Merge Social Security and Public Pensions

When solutions to the challenge to provide retirement security to American citizens in the 21st century are considered, they typically address either social security or public sector pensions, but rarely focus on both of these systems together. But when considered together, as systems that each have unique strengths and weaknesses that might be combined in a single program available to all Americans, options present themselves that might otherwise be ignored.

With both social security and public sector pensions, the challenge of maintaining financial sustainability is dramatically affected by the demographic reality of an aging population. As increasing numbers of people live well into their eighties and nineties, the ratio of workers to retirees edges closer and closer to 1.0.

There are four ways to address the reality of an aging population: (1) Increase withholding from current workers, (2) Increase the retirement age, (3) Lower the level of retirement benefits, and (4) Increase the amount the retirement trust fund can earn. Before delving into each of these further, however, it is important to identify one crucial advantage the USA enjoys vs. virtually all other major developed nations. America, alone among major nations, is projected to have a perfectly even distribution of ages within her population.

AMERICA’S DEMOGRAPHIC ADVANTAGE

America, like all developed nations, has an aging population. But as the four charts below indicate, unlike all other major developed nations, America’s population is replacing itself at an even rate. It is difficult to overstate the serendipity of this phenomena, nor the advantage that it imparts to policymakers intent on engineering sustainable retirement security for American citizens. Not only does having an even age distribution, with an equal number of people in every age group, guarantee that America’s worker-to-retiree ratio will be more favorable – higher – than that of other major nations – but, as will be seen, this higher proportion of productive workers yields other significant economic benefits.

Here are the projected age distributions in 2030 for the 2nd, 3rd, and 4th largest economies on earth, China, Japan, and Germany (the Eurozone economies, in general, have an age distribution similar to Germany’s):

For each of these nations, what can be seen are a large proportion of individuals who are either in their late working years or retired. In each case, the number of people under the age of 10 are only about half as numerous as the number of people aged 55-65. These nations are on track to have a worker to retiree ratio – all else being equal – that is literally half as favorable as the USA, as can be seen on the next table:

America’s success in replacing her population to create an even distribution of ages makes meeting the challenge of retirement security far more feasible than it will be in the rest of the developed world. This advantage, however, does not mean that America’s retirement programs do not face wrenching challenges. America may be on track to have a sustainable population, which is good, but America is still an aging nation. Starting in 1946 with the so-called Baby Boom, American’s produced about 4.5 million babies each year. This was an unprecedented number of children being born in the U.S., which meant that even as the WWII generation retired and enjoyed life average expectancies that set new records, their children grew up and populated the workforce in numbers that greatly exceeded the number of retirees. Now that the baby boomers themselves are retiring, the ratio of workers to retirees in America is lowering. Because, unlike the Europeans or East Asians, Americans are replacing themselves, this will be a one-time lowering. But it represents a huge adjustment.

THE COST OF PUBLIC SECTOR PENSIONS VS. SOCIAL SECURITY

Complicating the challenges of funding retirement security for an aging population is the generosity of the pension programs that have been granted government workers in America. It is difficult, if not impossible, to get exact amounts paid in aggregate to retired government workers, but here is a useful equation that allows one to estimate and compare the amount paid to government workers, in total, to the amount paid to social security recipients, in total. The case can be made that we are already on track to spend more each year on public sector pensions to retired government workers, who represent 20% of the workforce, than we spend on social security to the entire population of retired private sector workers, representing 80% of the workforce:

(public sector pensions)   1.5S x 67% x 30%  >  S x 33% x 70%   (social security)

In the above equation, “S” denotes the average salary of a private sector worker. Because the average government worker earns 50% more, on average, than the average private sector worker, their salary is denoted as “1.5 S.” The next variable is a percentage showing what, on average, the typical public sector pension is as a percent of final salary, 67%, vs. what, on average, the typical private sector social security benefit is as a percent of final salary, 33%. Finally, the last percentage in each equation shows the percentage of the retired population receiving a public sector pension, 30%, vs. the percentage of the retired population receiving social security, 70%. An observant reader will immediately question why a 70/30 ratio of retired public sector workers to private sector workers is used, since public sector workers only comprise 20% of the workforce. This is because the average public sector worker retires ten years earlier than the average private sector worker, hence they may only represent 20% of the working population, but they are 30% of the retired population.

