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Sharing the costs of a beleaguered pension system

Original post made on Sep 23, 2011

Members of the Pleasanton City Council spent a few more hours Tuesday night in closed session discussing a new contract with the local firefighters union that expires shortly. It was another step the council is taking to sit together to review wages and benefits for municipal employees at a time when pension sustainability is becoming a major financial concern for cities throughout California.

Read the full story here Web Link posted Friday, September 23, 2011, 12:00 AM

Comments (56)

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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Sep 23, 2011 at 9:26 am

Stacey is a registered user.

After reading this, I'm still left wondering what "the principled approach" by the League of Cities is supposed to be. Some form of retirement benefits are of course an essential part of a competitive total compensation offering, but what kind of fair sharing are we talking about, 50/50 or something else?


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Posted by GX
a resident of Another Pleasanton neighborhood
on Sep 23, 2011 at 9:52 am

If you had the change to listen to Council Member comments on the night they adopted the League of California Cities framework, there wasn't a firm commitment by either Cook-Kallio or Sullivan. It was clear they were equivocating to give themselves plenty of room to continue to go slow on reform if necessary.

In the meantime, this painfully slow approach by our city's leaders is ensuring that the contributions required by employees will be minimized and pushed out as far as possible.

Net, those that will benefit the most from the enhanced benefit mistake will pay the least to help pay for the benefits. That cost will be borne by future citizens and employees.

You wait and see, come this fall they will crow about CalPERS' 20% returns last year, without ever acknowledging that that was below the market average of 30%, the fact that CalPERS is still way behind, and what the likely impact will be from this recent market downturn.

I'm not even sure they understand (or refuse to acknowledge) the gamesmanship that is going on with the CalPERS assumed rate of return of 7.75% that is essentially artificially lowering the cost of the pensions today so that that cost can be shifted to future generations.

All talk and very little action.



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Posted by Bert
a resident of Downtown
on Sep 23, 2011 at 10:20 am

GX,

I do not believe that the cost will be shifted to future generations of taxpayers because I believe the system will collapse within the next 3 years more or less. Everyone knows what is going on will not work and to pretend otherwise is fools gold. No the clock is ticking and sooner rather than later California will become the next Greece.


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Posted by GX
a resident of Another Pleasanton neighborhood
on Sep 23, 2011 at 10:36 am

Unfortunately Bert, the cost shift has already happened.

Pleasanton leaders voted in grossly irresponsible employee contracts in 2003. By 2004, the actual costs numbers where above plan. For years, our leaders said there wasn't a problem.

Only two Firemen started contributing 2% of their 36% total pension costs - and this was only because Livermore pushed it as they were out of money. Pleasanton leaders and city management had nothing to do with this concession.

Now after eight years after the benefit enhancement mistake, other emloyees are starting to contribute a small fraction of their pension costs. This means that tens of millions of unplanned dollars have been sucked from this comunity to pay for this pension mistake.

Look at the stats:
- capital investment projects like an expanded library has been pushed out
- we spend more now for fewer policemen
- number of paved roads are down
- maintenance costs have been squeezed
- reserve accounts have been shrunk
- etc.

All so that the required contributions of our city employees could be minimized.

Again - all talk and little action. A failure in leadership and lack of courage to stand up to public employee unions and do what is right for all citizens of Pleasanton.


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Posted by taxpayer
a resident of Downtown
on Sep 23, 2011 at 11:04 am

The generous pensions and medical benefits were originally intended to make up for the lower than standard wages that public employees earned. That is no longer the case by a landslide. It is not hard to find any one of many public sources that outline the wages and benefits of our public employees. Firefighters work 10 days per month, have fully paid health benefits for life, can retire at age 50 and make salaries well over $100,000 during their careers. Cops are not far behind although they work more than 10 days a month.
They spike their final earnings, most scam a so-called disability to make the pensions tax free for life, they often work after leaving their departments and they continue to collect full pensions for life. Pensions that most of them contributed not one cent into.
Are you as fed up as me with this system? Public employees need to make 100% of the pension contribution, they need to share the cost of health care, they cannot be allowed to retire on full pensions at less than age 65 and they need to pay for the entire cost of health insurance after retirement. Even with those changes they will be far ahead of the average worker in benefits. And they will have earned far more than most during their careers.
Don't think we can attract people for those jobs? Ha! What a joke. Any time there is a police or fire academy announced there are hundreds of applicants for every job. These should be jobs, not a means to a long and taxpayer funded free retirement.


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Sep 23, 2011 at 11:22 am

Stacey is a registered user.

taxpayer,
What do you mean by 100% of the pension contribution, 100% of the employee's 8-9% of the pension cost?

When I look at this opinion's mention of "principled approach", I think sharing "normal cost" of the pension plan, not the individual's contribution to it. See, for example, this Web Link

"First, the optimal public policy is a 50-50 match of employer and employee contributions to retirement plans... In today's competitive labor markets, they really should be paying two-thirds of the costs of all retirement benefits to achieve parity with the private sector which more typically matches only 50 percent of employee contributions. However, that takes the argument to unnecessary extremes."

"The employees' share of costs should be based on what is called "normal cost" — the current actuarial cost of this year's earned benefit. Employees don't pay toward any unfunded liabilities which result from investment underperformance or actuarial experience that are beyond their control. In most instances, employers must properly bear those risks as the inherent cost of providing a defined benefit plan."


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Sep 23, 2011 at 11:47 am

Stacey is a registered user.

OK, from the attachments on the meeting agenda (Web Link), it looks like the League's "principled approach" leaves it up to local agencies to determine what a "fair share" of the normal cost is. Sounds like there's a PERS limit to dividing up the cost between employer and employee too.


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Sep 23, 2011 at 12:45 pm

"The employees' share of costs should be based on what is called "normal cost" — the current actuarial cost of this year's earned benefit. Employees don't pay toward any unfunded liabilities which result from investment underperformance or actuarial experience that are beyond their control. In most instances, employers must properly bear those risks as the inherent cost of providing a defined benefit plan."

Stacey, who is to say that either underpermance or acturial experince is beyond a bargaining units control? Part of the unfunded liability is well within the grasp of the bargaining units. For instance, CalPERS has built into their model a 3.25% gerowth in payrol. COLA's have provided 4-5% wage increases for the past decade and any promotion pays 5% per year for five years, for each promotion, on top of the COLA. Changing the pension plan formula from average of highest three years to highest 12 months adds 2-3% percent to the cost of payroll. Paying the "employee" contribution adds nine percent to the taxpayer/city cost of pensions - but it costs taxpayers an additional 2.9-6% of payroll to allow employees to count that money as income in the employees final year pension contribution. My point is, not everything is beyond the employees control. They have negotiated these perks.

"In most instances, employers must properly bear those risks as the inherent cost of providing a defined benefit plan.""

- I would agree with you if we were talking about reasonable pension benefits, that didn't include unreasonable retroactive pension credits, discounted airtime/service credits, ridiculous inclusion of uniform allowance - educational incentive pay -etc...and the fact that the unions control Calpers (crooks) that have set up a system that only benefits members while treating taxpayers like an ATM machine.

For public safety the normal cost is about 16% of payrol for the city/taxpayers, and 9% for the employee. Currently, Taxpayers are paying 42%, and public employee unions are paying zero (the FD pays 2%).


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Sep 23, 2011 at 1:18 pm

Stacey is a registered user.

