California Sheriff Takes Home $640,000 a Year; Automatic Muni Raises in SF; Oregon Pension Board Buries Head In Sand

The San Francisco Chronicle has an interest story about Automatic Raises For Muni Drivers.

So much for the idea of saving $8 million by having Muni drivers give up their raises next year. Even if Muni drivers were game, they can't forgo their raise because they are required in the city charter, which guarantees that they are the second-highest paid transit operators in the nation.

With the raise issue off the table, the union is being pushed to consider other concessions, such as allowing Muni to use part-time drivers and ending or reducing premium pay benefits for such things as working at night or training other drivers. Or, Muni operators could start contributing to their retirement account.

Supervisor Sean Elsbernd has another option: pass a proposed ballot measure he's pursuing for the June ballot that would remove the formula-based pay provision and make the pay scale for Muni operators subject to collective bargaining. Elsbernd's proposal, vehemently opposed by the transit union and generally given a cool reception from several of his colleagues and the mayor, will be considered by the Rules Committee on Thursday for placement on the ballot.

No matter how poorly they perform, or how broke the city is, San Francisco muni workers have a guaranteed second highest pay schedule in the nation. One would have to be absolutely out of his mind to go along with such nonsense. Yet, the mayor does not want to do a damn thing about it.

Oregon Pension Board Ponders Rate Increases

Oregon's pension plan (like that of nearly every other state) is massively underfunded. But no one wants to increase employer rates to properly fund it.

Inquiring minds are reading Public pension board to vote on employer rate increases.

Under current rate-setting rules, public agencies and the taxpayers that support them face a 170 percent spike in biennial pension contributions starting in 2011 -- a collective $1.5 billion budget hit -- to start digging out of the pension fund's actuarial hole.

The market plunge lopped $17 billion off the value of the Oregon Public Employee Retirement Fund. Despite a strong recovery last year, the $51 billion fund still has a shortfall of approximately $14 billion, with 75 cents in assets for every $1 in liabilities.

The board has been lobbied by public employers and unions to temper any rate increases because of the impact on the already strained budgets of municipalities, school districts and public agencies across the state. The dilemma is whether it can do so without further compromising the funded status of the system or pushing the obligation off on future generations.

PERS-covered employers currently pay an average rate of 12.4 percent of payroll to cover retirement benefits. The system has a contribution rate collar that normally limits rate changes to 3 percent of payroll per biennium. But when individual employer's funded status is less than 80 percent the collar doubles, and their rates jump by 6 percent of payroll costs.

A 6 percentage point increase would leave average employer rates above 18 percent in 2011.

The depressing reality in Mercer's models is how little the increased contributions under either the current or revised policy actually budge the system's funded status. Even if the pension fund's investments earn 8 percent annually for the next decade, the system's funded status only reaches the 80 percent level in 2019. If that's the case, employers will face further rate increases in 2013 and 2015.

"Even if market consistently deliver strong returns, we're moving to a higher level of contributions for the next decade," said PERS board chairman James Dalton, a former Tektronix executive. "It's going to take a long time to recover. It's a different environment."

If, on the other hand, returns are closer to the system's average over the last 10 years -- 4.5 percent -- the actuarial deficit will grow precipitously.

Employers need to pay 18% of salaries to fund pensions

If returns are poor it will quickly be 20%, then 24%. When does someone finally have the guts to tell the union freeloaders to go to hell or to raise rates to what is needed so there is a public outcry. Instead ...

The Oregon Pension Board Eases Rate Hikes.

The board of the Oregon Public Employees Retirement System has voted to take some of the edge off a coming increase in employer pension rates.

Rates are rising because of the 2008 stock market downturn. The new policy bases them on a sliding scale tied to how well-funded each employer’s pension fund is.

PERS Executive Director Paul Cleary characterized the move as based more on fairness than to provide rate relief.

Under the old policy, the investment declines most participating pension plans have suffered would have triggered an automatic 6 percent rate increase for employers.