If you calculate these variables, you will see that expenditures per year to support public sector workers in the U.S. are on track to exceed the total social security payments by a ratio of 1.3 to 1.0. This ratio doesn’t currently apply, because many public sector workers retired at a time when the benefit formulas were far less generous than they are for current workers (ref. Government Worker Understates Average Pension).

For a much more expansive analysis of the disparity between social security payments and public sector pension benefits, including links to source data, using California as an example, ref. The Cost of Government Pensions. Here are some charts from that analysis that underscore the point made in the preceding paragraphs:

In the above table, it can be seen the result of an average retirement age of ten years earlier for public sector workers translates into a 1-to-1 ratio of workers to retirees, since the U.S. enjoys an even distribution of ages within the population. This is based on assuming an average age to commence working of 25 and an average life expectancy of 85. In all, a 60 year span between beginning work and death is probably reasonable. Under this scenario, the private sector workforce is on track, at an average retirement age of 65, to have a 2-to-1 ratio of workers to retirees.

In this table, using data for California (ref. source links in The Cost of Government Pensions), it can be seen that the average public sector worker makes 1.5 times as much in base salary than the average private sector worker. Based on data from CalPERS and CalSTRS, the average pension for public sector retirees in California who have worked 30+ years and have recently retired is well in excess of $45K per year, but 66% is a good conservative benchmark to use for comparison, particularly since it is difficult to access a national average for all state and local government workers. The $15K per year national average for social security is well-documented, and equates to about 33% of the average annual private sector wage.

This table puts together the preceding data for California’s retired population and projects a $110B per year outlay in pension payments to support 2.4 million retired public sector workers (local, state and federal), compared to a projected $95B per year outlay for 6.1 million retired private sector workers. What both the equation “1.5S x 67% x 30%  >  S x 33% x 70%” as well as the three tables above are intended to convey is a startling fact: The United States taxpayers going to be spending MORE on payments to public sector retirees, comprising 20% of the workforce, than they will spend per year on social security payments to the entire population of private sector retirees, comprising 80% of the workforce.

DUBIOUS PREMISES OF PUBLIC SECTOR PENSION FUND INVESTING

Before delving into scenarios whereby the social security fund and the public sector pension funds in the United States can be combined into one single system where the same formula is applied to all citizens, it is important to explore something unique to public sector pension funds; the fact that these funds are invested, and that returns on these investments yield additional capital that can be used to help meet pension payment obligations to retired government workers.

There are a host of fallacies and dubious premises that accompany the practice of relying on investment returns to shield taxpayers from fully funding government worker pensions. While all of these are debatable, they would include the assumption that government workers, funded by taxpayers, shall reap the financial rewards of investment returns, yet social security recipients shall not. Or the assumption that these government employee managed, labor union influenced, massive pension funds – pouring hundreds of billions through Wall Street brokerages every year – do not exercise a distorting influence on market returns, inordinately influence corporate governance, carry a political agenda, invest offshore, or aren’t themselves engaging in a mutually corrupt partnership with aggressively managed hedge funds that extract over-market returns using manipulative tactics in a zero sum market – i.e., causing lower-than-market returns for small investors who rely on their 401K investments for their retirement. But the most dubious premise of all is the myth that these pension funds can project long-term annual rates of return (after inflation) of nearly 5.0%.

There are two reasons that rates of return of 7.75% per year cannot be achieved (4.75% after adjusting downwards for inflation – this is CalPERS and CalSTRS official long-term projected rate of return, and is fairly typical of the rates used by most other public sector pension funds). They are the trends of demographics and debt. In the case of the public sector pension funds, the demographic challenge is compounded by the fact that new retirees, on average, receive far more generous benefits than existing retirees.

THE DEMOGRAPHIC CHALLENGE

The demographic challenge to 7.75% rates of return is a matter of simple supply and demand. When the worker-to-retiree ratio for public sector workers reaches 1-to-1, and when long-time public sector retirees are enjoying pensions that are derived using the same formula as workers just entering retirement – both of these things will happen if current policies aren’t changed – then for the first time, the massive government employee pension funds, currently managing about $4.0 trillion in assets in the United States, will be selling as many equities as they are buying. With funds this large, this will completely change the dynamics of the market.