Arnold,

I get your point, the details of the pension plans were negotiated for. The perks make the plans more expensive than they need to be to provide retirement security. That's the idea behind sharing the cost 50/50. Sharing the costs fairly makes it less likely that such perks would be negotiated for in the first place. Market performance and actual growth in payroll (vs. what the CalPERS assumption is), COLA, length of service, retiree deaths, etc. are still beyond bargaining unit control.

Did you read the rest of the League of California Cities' framework in the meeting attachment? It is mostly reform suggestions that have been reported about already.


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Sep 23, 2011 at 2:25 pm

"Market performance and actual growth in payroll (vs. what the CalPERS assumption is), COLA, length of service, retiree deaths, etc. are still beyond bargaining unit control.

Deaths are beyond the bargaining units control, the rest of the items on that list are not: COLA, length of service, etc...

"I get your point, the details of the pension plans were negotiated for. The perks make the plans more expensive than they need to be to provide retirement security. That's the idea behind sharing the cost 50/50. Sharing the costs fairly makes it less likely that such perks would be negotiated for in the first place"

I agree with most of that statement. But, it isn't just the perks. The basic premise of providing 90% payouts and lifetime medical (as a requirement to attract and retain) is flawed from the get-go. These numbers have nothing to do with providing civil servants with dignity during their retirements years. As of today, for 30 years service (I guess thirty years is a career) public safety employees can retire as early age 50 with 98% of their final wage, with lifetime medical, which includes items that were never meant to be included in the first place.

I agree with the 50/50 split, but only within reasonable limits. The current cost for the PD plan is 42% of payroll. That number is going way up. If CalPers were to use the industry standard 5 year smoothing policy, as opposed to the current 15 & 30 year smoothing policy, we would be paying about 70% of payroll toward pensions. Should taxpayers allow themselves to pay 35% of payroll while continuing to guarantee a 7.75% rate of return? I think your point is that maybe the unions would be more willing to re-negotiate the pension formula if they paid half. That might be true. But if I were guaranteed a 7.75% return I wouldn't be so inclined to negotiate.

And if you think the 70% of payroll number is far-fetched, you need to think again. What do you think a 70% of payroll pension contribution would do to city services? Look toward San Jose for the answer. They use an industry standard five year smoothing policy.

CalPers fiscal year began July 1, 2011, with 237.5 billion in assets. Today, almost three months into their fiscal year, CalPers assets have shrunk to approximately 218 Billion, for a YTD return of -8.2%, or a loss of 19.5 billion.


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Sep 23, 2011 at 3:31 pm

Stacey is a registered user.

Arnold,

"These numbers have nothing to do with providing civil servants with dignity during their retirements years."

Precisely. I guess what I'm asking is to just set aside the problems inherent with CalPERS assumptions for a moment and to look at it from a policy standpoint (the League's pension reform framework does include state law goals to address those other issues). The overarching goal of offering retirement benefits is to provide retirement security. When constructing a retirement defined benefit plan, a 50/50 share of the normal costs for that plan is fair. What is not fair is undermining either employee or employer's finances to achieve that goal from where we are now.

I think we may be talking about two different things with regards to actuarial experience. A bargaining unit and CalPERS cannot control the actual outcomes of how long employees ultimately end up working, just like they can't control how long retirees end up living to enjoy the retirement benefit. Just because a retirement plan is 3% @ 50 doesn't mean all employees will retire at 50. They may leave service at 40 or stay working until 60. CalPERS can only make assumptions based on historic data then review how close their assumptions got to reality. If the actual length of service declines because the workforce say, becomes more mobile or increases because people are living longer and want to stay employed longer, who controls that? Force people to stay in their jobs until 50 then kick them out? It certainly would make the actuary's job easier.


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Sep 23, 2011 at 3:42 pm

Stacey is a registered user.

"Should taxpayers allow themselves to pay 35% of payroll while continuing to guarantee a 7.75% rate of return?"

Also, if you review the Girard Miller column I linked to, he tries to answer that question with a strategy that has the discount rate at 4-5%. He says basically that if bargaining units want stock market-like returns, then they should take the risk through other kinds of plans like a defined contribution plan. He also says...

"The employers (and thus the taxpayers) who bear the investment risk should enjoy all the benefit of the riskier portfolio's expected returns, not the employees who take no risk and get returns from risky investments. If investment portfolios produce a substantial investment surplus, the portfolio can then be "immunized" by investing in bonds to eliminate the equity risks and assure taxpayers that their obligations have been fulfilled. At that point, the employer and employee discount rates will converge to the risk-free rate."


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Sep 23, 2011 at 5:17 pm

"Also, if you review the Girard Miller column I linked to, he tries to answer that question with a strategy that has the discount rate at 4-5%. He says basically that if bargaining units want stock market-like returns, then they should take the risk through other kinds of plans like a defined contribution plan. He also says..."

- OK

""The employers (and thus the taxpayers) who bear the investment risk should enjoy all the benefit of the riskier portfolio's expected returns, not the employees who take no risk and get returns from risky investments. If investment portfolios produce a substantial investment surplus, the portfolio can then be "immunized" by investing in bonds to eliminate the equity risks and assure taxpayers that their obligations have been fulfilled. At that point, the employer and employee discount rates will converge to the risk-free rate."

Stacey, that sounds good in theory, and that's the way the system was set-up anyway, but when the pension was 132% funded the unions, through their high powered advocacy group known as CalPers, promoted SB400 while claiming the DOW hit 25,000 by 2009, and cities wouldn't have to pay anything for a decade - what some refer to as the greatest gift of tax dollars in our states history (without a vote). The pension plan has tanked ever since and now stands at about 63% funded (while Pleasanton plans are about 55% funded).

I'm a fan of Girard Miller, and I did read the link you provided. I will also say his opinion has changed over the past three years, and even the past several months. He, like myself, consider CalPERS a big part of the problem. Here is what he has to say about Calpers smoothing policy:

"How high will this flood crest? Local employers are now skeptical that they have been told the full truth about how high their pension costs will ultimately surge. Unlike the vast majority of public pension funds, CalPERS uses a 15-year actuarial smoothing process that camouflages the genuine economic impact of market fluctuations. I have no issue with normal industry-standard actuarial smoothing periods of 5 years, in light of the average length of a business cycle — which is 6 years based on 14 recession cycles in the past 84 years. But the CalPERS process is opaque and flunks the transparency test that taxpayers, public managers and municipal bond investors are entitled to expect. As I have explained before, such extraordinary "smoothing" practices deserve SEC investigation as an "artifice and device" to conceal relevant financial information from the investment community — as well as the employers who must now bear the financial brunt of unsustainable pension benefits."

"A bargaining unit and CalPERS cannot control the actual outcomes of how long employees ultimately end up working, just like they can't control how long retirees end up living to enjoy the retirement benefit."

That is much different than your previous statement, "Employees don't pay toward any unfunded liabilities which result from investment underperformance or actuarial experience that are beyond their control. I'll stick to my earlier comment that the bargaining units (unions) and CalPERS (union controlled board of directors) are dictating and controlling much more than you give them credit for. What CalPers can do is not wait 10 years to tell the pension paying public that retirees are living 3 years longer. They had this data at their fingertips for years but didn't acknowledge it until recently. So, while they might not control death, they control when death is recognized on an actuarial basis. Unfortunately, they were late in recognizing/celebrating that their members were living three years longer, and that adds to the cost.

