            For What it’s worth, overall, you and I are NOT that far apart in our thinking.

            No longer “sure” you’re a Public Sector worker/retiree, but for what it’s worth, your thinking is miles from the Public Sector “moochers” I usually trade comments with.

      • S Moderation Douglas
        S Moderation Douglas 20 April, 2017, 01:19

        Quoting “Never In Doubt”

        ” Wrong. Public Sector pensions at EVERY (yes EVERY) income level should be no greater than those of comparable Private Sector workers unless those workers can demonstrably show materially lower wages.”

        Wrong again. Pay disparity in the private sector has been increasing. Literally, the rich get richer and the poor get poorer. The so-called “free market”, unconstrained, does not lead to ideal results. Public sector compensation is much more egalitarian. Lower paid government workers earn more than equivalent private sector workers, while more highly educated, professional, public workers earn much less than their private sector peers.

        If this simple fact* is not recognized in any pension “reform” scheme, that reform will be doomed to failure.

        *fact… Fact, according to every major study, liberal or conservative.

        Reply this comment
        • Tough Love
          Tough Love 20 April, 2017, 07:15

          Yes, studies show that the highly paid (the 8% of all Public Sector workers that fall into the PHD and “professional” categories) do seem to be paid less in wages, perhaps justifying greater pensions than their Private Sector counterparts, but ONLY to the extent that it makes up for any lower wages ….. wages appropriately determined by compared actual hours worked/wk. I suspect that Private Sector professionals (CPAs, Lawyers, Doctors,. etc.) routinely work FAR more hrs/wk than those in similar occupations in the Public Sector.

          If you work 3/4 the hrs (AND are equally “productive”…..e.g., internet surfing hours excluded), you SHOULD earn 3/4 the wages, and 3/4 the wages under such circumstances would NOT justify greater Public Sector pensions or benefits.

          Reply this comment
          • S Moderation Douglas
            S Moderation Douglas 20 April, 2017, 08:12

            Even the most conservative study showed that nationwide, sixty percent of state workers are either underpaid or roughly equal, including the value of pensions and benefits, despite what you “suspect”.

          • S Moderation Douglas
            S Moderation Douglas 20 April, 2017, 08:28

            Don’t listen to what the most prominent experts in pension matters have determined after studying thousands of data points nationwide, listen to what Tough Love “suspects.” Tough Love is often in error, but “Never in doubt.”

            Even the most conservative study showed that nationwide, sixty percent of state workers are either underpaid or roughly equal, including the value of pensions and benefits, despite what you “suspect.”

          • Tough Love
            Tough Love 20 April, 2017, 15:51

            Quoting SMD ….

            “Even the most conservative study showed that nationwide, sixty percent of state workers are either underpaid or roughly equal, including the value of pensions and benefits, despite what you “suspect””

            To arrive at that 60% you would have had to to find, read, study, and understand (by itself, quite a feat, given you were a light-bulb-changer before retiring from the public Sector).EVERY existing study. How do you know you didn’t miss any ? How many studies in total? Surely you would have that information if you calculated that 60% ratio.

            Did you keep a spreadsheet or notes after reading each study for later compilation of that ratio? Care to share it ?

            LOL …….. LOL ……… LOL

          • S Moderation Douglas
            S Moderation Douglas 20 April, 2017, 23:24

            For those not familiar, the sixty percent comes from Biggs and Richwine “Overpaid or Underpaid? A State-by-State Ranking of Public-Employee Compensation ”

            Table 4, page 60. According to their nationwide data, public sector workers with a Masters degree have a 3% compensation penalty compared to the private sector, which they call statistically insignificant. By that reasoning, the Bachelors level 2% compensation advantage would also be insignificant. Therefore, all those public workers with a BA, or higher, are either “roughly equal” (BA or MA) or significantly underpaid (Professional or PhD).
            According to table 1, page 58, BA and above comprise 60% of the total state workforce.