The larger private sector workforce also is trending towards a smaller worker-to-retiree ratio, moving from today’s approximate 3-to-1 ratio to a 2-to-1 ratio by 2030. Presumably these private sector retirees will collectively own additional trillions in equities. In 2030, for every two private sector workers purchasing equities to eventually use when retired, there will be one retiree who is selling equities. This move from a 3-to-1 buyer-to-seller ratio to a 2-to-1 buyer-to-seller ratio will also have a dramatic macroeconomic impact on stock prices. There will be less demand for stocks and other passive investments because there will be more sellers than ever.

THE DEBT CHALLENGE

The debt challenge to 7.75% rates of return is, if anything, more daunting than the demographic challenge. The accumulation of debt in the U.S. enabled faster economic growth than would have otherwise occurred. Inflated asset values, especially private homes, enabled trillions in borrowing at unusually low rates. These trillions were immediately plowed back into the economy on consumer products or more homes, fueling both corporate profits and home prices – which raised the value of corporate equities and enabled further borrowing. The table below, documented with links to source data in the post “National Debt and Rates of Return,” shows the aggregate total market debt for the United States economy as a percent of GDP for the last 120 years:

The data for the above table is gathered from three sources, which all corroborate a sobering fact – the total debt in the U.S. is currently higher than it was during the great depression in the 1930s. Currently the reported total debt / GDP ratio in the United States is 370% and rising. At the height of the great depression, total debt / GDP was barely 300%. The above table breaks the last 120 years of American history into four 30 year financial eras. In all four 30 year periods, the total U.S. debt fluctuated between 140% and 160% of GDP. Two of the 30 year periods, the those beginning in 1890 and 1950, respectively, saw debt as a percent of GDP display very little variation. For example, between 1890 and 1920 the maximum debt/GDP ratio was 165%, and the minimum debt/GDP ratio was 125%. For the period beginning in 1950 the variation was even more unremarkable, with the 1950 beginning level of 140% comprising the lowest ratio, and the 1980 ending level of 160% comprising the highest ratio. This parallel between the two relatively stable periods makes any parallel one may infer between the two relatively unstable periods quite ominous. Because the 300% debt/GDP extreme achieved in 1930 took 20 grueling years to unwind.

During this same 20 year period, between 1930 and 1950, the Dow Jones Index moved from 286.10 downwards to 206.05. To the extent this stagnancy was caused by slower economic growth due to mandatory deleveraging, there is no reason to expect any growth whatsoever from publicly traded equities in the U.S., since debt today is a higher percentage of GDP than it was in 1930. The reality of an aging population, which increases the seller-to-buyer ratio in the equities markets creates an additional downward pressure on returns that was not present in the 1930′s.

These trends occur against the backdrop of a stock market that never recovered from the crash of 2000. As referenced in the post CalPERS Projected Returns vs. Reality, here is a chart of the Dow Jones Industrial Averages staring in January 2000, and running through mid-August 2011 (they haven’t changed significantly since then):

What is immediately clear from viewing this chart is that where the index began, nearly 12 years ago, and where it is now, are pretty much the same. To be precise, the Dow entered the week of January 4, 2000 at 11,522, and the Dow entered the week of August 8, 2011 at 11,269 (ref. Yahoo Finance – DJIA 1-2000 to 8-2011). The Dow has actually declined over the past 10.5 years.

Moreover, this loss of equity value should be measured using inflation adjusted dollars, not nominal dollars. If you review the Consumer Price Index from the U.S. Dept. of Labor, you will see that in January 2000 the index stood at 168.8, and in June 2011 the index stood at 225.7. This means that it would take $1.33 today to purchase what $1.00 would have purchased in 2000. From this perspective, the Dow index today would have to stand at 15,406 just to have kept up with inflation. Put another way, in real dollars, the Dow has lost 2.67% per year for the last 11.5 years.

