As a guest at today’s luncheon meeting of the South Bay Chapter of the LA County Lincoln Club of Los Angeles I had an opportunity to listen as termed out Assemblyman Keith Richman shared his concerns about a fiscal time bomb in our state better known as our retirement and health care pensions for public employees. It is coincidental that OC Supervisor John Moorlach held his press conference, on the same topic, an hour before this presentation.
It is also worth noting the number of elected and appointed South Bay officials who were in attendance to get a better understanding on this Initiative that is currently awaiting it’s “Title and Summary” from the office of the Secretary of State. You can find the text of this Initiative on the Attorney General’s web site which on June 21st assigned #07-0024 to this proposal.
The Initiative was submitted by the California Foundation for Responsible Responsibility. They have requested that the title read “The Public Employee Benefits Reform Act.” We will need to wait and see if that title is retained when it is officially accepted.
The three cosigners are O.C. Supervisor John Moorlach, former CA Republican Assemblyman Keith Richman and Kris Hunt, Executive Director, Contra Costa Taxpayers Association.
Lets begin by making it perfectly clear that this initiative affects only NEW State and local government officials with regard to their participation in defined benefit and retirement health care plans. Furthermore the initiative has several safety features to protect the recipients and the taxpayers.
Due to pension spiking we have government officials retiring at greater than 100 percent of their base salary. This is due to tacking on “overtime pay, bonus pay, severance pay, and payments for accrued but unused vacation and sick days (which ) shall be excluded from calculating the average annual base pay (for these new employees).
“Why do we need this initiative.” An easy question to answer. “The state of California’s own annual pension bill has increased from $160 million in 1999 to $2.7 billion this year.”
Keith told us that “the unfunded liabilities for teachers is around $25 billion” which is “actuarially unsound.” While John Moorlach has expressed his concerns for Orange County pension obligations we are not alone in facing this ticking time bomb. The Bay Area Grand Jury in Contra Costa County summed it up by saying “Mayday, Mayday, Mayday.” Hopefully the readers will understand that SOS message.
The Marin County Grand Jury stated that “it’s likely that a number of government agencies will go bankrupt” without a reduction in current service levels.
Adding the projections for retiree health care raises the shortfall to between $200 and $300 billion dollars.
In the LAUSD their retiree health care alone consumes 18 percent of their operating budget. When you add pensions that number grows to 27-28 percent simply to pay for these benefits. Keith said that there is a good chance that the LAUSD could go bankrupt.
Without getting into the nuts and bolts of their Initiative Keith estimated that voter approval of this plan could save $500 billion dollars over the next 30 years. That savings could be applied to wipe out the entire unfunded liability of both the pension and health care obligations of government officials.
If we keep our heads in the sand we are left with three choices:
1. Let the agency go bankrupt
2. reduce services
3. Raise taxes
Assemblyman Richman cautioned us to watch out for creative plans by government officials to address this red ink such as split property taxes or new local property taxes for services such as “public safety” when in reality said funds are required to back fill the current escalating obligation.
For more information on this Initiative simply go to:www.californiapensionreform.com
Special thanks to Lincoln Club members Denny Schneider, Executive Director Peter Bylsma, President “Bob” Holmes and Arun Bhumitra, President of Arjay Telecommunications for opening their meeting for my attendance and participation.
Larry, overtime pay would be a big factor in an employees retirement. This factor is not factored into the retirement equation. If it was, I would be working every one of my days off!! so I know this is not the case.
Larry,
I think the cow already got out of the barn…didn’t it? Time to close the door was long ago.
Thank all your union friends who hold the rest of us hostage, as well as those in govt that allowed govt employees to become union members.
Carl.
I agree that we should have addressed the cost of pension and retirement health benefits before giving away the store. As to your other remark, please tell me who all my union friends are that are holding us hostage?
Anonymous 7:46 p.m. Following is text from the Inititative:
“Section 12 of Article VII of the California Constitution is added to read:
Under Sec. 12(a) sub section (E). For purposes of subdivision (D), a new employee’s annual average base wage shall be based on no greater than the highest annual average base wage of the employee over a period of five consecutive years of employment by a public agency. Any additional payment, including but not limited to, OVERTIME pay, bonus pay, severance pay, and payments for accrued but unused vacation and sick days shall be EXCLUDED from calculating the annual average base wage.”