            And now, we should forgive Tough Love. When she gets desperate, reading comprehension (and common sense (and manners)) go out the proverbial window.

            No, TL, to arrive at that 60%, I did not have “to to [sic] find, read, study, and understand…” every study. I stated very clearly, the sixty percent came from one study… “Even the most conservative study showed that nationwide, sixty percent of state workers are either underpaid or roughly equal,…”

            And…

            I did not say “EVERY existing study.”, I said “every major study, liberal or conservative.”

            The fact that you believe “light-bulb-changer” to be an insult says much more about you than about me. I also have a Bachelors degree in Economics and Associate degree in electronics.

            Not to mention above average reading comprehension. Something you clearly need to work on, in addition to that manners thing.

            TL (AKA “Never in doubt”) also has a hissy-fit if I fail to mention the Biggs paper includes only state employees, not local, and not safety. And the study is based on data almost ten years old.

            “LOL …….. LOL ……… LOL” ?

          • Tough Love
            Tough Love 22 April, 2017, 14:26

            SMD,

            Prop 13 keeps CA’s Property Taxes low for many. In NJ the average property tax is nearing $10K annually and MANY homes now have taxes between $15K and $20K annually (including me). MOST of that is sourced from the wages, pensions and benefits of Local Town workers. Most are office clerks, DPW or Police and I can’t think of ANY that would be considered “professionals” (noting that the town has outside contractors for engineering and legal matters).

            The clerks and DPW have wages mostly in the $50K to $70K (with supervisors obviously getting more) and the Police have BASE PAY of $130+K after just 5 years of service.

            The pensions of the non safety workers require taxpayer contributions of a level annual 25% of pay, and the safety pensions about 45% of pay to fully fund over their working careers. Of course were paying less than necessary, using the same phony assumptions & methodology commonplace in Gov’t pension valuations…. screwing the next generation of taxpayers.

            Anyone working 25 years gets heavily subsidized retiree healthcare for life.

            Add the wages, the pensions, and the retiree healthcare benefits together …… using the best estimate of the TRUE cost of these pensions & benefits and few of the non-safety workers have total compensation packages worth less than $100K annually, with that rising to over $200K for (the lowest rank) Police.

            These are MIDDLE CLASS jobs, and no how you spin it, that compensation FAR exceeds what such jobs (or jobs with comparable risks and requiring similar experience, education, skills, and knowledge ….. in the case of Police) pay in the Private Sector.

        • Tough Love
          Tough Love 21 April, 2017, 18:05

          SMD,

          The “Financial Impact” on taxpayers is the net “Total Compensation” differential for ALL WORKERS combined (not selective segments), the split being “informative”, but NOT what hits the taxpayers in their pockets.

          The AEI State-Specific Public vs Private Sector compensation study very specifically showed that BOTH CA (where you live) and NJ (where I live) show a PUBLIC Sector “Total Compensation” ADVANTAGE of 23% of pay (33% if the significant incremental value of the FAR greater Public Sector “job security” is included). And since SAFETY Workers (the most highly paid and pensioned PUBLIC Sector workers) were excluded from that study, that 23% would have been materially greater had they NOT been excluded.

          Taxpayers …… just imagine how much richer YOUR retirement would be if YOU had an extra 23% of pay too save and invest EVERY YEAR of your career. Would it be an extra $500K, $1 Million, perhaps even $2 Million ?

          SMD is a “moocher” who believe Public Sector workers are “special” and deserving of a better deal …. on YOUR dime.

          Reply this comment
          • S Moderation Douglas
            S Moderation Douglas 22 April, 2017, 08:50

            “the split being “informative”, but NOT what hits the taxpayers in their pockets.”

            “Got a problem with EQUAL?”

            Equal compensation for equivalent work in the public and private sector.

            Logic…

            All the serious studies, liberal or conservative, agree that “excessive” pensions, as they exist, are not across the entire spectrum of public workers. Every responsible source agrees that, in total compensation, lower educated public workers earn more than the private sector, higher educated public workers earn much less, and somewhere around the middle, they are “roughly the same.”