One might argue that the Dow is not representative of the U.S. equities market, because the arcane formula that governs its calculation only incorporates a handful of blue-chip companies. Below is the S&P 500, an index that tracks 500 of the largest publicly traded companies, most of them based in the U.S. and traded on the New York Stock Exchange:

On this chart it is obvious that even in nominal dollars, the S&P 500 is lower today than it was nearly 12 years ago. As it is, the S&P 500 entered the week of January 4, 2000 at 1,441, and the Dow entered the week of August 8, 2011 at 1,179 (ref. Yahoo Finance – S&P 500 1-2000 to 8-2011). When you take into account inflation, the S&P 500 today would have to be at 1,927 just to break even with where it was 11.5 years ago. Put another way, in real dollars, the S&P 500 has lost 4.19% per year for the last 11.5 years.

PENSION FUND CONTRIBUTIONS ARE VERY SENSITIVE TO RATES OF RETURN

When analyzing the variability of required pension fund contributions based on 30, 25, and 20 year retirements, while assuming 30 years of work, the results on required contributions are dramatic. These calculations, including tables showing their complete methodology, using as examples the typical pension plans offered California’s safety and non-safety public sector workers, are explored in depth in the post “What Percent of Payroll Will Keep Pensions Solvent.” Here is the summary:


In the above table, the first set of four rows show various scenarios based on a pension equivalent to 90% of final salary, the second set of four rows show various scenarios based on a pension equivalent to 60% of final salary. One might suggest the first set of rows depicts public safety workers, representing approximately 15% of California’s 1.85 million state and local government workers, and the second set of rows depicts everyone else working for state and local government agencies in California.

For each pension example, the fund return is calculated at a best case of 4.75% per year, which is the official rate used by CalPERS currently, and is the rate used by most public employee pension funds across the U.S. That return is then dropped by 1.0% in each of the next three rows. It is important to note that these are “real” returns, after inflation, which is typically projected at 3.0% per year. In nominal terms, CalPERS official long-term projected rate of return is 7.75% per year. So in nominal (before adjusting for inflation) terms, the four returns evaluated on this table are 7.75%, 6.75%, 5.75%, and 4.75%. To keep this in perspective, the “risk-free,” nominal rate of return on the 10 year Treasury Bill is 3.0% per year, nearly two percent lower than our worst case scenario in this analysis.

As can be seen by reviewing the first column in the boxed set of data on the table, when someone works 30 years and is retired 30 years, and has a pension equivalent to 90% of their final salary, if you drop just one-percent from CalPERS official long-term projection, you have to increase the annual pension fund contribution by 10.1% of salary – from 30.3% per year to 40.4% per year. And if you want to be even more realistic when estimating necessary public sector pension fund contributions going forward, take into account pension spiking, staggering losses to the funds over the past 10 years, and retroactive pension benefit increases.

To expound further on what may be a realistic rate of return for multi-trillion dollar retirement funds in an economy with an aging population is beyond the scope of this analysis. For the proposed options to follow, the operating premise is that such funds, at best, will not yield returns that exceed the real rate of broader economic growth. Especially due to the aging population which creates more retirees who are sellers in the market. And mid-single digit economic growth will remain elusive as long as total market debt exceeds 370% of GDP.

TAXPAYER-FUNDED RETIREMENT SECURITY REQUIRES ONE-FORMULA FOR ALL

If one strips away the reliance on investment returns and compares social security to public sector pensions based on payroll withholding from current worker’s providing 100% of the funds required to make current payments to retirees, it quickly becomes obvious that public sector pensions are completely unsustainable, whereas social security can be rendered permanently solvent with relatively minor tinkering. Here’s why:

Public sector pensions pay retirees, on average, 2/3rds of what they made when they worked, and based on an average retirement age of 55, there will be one worker in the public sector for every retired public sector worker. This equates to 66% withholding on current government workers to fund retired government workers. Social security, by contrast, pays retirees, on average, 1/3rd of what they made when they worked, and based on an average retirement age of 65, there will be two private sector workers for every retired worker collecting social security. This equates to 16% withholding on current private sector workers to fund workers who have retired on social security.