Note: CAPITALIZED emphasis added by me to address your comment.
Larry,
Please correct me if I’m wrong, but isn’t this all about the union contracts that are negotiated, usually at the threat of strikes? Or is my assumption off base about it being unionized employees who have driven us here? Along with bad management by the political hacks.
Larry,
Sorry too, I didn’t mean specifically “your” friends. We all know union members, who believe the socialist ideas of unions are in everyone’s best interest. an assertion I would disagree with.
Good morning Carl.
If we put our heads in the sand we just might experience cities and school districts being forced to seek bankruptcy protection as they did in Bridgeport, CT. It’s not as threat, it’s a reality.
As they say about balloons. What goes up eventually comes down. Look at the high flying days of the “dot com” companies in CA where we received a huge bump in revenues. Our state officials, or should I say a former governor, assumed that that floor would never cave in. But it did. The same can happen in the market which is now over 14,000.
Who caused this fiscal nightmare? While some give credit to the union negotiators we must also hold our elected officials accountable for this mess. Mind you we are talking about public sector, not private sector employees and unions.
While I don’t fault the union negotiators for asking I fault the decision makers, on the government side, for giving away the store without consideration for the long term impact of these binding Agreements. Many of these elected officials will be out of office while these Contracts, that they approve, go on indefinitely.
This Initiative brings pension and health care benefits more in line with today’s private sector. Benefits that are fair and sustainable.
There seems to be a disconnect between State law that requires meet and confer (collective bargaining) regarding wages and working conditions and this proposed initiative that would appear to say “never mind what is agreed to in State mandated meet and confer”. Can’t have it both ways folks. Commitments made should be lived up to as contractual commitments. Constraining the ability of electeds in future meet and confer sessions to give away the store makes more sense.
Anonymous 7:17 p.m.
The proposed initiatve does not tamper with the agreements in place for any current government employee.
What it hopes to address is making a correction on the extent of benefits provided for NEW government employees. Let me also say that anyone starting a job should ask about benefits, not just basic compensation before accepting said job offer. If you are not happy with the benefit package being offered no one will twist your arm to take that job.
Let me point out that NEW employees would need to work 5 or more consecutive years for a public agency or agencies to qualify for lifetime pension benefits. Lifetime retiree health benefits would only be available to new employees who work ten years for one or more public agencies and have at least five consecutive years immediately prior to retirement.”
In effect we will end up with a two tier system so as to protect the benfits of current employees.
Regarding No. 9 post –
Larry, just to be clear, all government retirees do not received health benefits in retirement. It varies widely from city to city, county to county, district to district. Some offer nothing to retirees other than the right to buy coverage out of their own pockets 100%, some offer partially funded coverage if the retiree pays part. Not sure, but I think very few offer 100% (former) employer paid health coverage to retirees. Just that we should not imply all government employees get paid health coverage in their retirement.
Anonymous 3:22 p.m.
Thank you. I agree that this proposed legislation is a guideline.
In Mission Viejo a former city council voted to give lifetime health care to any city employee (and city council member) after 12 “years of service.
Let me add some additional text from the initiative:
EXPAND LOCAL CONTROL. The Initiative establishes prudent limits on defined benefit pension and retiree health care plans. State and local government agencies may provide lower benefits as they see fit and may offer other forms of deferred compensation that are not defined benefit plans…”
If you re-read my post I chsoe not to publish toeh entire document and stated that I was not incliding al of the nuts and bots of the initiative.
Larry,
You asked me in the McClintock thread to read this post; I did.
First, LAUSD says that 18% of its expenses are for retiree medical insurance; a good deal of their classified, teacher, and administrator benefits are for medical insurance. But this is true for virtually every company in the state and nation. Cutting that 18% alone would allow all school districts to add adequate classrooms, curriculum, and teachers.
The problem is that we see health care as a benefit. In every other industrialized nation, good health is considered as much a right at trial by jury. As I said in the McClintock thread, there are some things that are better done by government, and this is one of them.
My feelings about unions are simple: they represent workers’ interests in opposition to those who do not have those interests at heart. I get to vote for my union officers; I don’t get to vote for the corporate interests opposing me.
I have no problem at all in allowing corporations a profit, but maximizing that profit is best served by keeping my wages and benefits as low as free market forces will allow.