As mentioned earlier:

- I would agree with you if we were talking about reasonable pension benefits, that didn't include unreasonable retroactive pension credits, discounted airtime/service credits, ridiculous inclusion of uniform allowance - educational incentive pay -etc...and the fact that the unions control Calpers (crooks) that have set up a system that only benefits members while treating taxpayers like an ATM machine.


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Sep 23, 2011 at 5:30 pm

Stacey

If you think CalPERS is an independent state agency, as it was meant to be, you need to do some research. CalPERS is a HUGE part of the pension problem!


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Posted by Mike
a resident of Highland Oaks
on Sep 23, 2011 at 5:49 pm

If conditions change, then agreements should be modified, even retroactively, to reflect those changes.

Because the figures used to determine available funding for future benefits are estimates, benefits should be adjusted to reflect the actual funds available at the time such benefits are drawn.

If the estimates turn out to have been overly optimistic, then a certain minimum amount of benefits could apply as a safety net; however, continuing to pay benefits based on estimated funds that in fact failed to materialize by pilfering funds meant for other needs is unacceptable.

If you've got a soldier on the ground leaking like a sieve, it makes no sense to keep pumping fluids into him unless you are also plugging the holes.

Mike


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Sep 23, 2011 at 6:10 pm

Mike

You could do what you describe in the private sector; reduce future benefits going forward. For public employee unions, in California, that isn't an option. If you hire an employee and he/she works one day under a defined pension benefit formula that employee is guaranteed that pension benefit for the remainder of his/her career (even if they aren't vested) - according to our state constitutuion.

According to the unions, CaLPERS, and most democrats there is nothing you or I can do about it.


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Posted by Mike
a resident of Highland Oaks
on Sep 23, 2011 at 9:57 pm

Arnold,

You explanation is well stated, but do you feel that the recent questioning of this particular status quo resulting from the public's growing awareness of the malignant nature of such a system may eventually evolve into the political will to change it?

Mike


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Posted by Get serious ! !
a resident of Another Pleasanton neighborhood
on Sep 23, 2011 at 11:37 pm

The League of Cities is denying and obfuscating....basically peeing on us and telling us it's raining. Do they really think we are THAT gullible ?!? These ridiculous benefits were NOT sustainable at the time they were written !! At this time we would be experiencing the same as now if there had not been a collapse. The 'markets' just lit the bulb faster and brighter !! Today's results would have been the same by now......going broke fast !
Anybody, at any level, who is trying to con us with that excuse isn't dealing honestly....walk away, they're either very stupid, or expose them for being in the pockets of the public unions....like the PERS board members who have been exposed for taking bribes. Dont's bother talking with anyone who's not a straight shooter. Time for lies and excuses to end. Jig's up. game's over. get serious ! Not one more contract, pushing this lie and theft into the future with another contract.


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Posted by Pete
a resident of Another Pleasanton neighborhood
on Sep 24, 2011 at 2:30 pm

Get serious ! ! has never had it more right! "These ridiculous benefits were NOT sustainable at the time they were written !!" Mike... the lowest tiered employees knew this was not sustainable... at the time it was written. Bargaining in good faith at tax payers expense is not even a reality... never has been.


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Posted by Pete
a resident of Another Pleasanton neighborhood
on Sep 24, 2011 at 2:47 pm

Defined benefits not adequately contributed by the employee themselves... sorry for not clarifying.


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Posted by taxpayer
a resident of Downtown
on Sep 24, 2011 at 8:09 pm

Best solution -- defined contribution plans only. If the employee wants to have some money at retirement, then they need to put some in while they are working. If the employer matches, fine. If not, the employee will live on what they save, just like most of the rest of us.
The public employees are breaking the backs of the taxpayers. Most of them can retire at age 50 making as much or more than they made while working. Think they will work past 50? Why? Every year past their allowed retirement date they are working for 10% or less of their salary. Think about it. Go to work every day for TEN PERCENT of what you made or stay home every day and bleed the taxpayers for 100% of your former salary for the rest of your life. Except that it is quickly more than 100% because of their COLAs.
Grey Davis should be shot for enacting 3% at 50. Now is the time to legislate it away.


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Posted by Patriot
a resident of Another Pleasanton neighborhood
on Sep 24, 2011 at 9:27 pm

"If not, the employee will live on what they save, just like most of the rest of us."

Not really. Most of the rest of us get Social Security and Medicare, and those are breaking the backs of the taxpayer.


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Posted by Pete
a resident of Another Pleasanton neighborhood
on Sep 24, 2011 at 10:22 pm

Now that the "Equalibrium" effect has been established... is it possible for the Community that I grew up in... to confront these issues without half measures? At least confronting each other in an honest way... that is what I miss most. Take a risk to formulate "OUR" own plan of action instead of copying others. That goes for the school parcel tax as well. We have good/great people...


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Posted by David
a resident of Pleasanton Meadows
on Sep 26, 2011 at 9:19 am

As a Law Enforcement Officer, I would like to see an honest, "Pension" discussion.

The truth about what we pay into our pensions and what we make is far different from the picture painted by the media. I currently contribute $17,498.00 per year out of my paycheck towards my own pension and more than $500,000.00 since starting 27 years ago.

My employer gets to forgo their contribution any time the pension system exceeds it's earnings requirement. So during the 1990's, into the early 2000's anytime PERS exceeded 8% (13 out 20 years) the various cities and counties got a,"Payment Holiday". I never did. Multiply this by 58 Counties and Hundreds of cities, not to mention over a million employees, and the amount never paid in is astronomical. Those, "Payment Holidays" would have made-up for the losses in 2007-2008 almost entirely.

Piss Poor Planning is the biggest problem. I also believe that 3@50 has made these, "Payment Holidays" even more costly.

Law Makers can fix the problem right now. Stop 3@50 immediately and return to 2@50. Give those employees that have been under 3@50 credit for the years they have to date, then move to 2@50 going forward. 2@50 never had a problem with funding, even with the, "Payment Holidays". Also abolish Payment Holidays and Super Funding laws, which limit the solvency of PERS and other 1937 Act pensions.

PERS currently has 1.1 million retirees, with an average pension check of $38,000 per year. Only 18,000 are collecting over $100,000.00 per year (all uppper managers), yet 100% of the conversation surrounds them?

Most Public employees know that the current system is in need of change, but in order to get there, we need out of the box ideas by real leaders, not elected, "Party Line"
pukes...


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Posted by Spudly
a resident of Laguna Oaks
on Sep 26, 2011 at 9:37 am

Dave, good points. Please tell the city your position.


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Posted by Use honest numbers
a resident of Another Pleasanton neighborhood
on Sep 26, 2011 at 9:59 am

That 'average' sales pitch, includes PART-TIME employees in the state...like dish washers. Let's use honest numbers.


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Posted by GX
a resident of Another Pleasanton neighborhood
on Sep 26, 2011 at 10:10 am

David, I appreciated hearing your candid assessment of the situation and I concur with you that we need true non-partisan leadership to get us out of this mess.

But clearly you are not a Pleasanton police officer as they have yet to contribute to their own retirements. Or if you are, you have spent the majority of your career elsewhere. Anyone can look up city records to see that Pleasanton police have not contributed one dime to their own retirements.

