Posted on 08/02/2012 9:37:15 AM PDT by SeekAndFind
Want to know how California finds itself in debt at the state level by tens of billions each budget cycle? Why three of their cities have already declared bankruptcy this year, and more may be on the way? Here's a cautionary tale from Stockton, one of the three Golden State cities to shield itself from its creditors this year, where they pay a retired police chief in pension slightly more than half of what the President of the United States makes. That's a fine reward for devoted service of --- eight months?
Stockton, California, Police Chief Tom Morris was supposed to bring stability to law enforcement when he was appointed to the job four years ago.
He lasted eight months and left the now-bankrupt city at age 52 with an annual pension that pays more than $204,000 --- the third of four chiefs who stayed in the position for less than three years and retired with an average of 92 percent of their final salaries.
Stockton, which filed for bankruptcy protection on June 28, is among California cities from the Mexican border to the San Francisco Bay confronting rising pension costs as they contend with growing unemployment and declining property- and sales-tax revenue. The pensions are the consequence of decisions made when stock markets were soaring, technology money flooded the state, and retirement funds were running surpluses.
Actually, it's the consequence of the pension structure itself. California, like most other states, use defined-benefit pensions for their public employees, rather than the defined-contribution plans used by almost everyone in the private sector. The latter either utilizes a 401K plan or something similar, where both employees and employers deposit funds, which get invested over the time of service. When employees retire, they own their own fund and draw off of it for their retirement income, which leaves no overhang of debt for the employer and gives the employee control over the investment strategies used.
The defined-benefit structure, on the other hand, guarantees certain levels of payment regardless of whether the retirement fund has actually performed to that level or whether the employer has made the requisite deposits. The payout levels usually hinge on the average compensation paid during the final three to five years of service. This structure lends itself to all sorts of mischief. People work large amounts of paid overtime to pad the average and boost their retirement checks, for instance. Employers defer plan payments in order to cover other spending, figuring that contemporary tax receipts will cover the eventual costs of retirement; that is why San Diego and San Jose were forced to offer referendums to revise their benefit plans, because those costs ate over 20% of the operating budgets of both cities. Finally, that kind of retirement leads to very perverse outcomes for people who only work a short period of time, and who draw the same kind of pension as those who have worked for decades.
That’s also one of the main problems for San Bernardino, which declared bankruptcy last month:
San Bernardino, a city of 209,000 about 60 miles (100 kilometers) east of Los Angeles, is typical of the phenomenon. Its city council voted July 18 to approve an emergency bankruptcy filing, about six years after the panel unanimously lowered the retirement age for public-safety workers to 50 from 55.
The council acted in August 2006 even though Aon Plc, the city’s risk-management consultant, had warned it that such a change would add millions of dollars to San Bernardino’s long- term pension costs. In the fiscal year that ended in June, pensions consumed 13 percent of the city’s general fund, up from 9 percent in fiscal 2007.
Two of San Bernardino’s former police chiefs receive pensions above the $200K mark. Keith Kilmer actually took another job — as interim police chief in Seal Beach.
Bump
The union work rules are destroying cities everywhere.
Were these negotiated packages to attract people into difficult jobs or is this just how the retirement system works. I suspect it was the former and the city negotiator’s skills suck. The CA retirement system is bad enough but the politicians are basically responsible. If I were a potential CA retiree, I’d have a vested interest in voting progressive.
It’s only taxpayer money, screw it.
The problem with any kind of investment is that it can go poorly. That’s true of both pension plans you mentioned. Folks didn’t see how the defined-benefit could go bad, but now they do. The government can go bankrupt and take pensions with it.
Hey, don’t worry, the government will never run out of money.
Ah, who cares! It's only monop ... err tax money and cities get that for free!
Do govt bureaucrats get a moronitude implant when they're elected/appointed?
Godspeed
HoA
It’s not like he gets to keep all that money. He has to pay off the Democrats, too.
The unions alone aren’t responsible for the problems in California. The government...democrats...must shoulder the major blame as they not only ok’d the employment terms but did so more than willingly.
Wow. At 52 he makes $204K per year to do nothing? If he still lives in the Stockton area he’s a fool. Lots of nice places to live in the US for $204K.
No wonder the city is bankrupt. This guy should not be receiving ANY retirement until 65. Just like the rest of us.
Public service unions work hand in glove with politicians to screw the public. This is why public service unions should be outlawed. Even FDR thought so.
Heck, I would have worked the whole year for that!
Really, LOL.
The people of ca need to just turn this over to Jerry brown and say “you broke it so you fix it.”
So in the instances of these chiefs, the only pension bump they get from short service as a chief is from the increase in pay from their previous position, usually as a police captain, to their new position as a chief.
The one thing you can count on in these horror stories about public pension plans is that the press will get the facts wrong on those just like they get the facts wrong on most everything. You have to know how the plans work to figure out what really happened.
Sure the defined benefit public employee plans have lots of horrible problems, including for taxpayers. But good luck in figuring out what is really happening just from what the media reports.
[ The unions alone aren’t responsible for the problems in California. ]
WRONG,, The Unions ARE the problem in Mexifornia...
Nobody at the taxpayer-funded public trough should get over $200,000 in retirement pay. When the people are struggling to feed their children and find a place to rent after losing their homes to foreclosure only the greedy “public serpents” think their outrageous fringe benefits should be sacrosanct.
That's not how it works here in IL. We have hundreds of police and fire white shirts "double dipping". They retire after 20 years and move to another locality, work ten years and get two pensions.
It's killing us here in Illinois.
there’s also the problem that the central valley is overrun by illegals who suck the money out of the area.
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