Social Security and public sector pensions have something in common; they are both defined benefits. Retaining the defined benefit at some level to provide a minimal safety net to all citizens is something for which most Americans would agree. Determining what level of defined benefit is both adequate and financially sustainable is harder. But the exercise is simplified if you eliminate the inherently corrupt practice of investing taxpayer’s retirement funds in speculative investments. It is also simplified by the fact of America’s even age distribution, which makes the actuarial calculations far less complex. Using these assumptions, a average defined benefit equal to 1/3rd of salary can be provided to all American’s, if they are willing to contribute 16% of their salary to a retirement fund.

There are two elements to social security’s defined benefit formula that are absent from the defined benefit enjoyed by public sector workers. The first is the progressive nature of social security. A low wage earner may actually collect a social security benefit equaling as much as 50% of their income, whereas a high wage earner’s social security benefit will probably be closer to 10% of their income, or less. The second is that the social security plan adds up the entire career earnings of each beneficiary in order to calculate their entitlement, whereas public sector pensions are typically calculated by multiplying the number of years a beneficiary worked by a factor (usually between 2% and 3%), and multiplying that result by their final year’s earnings. Both of these elements belong in a merged plan; one to create more equity for low income earners and to place a cap on the maximum benefit, the other to take into account the total earnings history of each beneficiary to more equitably calculate how much they may receive.

By incorporating progressive benefits, imposing a cap on benefits, and raising the annual ceiling at which earnings become exempt from withholding, it may be possible to sustainably pay out an average pension to low and middle income wage earners that exceeds 33% of their average career earnings. Raising the retirement age to improve the worker-to-retiree ratio can also accomplish this. When exploring retirement security options based on this pure pay-as-you-go system, one can quickly visualize both a reasonable, sustainable retirement safety net for all citizens, as well as grasp just how problematic it becomes to raise taxpayer funded retirement benefits much beyond 33% of average annual career earnings.

AMERICA’S ECONOMIC ADVANTAGES

While the U.S. confronts an aging population and crippling levels of total market debt, the U.S. is nonetheless clearly positioned as having the strongest and most resilient economy in the world. America’s age distribution, while in transition to an older average age, has the unique virtue of being perfectly evenly distributed. New workers are replacing retiring workers at a 1-to-1 ratio, and the overall ratio of workers to retirees will never dip below 2-to-1. No other major economy has this advantage; most of them face a desperate shortage of new workers. This will ensure not only sufficient payees into any retirement security scheme, but it will ensure adequate numbers of workers to produce goods, and adequate numbers of workers to consume them. It is difficult to imagine how America’s sustainable demographic profile will not grant her a significant economic advantage over the other major economies of the world over the next 20-30 years.

Surprisingly, America’s debt profile, while dire, is comparable to most other major nations. The chart below shows the estimated amount of available credit, by major economy, based on known levels of total debt in each economy, compared to their estimated collateral expressed as a multiple of GDP. For the purposes of comparison, available credit is calculated by assuming a nation’s collective borrowing remains viable up to an amount equivalent to 50% of their collective assets. As can be seen, the absolute value of each nation’s GDP has a decisive effect on the calculation, since countries with much larger GDPs such as the U.S. have as much remaining borrowing capacity – 19.8 trillion – as the much smaller Chinese economy – 22.4 trillion – despite the fact that China has a debt/equity ratio of 5% vs. America’s 36%.

At first glance this chart suggests that the U.S., with a debt/equity ratio of 36%, is in considerably worse shape than the Eurozone and China. But this chart was compiled nearly a year ago (ref. National Debt and Rates of Return) and is based on a huge assumption: Debt in the Eurozone and China were simply assumed to be triple their reported government debt.

Starting with Europe, the problem with this assumption is that the European banks have issued Euro bonds that aren’t calculated on any national balance sheet. Retirement obligations and current worker entitlements in Europe have stressed their borrowing capacity and threaten the very existence of their currency. China’s economy, while logging formidable growth over the past 20 years, is overly reliant on exports and construction. While the Chinese don’t appear to have a serious debt problem based on the simplistic assumption that their total debt is merely 3x reported government debt, their banking system is opaque, their real estate assets are grossly overvalued, and their exports cannot possibly continue to grow at the rate they have. Just a slowdown in the rate of export growth could have a sharply negative impact on China’s asset values – and when collateral collapses, debt as a percent of equity rises accordingly. And China’s fitful progress on human rights, along with Europe’s attempts at integration which may have peaked, guarantee these economies will struggle with social distractions unheard of in the U.S.