It was good to hear you mention that poor planning helped get us into this mess. But I was surprised that you missed the point that the RETROACTIVE granting of significant new pension benefits in 1999 (via SB400) had a major impact on sustainability. Even if agencies had fully funded pensions up to that point, they'd still have major issues. And it was CalPERS who said it was OK at that point to increase benefits even in light of previous pension holidays.

It has been the poor planning of CalPERS (a union controlled organization) that needs to take significant responsibility in creating this mess.

It is quite disingenuous that you bring up the $38K average pension point as you probably know that this includes everyone in the system - including those who only worked a few years and those who retired decades ago. The issue today is the vast majority of people who have worked full careers are retiring with plus-$100K pensions based on their last year peeked incomes. There is no way for the system to make up for this rampant gamesmanship.

Worse a majority of public safety employees are trying to further game the system buy claiming a disability so they don't need to pay taxes on a portion of their retirement. Think of the hypocrisy this action represents. Shaft the taxpayer AND game the system so you don't need to pay taxes to help fix the problem.

Lastly I find it quite interesting that you are willing to cut the benefits of all those who come after you but did not offer up what sacrifices/contributions you were willing to make. You are rightly fully concerned that the system may crater but are still unwilling to personally sacrifice to help fix it.

Regarding the contribution of your own money - just remember those of us who have contributed similar amounts to Social Security/Medicare with little hope that we will recover what we contributed.


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Posted by GX
a resident of Another Pleasanton neighborhood
on Sep 26, 2011 at 10:18 am

BTW, I agree 100% with your recommendation to move back to a 2%@50 formula.

Unfortunately, this can only be fixed at the state level and it is extremely disappointing that no pension-reform bill made it out of our public union controlled legislature this year.


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Sep 26, 2011 at 10:26 am

Stacey is a registered user.

The pension contribution holidays did indeed have a disastrous effect. Prohibiting them, along with spiking, retroactive benefits, and purchasing of "air time", is part of the League's pension reform framework. While local agencies can still contribute during a "holiday" (Pleasanton apparently did contribute iirc), it has to be changed at the state level.

Arnold,
Sorry I left you hanging. I won't disagree with you that CalPERS is indeed part of the problem. The League's framework mentions reform with that agency too. The problem is complex and won't be solved by just making employees contribute more or just prohibiting pension contribution holidays or just reforming how CalPERS is run, unfortunately. It's a lot of work that needs to be done and the question is, will we get it done before the political will to do it is lost?


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Posted by GX
a resident of Another Pleasanton neighborhood
on Sep 26, 2011 at 10:41 am

Stacey - let's look at the timeline here:

- 1990's - stock market up so some cities took pension contribution holidays
- 1999 - CalPERS published the infamous SB400 supporting document that they could retroactive raise benefits (knowing full well the previous pension contribution holidays) and it wouldn't cost taxpayers any extra
- 1999 - Davis signs SB400 into law
- 2000's - stock market didn't go to 26,000 as CalPERS had assumed and therefore annual pension costs and pension unfunded liabilities exploded

So yes, I agree that if there had not been pension contribution holidays in the 90's we'd be in a better position. But in no way is the the primary reason for the current mess.

In fact, given how CalPERS/legislature/governor behaved in 1999, if there had been more money at that point due to lack of pension holidays, THERE IS A HIGH PROBABILITY THAT THEY WOULD HAVE GIVEN THAT AWAY TOO AND THE MESS WOULD BE EVEN LARGER TODAY.

I find it quite humorous that public employee unions/CalPERS have about 90-100% of the responsibility for this mess and yet they still won't acknowedge this openly. Instead they come up with convoluted cause/effect scenarios like the one we are debating.

Dk2gP


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Posted by chemist
a resident of Downtown
on Sep 26, 2011 at 11:32 am

Closed door sessions with the unions? Guess who is going to get (*&#(^(. This City Council is not representing the taxpayers. We saw that with the city employees. After months and months of debate with taxpayers and union members packing the Board meetings, we got the huge concession that the union members will put a bit of their salaries into their own retirement instead of asking the taxpayers to pay 100% of their contributions. Wow. Now we go bankrupt a few weeks later than we would have otherwise.

On Wisconsin!


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Posted by David
a resident of Pleasanton Meadows
on Sep 26, 2011 at 2:42 pm

I have to comment on being disingenous about the $38,000 average penision. First off, it is a fact, and secondly there are no part time retirees. In order to vest, you have to work (5) years. In order to collect a pension, you must be 50-65, dependeing upon the agreement you are under. Most importantly, you cannot have a mothly payout unless you worked for (10) years, regardles of age.

As to what I have given up? I recently negotiated for our wages, and gave up 6 years without a raise, along with contribution towards medical, dental and vision.

I also started out working as a law enforcement officer in the 80's for $15.00 an hour while many of my friends made 6 figure silicon valley incomes. Many of them have lived far beyond their means and when they lost those incomes are telling me how lucky I am to have a pension.

What would they have if they had saved a little?

Im just saying that in order to have a true conversation about pensions, we need to look at the big picture, and not just hit all of us with a hammer. Cops in California make more in than other states, because of the cost of living. My old City gave up 26% of their income over the past two years, to save jobs. That did not make the press.

Thanks


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Posted by GX
a resident of Another Pleasanton neighborhood
on Sep 26, 2011 at 3:02 pm

David - It would be great if you could disclose the agency you worked for as it is clear it was not the city of Pleasanton.

Regarding the $38K, I will respectfully say that you are still misrepresenting that figure (maybe inadvertantly). I believe this is the David Lowe figure that unions are quoting far and wide. This includes a wide range of professions from janitors to senior managers. It does include people who worked for the state for as little as 5 years. Do tell me if there are any private industry jobs these days that grant a defined benefit retirement after working for only 5 years. I'm not sure there are any.

The issue these days are that a large percentage of employees are retiring with size figure packages (you can look it up with the city) and this is what is causing costs to explode.

I'm not trying to be disrespectful, but when I read statements from you like:

"As to what I have given up? I recently negotiated for our wages, and gave up 6 years without a raise, along with contribution towards medical, dental and vision"

it seems that you have been isolated from what has been happening in privated industry where everyone contributes significantly to their healthcare coverage and many have taken pay cuts.

Also, think about it from the perspective of public servants who will come after you. They have made the same contributions as you and yet you want to cut their retirement by 33% relative to yours and you won't touch yours.

I don't begrudge that you have a pension. What is wrong is to continue to cut services and raise taxes on others to support a pension system that was sold to the public on false information.

You should bare some of the risk and you should be saving your money to help cover that risk just like you are admonishing others. It should not all fall on taxpayers and future generations.


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Sep 26, 2011 at 4:06 pm

"As a Law Enforcement Officer, I would like to see an honest, "Pension" discussion.

The truth about what we pay into our pensions and what we make is far different from the picture painted by the media. I currently contribute $17,498.00 per year out of my paycheck towards my own pension and more than $500,000.00 since starting 27 years ago."


David, maybe you can prove me wrong, but I don't believe a word of that statement. If you're contributing 9% of pensionable salary, and your contribution is $17,498, then your persable compensation is $194,422 per year (that I believe but it is a separate issue - and it is an issue regarding fair compensation). So even if you worked 27 years at 194K and contributed 9% that only equates to 472k in contributions. I'm pretty sure you didn't start at 194K, 27 years ago (probably 25-30K with a 7% contribution), so your entire premise, "an honest, "Pension" discussion", is suspect at best.