The new policy means that better-funded pension plans within PERS will have smaller rate increases than public employers with plans hit harder by the economic downturn.

Oregon Buries Head In Sand

As expected, the pension board, stuck its collective head in the sand, pretending the problem will go away. It won't.

Double Dipping Sheriffs

Thoroughly disgusted minds are reading about sheriff officials double and triple dipping.

Though highly unusual, the methods San Luis Obispo County’s two top sheriff officials have adopted to double and even triple their incomes are entirely legal.

In an interesting twist, San Luis Obispo County Under Sheriff Steve Bolts is taking home between $640,000 and $772,000 this year in retirement benefits and an hourly salary, while his boss, Sheriff Pat Hedges, takes home $340,000, according to calculations based on dates provided by Bolts.

“I can see people saying this is double or triple dipping,” Bolts said. “But this is the pension plan and I am not hiding anything. All of that money is mine anyhow.”

The principal reason for Bolts’ hefty income is the Deferred Retirement Option Program (DROP). Adopted by the board of supervisors in October 2006, DROP allows county employees to simultaneously collect both their full wages and benefits along with their full retirement for a period of no more than five years.

Currently, sheriff’s department personnel retire under a pension formula that allows members to retire at age 50 with 90 percent of their salaries.

Question of Relativity

This kind of behavior will not change until public outcry forces it. Pray tell, exactly what does it take for the taxpaying public to revolt against this kind of union greed and arrogance?

I have had several email exchanges with teachers who just do not get it, and thankfully many more who are interested in an actual discussion of the issues.

The issue at hand is the defined benefit pension system is flat broke. The issue is NOT that police unions are worse (they are), firefighter unions are worse (they are), transportation unions are worse (they are), but rather what is actually mathematically supportable.

All public unions are a problem.

Inevitably I hear about "living wages". Well one of the reasons living wages are so high in the first place is unions (all of them) demand a free lunch (to varying degrees) that the private sector does not get.

I discussed the issue at length in Are Teachers To Blame For Economic Illiteracy?

Everything Is Relative (But It All Matters)

Dear "California Teacher"

The whole defined benefit scheme in general is broke. Cities will go bankrupt unless something is done. That is a simple mathematical statement of fact.

Yes, relatively speaking, teacher salaries are not as problematic as police or firefighter salaries, but is that a sound reason to avoid fixing a fundamental problem with teacher pensions and union rules that protect the worst employees?

I am infuriated with police and firefighters retiring at age 50 with 90% of top salary. However, just because something is less of a problem does not mean it is not a problem.

Teachers email me saying they are underpaid, police and firefighters email me telling me that their life is on the line, bureaucrats of all sorts email me saying what they do is important. To top it off, warmongers email me in support of defense spending because they have a job at a defense contractor.

In short, everyone wants an exception for their group and everyone thinks what they do is necessary. Unions spread fear if they do not get what they want. The teachers' unions, along with police and firefighters, are the most adept at spreading fear. Politicians are afraid to take on unions, and exempt themselves from the mess by increasing their own pay and benefits as well.

The only sensible thing to do is reduce benefits. Taxing the already overburdened private sector, which does not get such benefits, cannot and will not work.

There is absolutely no basis, none, nadda, zippo, zero, etc., for teachers to assume they deserve a pension plan paid at taxpayer expense, that the private sector does not get.

One teacher "ADL", went so far as to write:

You conveniently don’t bother ever mentioning is that when you become enrolled in either CalPERS or CalSTRS (most teachers are STRS) you no longer pay into social security so that does not accrue for you any longer. So, it is good that teachers have some kind of retirement to look forward to.

My reply:

I conveniently overlook that?

I will gladly take away your union pension and propose you pay into SS instead. Indeed, I think that is a great idea. I suggest you promote it!

Indeed, public employees should have to do what the rest of the country does. Politicians should not be an exception either.

Thus, I highly recommend ending the unjust disparity to which "ADL" refers. The solution is very easy. Teachers should give up their pension plans and pay into social security.

I commend "ADL" for his fine suggestion.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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