Finally, because of their impending demographic implosion for which neither of them are prepared, Europe and China face a very uncertain economic future. Japan, by contrast, has already experienced twin implosions – demographic and collateral – and with the worst behind them, Japan may surprise the world in the coming years. But Japan, with a $5.0 trillion economy and an imploding population, will never seriously rival the U.S. as the premier global economy.

ECONOMIC GROWTH IMPROVES RETIREMENT SECURITY OPTIONS

For the United States to flourish economically, she will have to reduce debt as a percentage of GDP while somehow managing to log rates of economic growth in the mid-single digits. More than anything else, this will require engaging in deficit government spending that yields long-term economic returns, rather than simply to pay out entitlements and inflated wages and benefits to government workers.

The economic problems in the rest of the world guarantee the U.S. dollar will remain a hard currency. They mean that the Chinese yuan will not deliver a sustained appreciation against the dollar, even if they finally float their currency on open markets. They mean that the Euro, even if it survives, will also be regarded as less stable than the dollar. The size and diversity of the American economy, the demographic sustainability of the American population, the stability of American society, and the historic status of the U.S. dollar as the reserve currency of the world are all contributing factors to the likely appreciation of the dollar for the next few decades.

The infrastructure projects of the 1930′s should provide inspiration to policymakers and economic planners today. The impact of these roads, dams, and power infrastructure were clear – they lowered the cost of living at the same time as they raised the standard of living. Unlike today’s seductive but economically disastrous “green” initiatives, infrastructure investments of the 1930′s made transportation, water and power cost less. This policy decision of the 1930′s – investing government funds to lower the cost of living – gave people more discretionary income to purchase new inventions – radios, cars, home appliances. And these new inventions created new asset classes which created new collateral, improving the overall national debt/equity ratio.

This is where government investment should go, into 21st century versions of the big projects of the 1930′s whose legacy still provides benefits to the American people. We need practical public works projects that will lower the cost of transportation, water and energy. We need upgraded freeways with “smart lanes” where ultra-efficient cars and buses will eventually drive themselves. We need to upgrade existing rail lines and limit the building of “bullet trains” to where they might be cost-effective; maybe Washington to Boston but probably nowhere else. We need to develop nuclear power, clean coal, shale oil and gas, and lower the cost of energy. We need to build cost-effective desalination plants and new water storage and distribution infrastructure – and to make these massive projects affordable and for the greater good, we need to roll back or eliminate unnecessary environmental regulations, environmentalist lawsuits, and project labor agreements.

Along with infrastructure investments, the federal government should invest in high-technology, which is essential to maintaining economic preeminence. A mission to Mars, a lunar base, and multiple orbiting outposts would consume hundreds of billions in funds, but result in almost unimaginable commercial growth and technological spinoffs. The federal government should also increase investments in basic science and medical research. As infrastructure investments lower the costs for energy, water, and transportation, and technology investments create new options for entrepreneurs, entirely new industries can spontaneously emerge in the private sector, from space commercialization to life extension, to things we can’t imagine today.

To fund these investments without increasing the deficit requires revisiting entitlement reform and eliminating special, cripplingly expensive pensions for government workers. While some classes of government workers may qualify for a premium when calculating their retirement compensation, such as those who operate in the military or high-risk public safety jobs, there is no reason why the vast majority of government workers should get anything other than a new and upgraded, economically sustainable social security benefit.

In order to minimize disruption to the markets, public sector pension funds can be liquidated systematically over a ten year period. They can be moved slowly but steadily into investments of minimal risk, such as ten year treasury notes, and placed under the administration of the Social Security Trust Fund. Moving these funds into T-Bills will also help finance the deficit until GDP growth raises tax revenues. And to preserve America’s demographic advantage as well as nurture her technological prowess, immigration laws need to be restructured to emphasize admission of highly educated and highly skilled workers.

These are prescriptions for economic growth, which will improve the options for whatever retirement benefit formulas are adopted.