"My employer gets to forgo their contribution any time the pension system exceeds it's earnings requirement. So during the 1990's, into the early 2000's anytime PERS exceeded 8% (13 out 20 years) the various cities and counties got a,"Payment Holiday"."

Under the CalPERS plan, member agencies do NOT have the option to take a pension holiday. Providing pension holidays is solely at the discretion of CalPERS, and the CalPERS BOD's. If an agency (TAXPAYERS) decided to forgo pension contributions they would be in default and have to pay the missed contribution payments, plus the 7.75% interest, plus administrative fees, and probably suffer a decline in their credit rating.

If the conversation is about the adverse effect of pension holidays then the finger needs to point at CaLPERS. And the finger should be pointed at CalPERS because they are the agency that promoted this nonsense (SB400), on the union's behalf, in an effort to get member agencies to distribute the extra funds (the money that represented the 32% of the 132% super funded status of the pension plan) to the public employee union members. The taxpayers were Madoff'd and are now left holding a bag filled with 200 million in IOU's, past off from city councils and city management teams, that must be paid to Pleasanton employee union members, for service that has already been consumed.

What is sad about this entire mess is the super funded status of CaLPERS would have automatically lowered the contribution rate of member agencies (taxpayers) for years. That is a CalPERS policy. Instead our elected officials at every level, many who benefit from the increased payouts either directly or in the form of campaign contributions for their support, the unions, city management employees that also benefited, and CalPERS have stuck it to the taxpayers in a big way.

"PERS currently has 1.1 million retirees, with an average pension check of $38,000 per year. Only 18,000 are collecting over $100,000.00 per year (all uppper managers), yet 100% of the conversation surrounds them?"

Upper management certainly gets their share, but it is Police & Fire employees that are burning down the fiscal house & robbing the bank!

David, maybe you work for a department under one of the Act 37 pension plans. Some of the worst abuses come from these out-of -control pension plans (see: every major city in CA, Contra Costa Conty, Santa Rosa, etc… CalPERS, which has limited the obvious abuses commonly attributed to ACT 37 plans, has found more subtle ways to abuse taxpayers with probably more devastating long-term consequences.


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Posted by Get serious ! !
a resident of Another Pleasanton neighborhood
on Sep 26, 2011 at 5:15 pm

Thank you David for the facts. So the 10 yr employees DO DRAG DOWN the averages retirement payout....that was precisely my point !
Also, you started in the early 80's...Yes that's right, this is how it use to be. Jerry Brown was Governor for 8 years, from '75 - 83'.
While he was Governor he signed in Ca PUBLIC EMPLOYEE UNIONS....the beginning of the end for CA. So, David, you're sitting pretty now ! The collapse is of no concern to you (unless you REfied your rentals), And the biggie....most of us have zero retirement, and your sittin' in fat city. How sweet for you.
What state are your kids moving to when our CA collapse caves in on the rest of us....just 2 classes, have lost the house and public union or techie fat city.


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Posted by Get serious ! !
a resident of Another Pleasanton neighborhood
on Sep 27, 2011 at 8:52 am

David, I would ask that you, and Lockyer stop misleading taxpayers wITH the 'average $38,000.' extreme intentional misleading...aka a LIE ! Those who quit after TEN years to have babies, are NOT RETIREES. However, the are vested to collect a proportionate 'RETIREMENT' checks later in life.
Thanks for clarifying....it perfectly illustrates the real story. But you and the unions must stop with the lie, and only reporte LONG-term RETIREES ! ! You all know damn well you are misleading. ..precisely your dishonest intentions ! ! ! ! That's why we need qualified representatives dealing with your kind....no 'good faith' wanted ! ! Honesty is desperately needed in your conversation.


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Posted by David
a resident of Pleasanton Meadows
on Sep 27, 2011 at 9:32 am

Wow,
Thanks for all the comments. I would like to address a s many as possible, but may miss a few. This is a far better discussion in person, since so many directions can be taken at once, and I have no way to answer all the what ifs.

As to my income and what I pay into my retirement. I Work for a 37 act county. Yes, many of the abuses that have led to the pension problem have come from those counties. My pay is $121,ooo per year and I pay $17,498.00 a year towards my pension. I do not make $194,000 like the previous writer thought.

PERS employee contribution is 9%, and the next year or so of negotiations will see every Agency move towards employees covering those costs. I do not have a problem with that. We pay about 15% towards ours.

I previously worked in Oakland, but after losing 13 friends from being murdered in the line of Duty, I left. I really don't think that I have robbed the tax payers as a previous writer has said.

I have not paid $17,498 a year for 27 years either, but as my income grew, so has my contribution. I have averaged $11,637.00 over those years, and if you do the math, I have contributed $314,199 of my income. add in compund interest at 7.75% and my personal contribution is worth $1,191,417.58.

I believe that a defined benefit is unsustainable because most of us are living longer and as it has been pointed out, many of us have far larger incomes than before. I would like to see a move to a defined contribution instead.

Right now if I die 3 years after I retire, my wife gets two options. Option 1: 50% of my pension if I pay $600 per month to an annuity. or option 2: $0 if I don't. Lets just do the math again.

If I contribute $300k and so does the County, then they save money, because their current contribution exceeds mine by nearly double. Using the same numbers I would have $2,394,000.00 in my own retirement account now. I could draw $185,000 a year if the interest return stayed the same, and when I died, leave wealth to my children.

The real problem is selling this concept to union and elected leaders. They like Defined benefits, because they are ignorant of the possibilities. Now there is always the possibility that returns are bad, and I lose some wealth, but I am willing to take that chance. I was also happy with 2%@50.

I am an anomoly mind you, but that is because I am pragmatic. My whole point is that there are solutions, and while all of them may be a little painful, they need to happen.

I do not like the written forum because so many contributers talk pretty big while typing, and say things they would never have the nerve to say in person.

There are a lot of Police Officers willing to make concessions and share the pain, but so few news papers share the fact that nearly every officer in California has begun paying their own contribution. The truth is; If we paid every ddime out of our own salary, it would not fix the budget. California mandates that $43 out of every $100 goes to K-12, then $11 out of every $100 goes to JC's -University. When you hear that we spend more on prisons and CHP than education, they are only talking about Universities. This is what I mean about truth. Law Enforcement expenses are not mandatory budget items, but education is. I am not saying that we should not pay for our benefits; Im saying we are only 9% of the states budget issue.

David


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Posted by GX
a resident of Another Pleasanton neighborhood
on Sep 27, 2011 at 4:53 pm

David - Thanks for your responses. It is refreshing to have a civil discussion of this pension topic with someone as thoughtful as you. While I don't agree with everything you are stating, your approach is causing me to listen and think more about what you are saying.

I urge you not to repeat the highly inaccurate and biased talking points that the unions are giving you (e.g. the $38K point) as this causes the informed public to negatively react and discount other good points you may have.

If you only knew how good of a deal Pleasanton police are getting ... city currently picks up all pension costs (37% of salary), minimal medical co-pays, very safe community ...

I continue to find your argument on how much you have paid into the system and the returns you should have gotten interesting. I continue to think about how much I have paid into Social Security/Medicare ($371K through last year) and how much that would actually be worth if there had been a reasonable return on it. I also think about how unlikely I will see much of that money as both those systems will be severly upside down by the time I retire.