            But, yeah, let’s castigate them all and cut them equally, damn the consequences.

          • S Moderation Douglas
            S Moderation Douglas 22 April, 2017, 09:10

            The split is not “just informative”.

            Those public workers “somewhere around the middle” are not costing the taxpayers one thin dime extra, let alone 23%. Not moochers, not crooks, not greedy Neither suckling at the government teat nor feeding at the public trough. Just doing their job, and collecting their pay, or our pensions.

            https://cdn.meme.am/instances/43242630.jpg

          • Tough Love
            Tough Love 22 April, 2017, 14:36

            SMD,

            Prop 13 keeps CA’s Property Taxes low for many. In NJ the average property tax is nearing $10K annually and MANY homes now have taxes between $15K and $20K annually (including me). MOST of that is sourced from the wages, pensions and benefits of Local Town workers. Most are office clerks, DPW or Police and I can’t think of ANY that would be considered “professionals” (noting that the town has outside contractors for engineering and legal matters).

            The clerks and DPW have wages mostly in the $50K to $70K (with supervisors obviously getting more) and the Police have BASE PAY of $130+K after just 5 years of service.

            The pensions of the non safety workers require taxpayer contributions of a level annual 25% of pay, and the safety pensions about 45% of pay to fully fund over their working careers. Of course were paying less than necessary, using the same phony assumptions & methodology commonplace in Gov’t pension valuations…. screwing the next generation of taxpayers.

            Anyone working 25 years gets heavily subsidized retiree healthcare for life.

            Add the wages, the pensions, and the retiree healthcare benefits together …… using the best estimate of the TRUE cost of these pensions & benefits and few of the non-safety workers have total compensation packages worth less than $100K annually, with that rising to over $200K for (the lowest rank) Police.

            These are MIDDLE CLASS jobs, and no how you spin it, that compensation FAR exceeds what such jobs (or jobs with comparable risks and requiring similar experience, education, skills, and knowledge ….. in the case of Police) pay in the Private Sector.

  12. Dude
    Dude 19 April, 2017, 13:59

    Not “Pension Envy”. Fiscal responsibility. Btw, they don’t deserve the right to the unbelievably greedy act of pension spiking.

    Reply this comment
  13. Dude
    Dude 19 April, 2017, 14:06

    Or…..we could just tell these greedy pricks that the uncontrolled feeding frenzy is over.

    Reply this comment
  14. Tough Love
    Tough Love 19 April, 2017, 15:45

    The insatiable greed and arrogance of Public Sector Unions/Workers has no bounds …

    http://www.eastbaytimes.com/2017/04/18/editorial-onerous-bill-would-fiscally-drown-cities-and-counties/

    Reply this comment
  15. Dude
    Dude 19 April, 2017, 22:27

    Amen Tough Love. Amen.

    Reply this comment
  16. S Moderation Douglas
    S Moderation Douglas 20 April, 2017, 01:51

    Two very different cases. The airtime case prohibits airtime for new employees, which everyone agrees is legal. It did not “prohibit” airtime for any legacy employee. It put a time limit on when the employee must apply. Any current employee at the time was still eligible for airtime …if… they applied before the deadline.
    In the Marin, and similar cases, negotiated contracts made standby time pensionable, and pension contributions were deducted from employee pay for those pensionable hours. Pension calculations should include those hours for which contributions have been deducted.

    Reply this comment
    • Tough Love
      Tough Love 20 April, 2017, 07:04

      Quoting SMD ……..

      “Any current employee at the time was still eligible for airtime …if… they applied before the deadline.”

      Which REMAINS and outrageous and preposterous abuse of the Taxpayers.

      If the weren’t paying FAR FAR less than the incremental pension value of the additional years of service, why would they be fighting so hard to keep it.
      ***********************

      Quoting SMD ………

      “In the Marin, and similar cases, negotiated contracts made standby time pensionable, and pension contributions were deducted from employee pay for those pensionable hours. Pension calculations should include those hours for which contributions have been deducted”.