If the U.S. were to merge all taxpayer supported retirement entitlements into social security, it would fund the revitalization of the U.S. economy. Redirecting government spending into productive investments instead of entitlements would create an economic boom that would create opportunities for all Americans. By moving the government out of the business of making speculative investments through Wall Street brokerages, that special interest as would see a significant erosion of its power and influence. Perhaps most important of all for a global perspective, the 21st century might then follow the 20th as another American century, a most desirable outcome for those who believe in the American experiment, in democracy, in pluralism, in competition and capitalism, innovation, progress, and the optimism and big ideas that have always defined America in the eyes of the world.

73 comments to Merge Social Security and Public Pensions

  • SkippingDog

    This would be a great idea if you included IRA’s and 401 accounts into the giant merge. That’s also the only way everyone would be able to share in both the sacrifice and eventual gains. Until then, you’ve only suggested taking property from public employees and retirees.

    What does Ron Paul think about your idea?

  • Editor

    SkippingDog – the idea here is to provide everyone a basic taxpayer funded retirement security plan. Then any employer who wanted to offer premium benefits could make a matching contribution to a 401K. But the taxpayer wouldn’t guarantee these 401K’s if their value dropped. The idea is to stop forcing the taxpayers to shoulder the risk when government employee pension funds fall short of their expected rates of return, and more generally, to get taxpayer’s money out of the business of making speculative investments on Wall Street. In the implementation of something this sweeping, you probably could convert some of the existing pension fund assets into 401Ks for the participants. That would be an equitable way to address your point.

  • SkippingDog

    Teresa Ghilarducci has a much better plan, and it seems to be gaining more traction as time passes. You should get on board and support the Ghilarducci plan if you really are as concerned as you claim, rather than narrowing your potential targets to public employees and retirees.

    http://abcnews.go.com/Business/PersonalFinance/story?id=6122417&page=1#.TtVD2GAhzyE

  • Editor

    SkippingDog – Is this what you are referring to? “In her book When I’m Sixty-Four: The Plot against Pensions and the Plan to Save Them, Ghilarducci proposed mandatory participation in a government-run savings plan to which each worker and their employer would supplement their Social Security pension by contributing 2.5 percent each of her or his salary.”

    What Ghilarducci is suggesting is not necessarily a bad idea – you would have to examine her assumptions carefully – but if it doesn’t do something about the disparity between public employee pensions and social security, it is a nonstarter. The withholding necessary to sustain social security is 16% of payroll – at the most. The withholding necessary to sustain government worker pensions at their current levels is 50% of payroll, if not more. How does Ghilarducci’s 2.5% solution begin to address a disparity of 34%?

    If you read my analysis, you would understand that my concerns are based on economic logic, not ideology. For example:

    - We are paying more each year in pensions for the 20% of the workforce who are former government workers than we pay in social security to the other 80% of our population.

    - These government pension funds rely on a long-term, inflation-adjusted annual rate of return of 4.75%, which is not even remotely realistic.

    - These government pension funds are engaging in risky investment tactics that are distorting our markets and further jeopardizing our economic stability. The sheer size of the flow of money into the markets from public employee pension funds distorts our markets.

    - Taxpayers are on the hook when rate of return projections are finally lowered, and for every 1.0% you lower the projected rate of return, you have to increase withholding as a percent of payroll by 10%.

    - Public employee pensions, on average, pay five times as much in lifetime benefits than social security, on average.

    - Social security is not in dire financial straits, but public sector pensions are.

    My conclusion: There is no way we can restore solvency to our taxpayer supported retirement security programs in the United States without dramatically cutting the size of public employee pensions. Merging these pensions with the social security fund would be a good first step, for the reasons discussed in the analysis. We could then consider programs such as Ghilarducci’s to augment social security for everyone.

  • SkippingDog

    I don’t know how you get around the Contracts Clause of the US Constitution and the fact that public pensions, particularly for those already retired, are mature debt. Your proposal is therefore no different than one that would confiscate any other property right, such as your home or your IRA or your bank account, to make up the difference between what you have decided is a “fair retirement” for public employees.

    The one thing we do have in the U.S. is strong legal protections for contracts and legal property rights. Many would go so far as to suggest that those protections are the very reason for the Constitution in the first place, and they apply no less to public employees and retirees than they do to anyone else — even you.