And yet public employee unions want to raise my taxes further to maintain their extremely rich retirements.

Hmmmm ....


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Posted by long time Californian
a resident of Another Pleasanton neighborhood
on Sep 28, 2011 at 8:35 am

You know, the town my father-in-law came from had a VOLUNTEER fire department and there were 38,000 people in that town.

So are our fire fighters overpaid? Yes.

Here are some measures to save Pleasanton money...

Close all the firehouses. just use them to park the trucks.

Then pay the firefighters a small wage to sit at home and wait for the calls. When the calls come in they rendezvous at the firetrucks, and go to the fire. They get additional pay called "hazard pay" for when they do go and work a fire.

For the days that they are being paid to sit at home they use that time to go visit the local businesses to check on fire extinguishers and check on code enforcement.

There are firefighters working in the business areas of Milpitas that make $125,000 a year plus benefits and they hardly have any calls to go to because all the industrial areas and business have sprinkler systems.. this is ridiculous.


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Posted by David
a resident of Pleasanton Meadows
on Sep 28, 2011 at 10:02 am

Get Serious,
I wish I had some rentals, but don't. Obviously you have missed the point I have tried to make while you are spitting out venom. I have clearly stated that the system is in need of repair. The problem is that you are spending all your energy blaming me, and those doing my job, when we did not create the mess.

I have been shot once, Stabbed and have had az heart attack while on-duty. All of this while robbing your tax dollars right?

Its funny that you have missed the forrest from the trees. California has a $29,000,000,000.00 (Billion) short fall. Pensiions make up $2,000,000,000.00 of that. Illegal aliens make up $9,000,000,000.00 to $16,000,000,000.00 of it depending on who you believe, not to mention that 21,000 of them are housed in California prisons, at a cost of $77.00 per day minimum times 365 days for a cost of $590,205,000.00 per year.

That's just the begining. Like I said before. If we (cops,fireman etc.) paid for 100% of our benifits....You still would not solve the budget. Not even close.

You need to get serious and actually check the media's facts. They are pointing to our grass fire, in order to keep you from watching the city burn down with your family in it.


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Posted by GX
a resident of Another Pleasanton neighborhood
on Sep 28, 2011 at 10:44 am

David - You may want to be careful with your statements like:

"Like I said before. If we (cops,fireman etc.) paid for 100% of our benifits"

as this is not true in Pleasanton and the majority of cities across CA. Pleasanton has picked up 100% of all pension costs from the 1980's until just last year when fire started covering a ridiculously small amount of 2%.

BTW, most people don't realized that the average personnel cost of firemen for Pleasanton is $211K/year. And this includes all employees from the lowest paid to the highest.

Clearly, the system is being gamed to benefit a few. This is one of the reasons why, unfortunately, the reputation of public service people is being stained and the public holds government in such low esteem these days.

Why is this issue such a hot button these days? Because the public employee pension system is clearly broken and all public unions/CalPERS can do is say "its not that bad and look elsewhere, and oh BTW we want to raise your taxes so we can cover our benefits."

This is not going to happen. That is why Brown has backed off on pushing for tax increases. He knows via his own poll numbers that he will not get public support for increasing taxes. And if for some reason CA does raise taxes this will just hasten the exodus of job/wealth creating citizens from CA.

It is time to look honestly at the public pension problem and solve it in a way that is fair to both employees and citizens - both current and future.


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Sep 28, 2011 at 7:07 pm

"The pension contribution holidays did indeed have a disastrous effect. Prohibiting them, along with spiking, retroactive benefits, and purchasing of "air time", is part of the League's pension reform framework. While local agencies can still contribute during a "holiday" (Pleasanton apparently did contribute iirc), it has to be changed at the state level."


Stacey, pension contribution holidays were the CalPERS/Unions carrot dangled in front of cities for allowing them to transfer dollars from the taxpayer side of the ledger to the public employee union side of the ledger, in the form of increased pension benefits - that are now of the verge of collapsing municipalities. In Pleasanton's case, those increased pension benefits were also made retroactive to the employees first day on the job. You mention that, "Pleasanton apparently did contribute iirc". I'm not sure what "iirc" is, but Pleasanton did NOT contribute to the pension fund during the CalPERS granted pension holidays. What the city did do was take some of those dollars and apply them toward retiree medical benefits which were completely unfunded, like most cities. I think city management deserves credit for funding a portion of retiree medical. Most cities haven't funded any retiree medical. Nevertheless, Pleasanton has just taken 8 million from retiree medical funding in order to provide CalPERS a lump sum in the same amount because the Police pension plan was grossly under funded in relation to their peers (in a "CalPERS Pooled Pension Plan").

Stacey, regarding Pleasanton adopting the League of California Cities proposal on pension reform, I would say that means nothing. If you remember, during the PCEA contract negotiations, Mayor Hosterman made a big deal about the reform efforts Pleasanton officials were developing in conjunction with other Alameda County cities. One of the reform items was to eliminate pension spiking by ensuring pensions were calculated based on the highest three years as opposed to the highest one year compensation. Jerry Browns plan to eliminate pension spiking is this: " 5. Prohibit Pension Spiking: Three Year Final Compensation. Final compensation for new employees would be defined as the highest average annual compensation during a consecutive 36 month period."

I consider this issue one of the most basic elements of pension reform, eliminating the "highest consecutive 12 months" as a basis for calculating pensions, and replacing that language with the average of the highest three years (or preferably the highest 5 years). But, for all the talk about the BIG efforts underway in Pleasanton - the PCEA contract, for people not yet employed by the city, remains at a PENSION SPIKING one year highest compensation.

While I agree with you (on many things really) that it will take reform at the state level to fully address the issue of pension reform and a greater degree of fairness to taxpayers, there is much that needs to be done on the local level. I'm not willing to let our local politicians or city management off the hook when they have a great deal of influence over this issue. They have helped create the problem and they have the ability to fix it.


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Sep 28, 2011 at 7:08 pm

"The pension contribution holidays did indeed have a disastrous effect. Prohibiting them, along with spiking, retroactive benefits, and purchasing of "air time", is part of the League's pension reform framework. While local agencies can still contribute during a "holiday" (Pleasanton apparently did contribute iirc), it has to be changed at the state level."


Stacey, pension contribution holidays were the CalPERS/Unions carrot dangled in front of cities for allowing them to transfer dollars from the taxpayer side of the ledger to the public employee union side of the ledger, in the form of increased pension benefits - that are now of the verge of collapsing municipalities. In Pleasanton's case, those increased pension benefits were also made retroactive to the employees first day on the job. You mention that, "Pleasanton apparently did contribute iirc". I'm not sure what "iirc" is, but Pleasanton did NOT contribute to the pension fund during the CalPERS granted pension holidays. What the city did do was take some of those dollars and apply them toward retiree medical benefits which were completely unfunded, like most cities. I think city management deserves credit for funding a portion of retiree medical. Most cities haven't funded any retiree medical. Nevertheless, Pleasanton has just taken 8 million from retiree medical funding in order to provide CalPERS a lump sum in the same amount because the Police pension plan was grossly under funded in relation to their peers (in a "CalPERS Pooled Pension Plan").