      Oh whoopie for the Taxpayers …… the employees pay 10% to 20% of the actual pension cost of these ridiculous “pay” items (e.g., “Standby time”) and taxpayers get to pay the 80% to 90% balance.

      Reply this comment
  17. Dude
    Dude 20 April, 2017, 20:03

    And those studies were contracted to be made by the SEIU. Hilarious!

    Reply this comment
  18. Ulysses Uhaul
    Ulysses Uhaul 21 April, 2017, 08:01

    The RAGWUS is beating drums!

    Reply this comment
  19. S Moderation Douglas
    S Moderation Douglas 21 April, 2017, 11:13

    Congratulations BeenThereDoneThat

    We are “No longer “sure” you’re a Public Sector worker/retiree…”

    I think we can all breathe just a little easier now.

    Please raise your right hand and repeat…

    “Public Sector Unions are a CANCER inflicted upon civilized society”

    Your membership card is in the mail. Conditional, of course.

    http://nhlabornews.com/wp-content/uploads/2016/04/149.jpg

    Reply this comment
    • Tough Love
      Tough Love 21 April, 2017, 12:50

      SMD,

      In my earlier reply to BeenThereDoneThat I mentioned that his thinking was miles from the Public Sector “moochers” I usually trade comments with.

      FYI, I was thinking of you when I made that statement.

      **************************************

      And re you quote ….

      ““Public Sector Unions are a CANCER inflicted upon civilized society””

      They sure are !

      Reply this comment
      • Tough Love
        Tough Love 21 April, 2017, 19:42

        SMD, Quoting from a recent article on the pension mess in Dallas…..

        *********************************************
        “The bill before the Texas Legislature to fix the failing Dallas Police and Fire Pension System is no solution. House Bill 3158 would only perpetuate the disaster. It’s unfair to taxpayers, and history explains why.

        In 1996, the pension board members representing the police and firefighters (the beneficiaries) voted to increase their pension board majority from four-out-of-seven members to a super majority of six-out-of-10 (and later to eight-out-of-12).

        In 1998, the beneficiaries voted themselves guaranteed returns of 8 to 10 percent on their DROP (Deferred Retirement Option Plan) savings accounts.

        Though the pension fund earned an average annual return of only 1.36 percent during the past 10 years, the beneficiaries paid themselves 8 percent returns, almost six times the actual earnings. By comparison, Houston, San Antonio, Fort Worth, El Paso and Austin pay zero interest on similar savings accounts.

        The beneficiaries also paid themselves annual cost-of-living-adjustment increases of 4 percent during the past decade, more than twice the actual COLA increases paid by Social Security. DROP even paid guaranteed 8 percent returns, compounding the cost-of-living-adjustment increases.

        The beneficiaries voted to invest in high-risk, speculative, illiquid assets that collapsed in value. But the beneficiaries hid these losses (and kept paying unjustifiably high returns) by repeatedly refusing the city’s requests to audit fund valuations.

        What were they thinking when they guaranteed themselves returns on phantom gains? Now the pension system approaches insolvency, and the beneficiaries demand that taxpayers bail them out of their self-created shortfalls while letting them keep their unjustifiable, unsustainable and excessive DROP and COLA gains.

        The beneficiaries claim these returns were promised to them, but they actually promised these unjustifiable gains to themselves. They were never approved by the state or taxpayers. This is the definition of the fox in the henhouse.”
        ***********************************

        So YES SMD …………………

        “Public Sector Unions are a CANCER inflicted upon civilized society”

        Reply this comment

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Steven Greenhut

Steven Greenhut

Steven Greenhut is CalWatchdog’s contributing editor. Greenhut was deputy editor and columnist for The Orange County Register for 11 years. He is author of the new book, “Plunder! How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation.”

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