Stacey, regarding Pleasanton adopting the League of California Cities proposal on pension reform, I would say that means nothing. If you remember, during the PCEA contract negotiations, Mayor Hosterman made a big deal about the reform efforts Pleasanton officials were developing in conjunction with other Alameda County cities. One of the reform items was to eliminate pension spiking by ensuring pensions were calculated based on the highest three years as opposed to the highest one year compensation. Jerry Browns plan to eliminate pension spiking is this: " 5. Prohibit Pension Spiking: Three Year Final Compensation. Final compensation for new employees would be defined as the highest average annual compensation during a consecutive 36 month period."

I consider this issue one of the most basic elements of pension reform, eliminating the "highest consecutive 12 months" as a basis for calculating pensions, and replacing that language with the average of the highest three years (or preferably the highest 5 years). But, for all the talk about the BIG efforts underway in Pleasanton - the PCEA contract, for people not yet employed by the city, remains at a PENSION SPIKING one year highest compensation.

While I agree with you (on many things really) that it will take reform at the state level to fully address the issue of pension reform and a greater degree of fairness to taxpayers, there is much that needs to be done on the local level. I'm not willing to let our local politicians or city management off the hook when they have a great deal of influence over this issue. They have helped create the problem and they have the ability to fix it.


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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Sep 28, 2011 at 9:01 pm

Stacey is a registered user.

Arnold,

The acronym "iirc" stands for "if I recall correctly". There's also "afaik" for "as far as I know". Sorry for the Internet shorthand. I recall Emily Wagner's presentation from a Council workshop saying something about what Pleasanton contributed. Not interested in digging it up atm (at the moment).

An average of three years for calculating benefits was listed in the League's document. Who is really responsible for that, the State or the local agency? Is that a negotiable item?


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Posted by John
a resident of Another Pleasanton neighborhood
on Sep 28, 2011 at 10:14 pm

Is this whole pension thing really as big a problem as some people say it is? If it is, why haven't we seen any negative effects so far? Don't we have far more pressing problems to worry about, like proper financial regulation? I'm not saying it is or isn't a problem, but I'm may be missing the story here. Something is going to go bad in the future?


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Sep 28, 2011 at 10:56 pm

"An average of three years for calculating benefits was listed in the League's document. Who is really responsible for that, the State or the local agency? Is that a negotiable item?"

Stacey, pensions based on the average of three years, to help prevent the pension spiking that occurs when highest one year salary is used for the basis of pension calculations, was a recommendation of the League of CA Cities, our Governor Brown, and the Pleasanton task force.

Apparently studying the pension issue, supporting the recommendations provided by the Alameda County pension task force that the mayor was boasting about (or whatever they called it), and our governor's own concerns aren't enough to influence the city's negotiating team to include this widely recommended provision as part of the current PCEA contract - FOR FUTURE HIRES!

What does that say about our city council? Pleasanton's pension plans are all critically under funded.

"Who is really responsible for that, the State or the local agency? Is that a negotiable item?"

They are both responsible. We are talking about two separate budgets, two separate governing boards, and two separate pension problems that will be paid by one group - the taxpayers. And yes, it can be a negotiable item but the city is under no obligation to negotiate with unions for future employees. Unions do NOT represent employees that aren't yet employees. The problem has more to do with the will of are elected officials, and who they are actually representing.


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Posted by Get serious ! !
a resident of Another Pleasanton neighborhood
on Sep 28, 2011 at 11:25 pm

David, thanks for making reasonable points to consider. You must admit previous union postings of others have not offered any factual or logical points, just name calling.
I still remember the guys I knew who were PLEASANTON 'volunteer' fire ...in the 70s....pre Moonbeam Brown.
And in the 80s I knew many Eastbay firemen all around who had rentals...fixerups they'd work on to 'flip',since they had more days 'off duty' than on.
However, from you, Lockyer, and all union members, we the paying employers, are all still entitled to accurate 'average' retirement pay figures, without the short-timers skewing the 'career' retirees
average pay quotes ! ! That inaccurate info just cannot be tolerated if you are to engage in honest conversation.
And the other poster 'savings' points are good, I'd like to add my amazement that fire trucks show up for the calls to other agencies.... for no reason. I certainly hope families are not being charged. I know of a dirtbike accident on a dirt, dirtbike track, paramedics were called, a helicoper whisk the teen away, because there were broken bones, family and others around..and here come the fire trucks. WHY ? They better not bill the family. Today I saw one car in a Dublin intersection, and one bruised but OK pedestrian, police handling the situation, and here come the firetrucks! That costs somebody, I hope it's not me the taxpayer, and I also certainly hope it not the family for whom fire trucks were not needed and the family had not called. WHO makes that $$decision.


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Posted by taxpayer
a resident of Downtown
on Sep 29, 2011 at 9:27 am

for get serious -- "WHO makes that $$decision."
The unions and the FD made that decision. In most CA cities the unions managed to force the issue to have an EMT or paramedic on every fire truck. Then they tried every way possible to limit the number of contract ambulances that are available to respond. Therefore, each and every time that a rescue calls comes in, a fire truck is dispatched on the theory that a medical first responder from the FD will get there before the ambulance. And they often do. Re-read the part about the unions pushing for limits to the number of ambulances. Don't know the percentages in Pleasanton but in another, much larger, Bay Area city, the ratio of rescue calls to fires is nearly 100 to 1. The FD unions know that fire prevention is much better now and there are far fewer fires. They have cut themselves another niche in the medical area in order to keep up manpower, pay and pensions.
No citizens are directly billed from the FD. However, your taxes pay the salaries, benefits and pensions of these people who retire at age 50 with 90% or more of their salaries. They get COLAs yearly and most get free medical benefits for life. Feeling the hit yet? I know that I am.
2% at 60, no spiking, no free medical benefits. That's the bare minimum as a starting place.


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Posted by John
a resident of Another Pleasanton neighborhood
on Sep 29, 2011 at 9:34 am

Is anyone going to answer my question? Where is the problem with all this pension stuff. People's pensions are being paid and it isn't breaking the budget. Isn't everything OK? Can someone give a summary of what's wrong, and why it is important? Can someone rank whatever this problem with pensions is against other problems that threaten our economy?


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Posted by taxpayer
a resident of Downtown
on Sep 29, 2011 at 9:50 am

How about a rank of just about number 1 John? Read what's been written, look at the links. The public pensions will bankrupt the state (read "you") within the next few years. Public employees retire early, get more money in retirement than they made, they live longer (statistically they live for more pensioned years than they worked) so how do you see that this is not a monumental problem?
Or are you just a union shill. Come on.


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Posted by GX
a resident of Another Pleasanton neighborhood
on Sep 29, 2011 at 10:18 am

John - here are two key facts you should keep in mind:

- Pleasanton's unfunded liability has grown from zero in 2003 to $180M today. Today, there is no credible plan to pay this off so future generations will be saddled with this debt.

- Personnel costs grew from 65% of budget to 79% today. This is forcing a reduction in city services.

Other than the overall state of the economy, this is the single largest fiscal issue facing Pleasanton. If you care about the future of Pleasanton, you must care about this issue.

The only people who are trying to minimize the issue with the hope that it goes away, are public employees, their union representatives, and their bought politicians. Everyone else (meaning the vast majority of the public and leaders) understands this is an issue that threatens our future.


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Posted by GX
a resident of Another Pleasanton neighborhood
on Oct 1, 2011 at 8:20 am

Michael Lewis (Money Ball fame) recently wrote a piece in the Altlantic regarding the dismal state of California finances, in particular the stress that out-of-control public employee pension are putting on local governments.

Here is an excerpt from his discussion with SJ Mayor Chuck Reed:

**********
He hands me a chart. It shows that the city's pension costs when he first became interested in the subject were projected to run $73 million a year. This year they would be $245 million: pension and health-care costs of retired workers now are more than half the budget. In three years' time pension costs alone would come to $400 million, though "if you were to adjust for real life expectancy it is more like $650 million." Legally obliged to meet these costs, the city can respond only by cutting elsewhere. As a result, San Jose, once run by 7,450 city workers, was now being run by 5,400 city workers. The city was back to staffing levels of 1988, when it had a quarter of a million fewer residents. The remaining workers had taken a 10 percent pay cut; yet even that was not enough to offset the increase in the city's pension liability. The city had closed its libraries three days a week. It had cut back servicing its parks. It had refrained from opening a brand-new community center, built before the housing bust, because it couldn't pay to staff the place. For the first time in history it had laid off police officers and firefighters.
************

Unfortunately, you can see the early signs of this dynamic in Pleasanton.

Mayor and City Council - find the courage to do your job so we don't end up in the same state.


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Oct 1, 2011 at 10:29 am

Calpers Chief Says 7.75% Return Tough to Meet

"The California Public Employees' Retirement System will be hard-pressed to return 7.75 percent this year as Europe's debt crisis and the weak U.S. recovery continue to weigh on global stocks, its investment chief said.

"That's going to be tough this year and maybe for the next few years," Calpers Chief Investment Officer Joe Dear said in a Bloomberg Television interview today. "This low-return environment is structurally driven, and there's not a lot of policy to move it.""

"Nationwide, the median state pension fund will achieve an annual return of 6.5 percent in the next 15 years, according to a February study by Wilshire Associates, the Santa Monica, California, investment adviser." Web Link


COMMENTARY: Latest public pension report means taxpayers still on hook for trillions

"Prepare to write another bigger one every year for the next 30 years, even if public pension fund investments match historic indexes of the past 30 years — which would put the Dow above 65,000 — and managers actually earn what they promise.

Even if long-term bond yields miraculously increased tenfold overnight, taxpayers would have to write the big checks.

Neither of those miracles will happen, so forced transfer of wealth from one generation to the next, and from private to government pockets, is locked in for at least three decades.

Why? Because this public pension crisis is not going away. It actually is getting worse every year, because politicians, financiers and union bosses lie to taxpayers, public workers and themselves about how much retirement benefits truly cost." Web Link


CalPERS has been busy projecting a rosy picture with the help of half truths and outright lies while asking the question, what problem? Meanwhile their current Chief Investment Officer, who recently replaced the previous guy that said the whole system is "unsustainable", is now claiming CalPers returns will fall short for several years.

I can't wait to see the CalPERS press release that disputes the CIO's claim. And I'm sure it's coming.


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Oct 3, 2011 at 3:35 pm

Here is the expected damage control from Calpers (regarding my previous post above), but first here is what he said in the first place (regarding CalPERS ability to earn the assumed rate of return of 7.75%):

""That's going to be tough this year and maybe for the next few years," Calpers Chief Investment Officer Joe Dear said in a Bloomberg Television interview yesterday. "This low-return environment is structurally driven, and there's not a lot of policy to move it.""


THE DAMAGE CONTROL:

From CalPERS responds: "CalPERS CIO on Investment Target: "The game has gotten harder, but it's not impossible to succeed"
September 30, 2011

My recent remarks on Bloomberg Television about the challenges for CalPERS to meet its 7.75 percent assumed rate of return have caught the attention of financial reporters, not to mention critics of public pensions including CalWatchdog.com. For those who have taken the time to watch the full interview, I state in so many words that while it may be difficult to meet our targets in the short-term, we believe it's achievable in the long-term. The game has gotten harder, but it's not impossible to succeed. Our investment track record is proof. We have met and beat our target over the last 20 years, earning an 8.4 percent average annual return (more on that below). It is also important to point out that CalPERS has a global portfolio, not a US or developed markets one (more risk), which means we can capture the growth expected in emerging markets. We also will continue to pursue private equity and other investments that allow us to take advantage of our long horizon and liquidity. Those that read into my statements that this is CalPERS admission that our assumptions are too optimistic or unrealistic are simply wrong.

Joe Dear
Chief Investment Officer

Read "CalPERS: 7.75% Gain Unrealistic?" at CalWatchdog.com."


I take great exception to the CIO's use of 20 year average returns of 8.4% to predict the future. In 1999, they used average returns of a booming market and the super funded status of the mostly taxpayer funded pension plan to promote increased pension benefits while projecting a DOW of 25,000, by 2009. Essentially they transferred what amounted to tax payer reserve funds directly into the ownership of public employee union members. Since then (1999) their predictive skills earn them an "F", and the taxpayers are stuck paying for the mistake because the reserves were GIVEN away in the form of increased benefits that enrich the employees during retirement years (providing as much as 100% of salary in pension payments) with the help of the unbelievable gift of retroactive pension benefits (kind of the equivalent of giving someone a raise and telling them we'll fund the raise going back 15-30 years). Here is a more realistic view of what have you done lately, or what are the average returns when not allowing CalPERS to cherry-pick the time frame. The WSJ and Bloomberg have picked-up the story. Here is an excerpt from Bloomberg:

"The fund earned 20.7 percent in the 12 months ended June 30, its best result in 14 years, led by gains in stocks and private equity. Since then, Calpers's value has dropped by $20 billion to $218.6 billion as of Sept. 26, as global stocks declined 18 percent.

Even with the fiscal 2011 gains, the pension fund has earned 3.41 percent annually on average in the past five years, 5.36 percent in the last 10 and 6.97 percent in the last 15. It has only beaten its assumed rate of return with a 20-year average of 8.38 percent annually.

Nationwide, state pensions will achieve a median annual return of 6.5 percent in the next 15 years, according to a February study by Wilshire Associates, the Santa Monica, California, investment adviser." Web Link

So who will pay for the current 180 million dollar unfunded liability that Pleasanton has already racked up? It won't be the state, it won't be the city, it won't be the county - it will be the taxpayers. BTW, the unfunded pension liability of Pleasanton only represents a portion of the unfunded liability Pleasanton residents will pay. We are also on the hook for a portion of the County's unfunded liability, the unfunded pension liability of special districts, the unfunded pension liability of the California, and the unfunded pension liability of the FED.

Unfortunately I do NOT have a great deal of confidence in our city council's ability to properly address the issue because of who helped get them elected (I'm only talking about 2-3 members of the council but that could represent the majority). If you don't understand that comment you can watch this two minute video featuring our State Treasurer, Bill Lockyer, explain why pensions will bankrupt the state (taxpayers): Web Link


 +   Like this comment
Posted by John
a resident of Another Pleasanton neighborhood
on Oct 3, 2011 at 6:39 pm

"The public pensions will bankrupt the state (read "you") within the next few years."

Not me personally because I don't have any long term ties to the state. I was thinking more on the national level. There are unfunded liabilities there that dwarf anything from California.


 +   Like this comment
Posted by Cali
a resident of Danbury Park
on Oct 4, 2011 at 8:29 am

Outside of social security California has the highest by far unfunded pension liability in the world.


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