  • Editor

    SkippingDog – we can rehash that debate here if you wish. I would simply argue that contracts are void in bankruptcy. And as soon as these pension funds admit they can’t earn 7.75%, you are going to see a wave of municipal bankruptcies.

    There is a moral argument that seems to escape most defenders of the current system – it is simply wrong to hold taxpayers accountable for pension fund shortfalls. When these pension benefit increases were negotiated, the market was booming, and policymakers were told they might not even have to contribute to the funds. Voters had virtually no awareness of the deals that were being made, and policymakers had only a dim understanding of the financial risks, if any.

    If you believe the misinformation coming out of the PR firms hired by the unions, you will probably think the alarm raised here is phony. But I have arrived at all of my conclusions independently, using source data. I have personally accessed Bureau of Labor Statistics data, the annual reports of CalPERS and CalSTRS, U.S. Census data, and I have personally constructed the spreadsheets that I’ve used to analyze this problem. I am convinced that if we don’t reform our public sector pensions, we will destroy the U.S. economy. It is the responsibility of public sector employees and their union leadership to recognize this as well – and many of them already do, privately and off the record – and do something about it.

  • rex

    I don’t know how you get around the Contracts Clause of the US Constitution and the fact that public pensions, particularly for those already retired, are mature debt……..The one thing we do have in the U.S. is strong legal protections for contracts and legal property rights.

    Skippy the Harvard Law Professor. You parrot these propaganda talking points more than Teddy Steals does.

    Any gov can change pensions for years not yet worked, future service years. You can CUT pensions of current retirees if the money is not there, Central Falls RI has proven that already.

    States can do whatever they want to do because the Contracts Clause cannot be enforced against them under the 11th Amendment. So once again, your parroted talking points can easily be refuted.

    The author is correct, if the gov employees want to “retire” at age 50 with $10 million pensions for front line rank and file GED cops and FF’s, who make as much as $161K per year for these front line rank and file positions, then they can pay for them, not the poor.

  • Rex The Wonder Dog

    There is a moral argument that seems to escape most defenders of the current system – it is simply wrong to hold taxpayers accountable for pension fund shortfalls. When these pension benefit increases were negotiated, the market was booming, and policymakers were told they might not even have to contribute to the funds. Voters had virtually no awareness of the deals that were being made, and policymakers had only a dim understanding of the financial risks, if any.

    Actually CalPERS engaged in a fraud, they knowingly, willfully and intentionally gave incomplete data on SB400, 3%@50, to the CA legislators, giving only the very BEST case scenario and and hid the worst case scenario-and the worst case is what happened. That is fraud, and I am sure sooner or later a member muni of Calpers will sue for fraud. SB400 was the basis for the leap frog effect of these 3%@50 pensions.

    So it is mnore than a moral argument, it is a criminal and civil fraud argument. If I ran a muni that was a CalPERS member I would sue them for fraud.

  • SkippingDog

    Okay Ed. You and Rex have it your own way if it makes you feel better. Whatever fraud theory you wish to spin won’t be something recognized by any US court, and your suggestion that there is some “moral argument” that supports your position would do nothing more than get your lawyer sanctioned by the court for filing a frivolous motion. Look at the Orange County case against its own deputy sheriffs for a recent example.

    As to your comment about bankruptcy eliminating contracts, you’ll need to do some more reading about how Chapter 9 differs from the other bankruptcy statutes. You should also check into the fact that in California, as in most large states, the pension system is not part of the same government for which it provides a service. For example, CalPERS is a completely separate entity from both the state and from the various cities, counties, and special districts for which it provides pension services.

    If a city contracting with CalPERS were to file Chapter 9 bankruptcy it would have no immediate effect on CalPERS, since CalPERS is a legally independent agency. CalPERS would become a creditor in such a filing, and would have significant influence in the structure of the workout plan required under Chapter 9. The pensions for which it is responsible would still be paid. There’s no getting around that.

    Central Falls hasn’t done anything except file a bankruptcy case with the court. The freeze or reduction in pension benefits was imposed by that city’s state appointed trustee/receiver, but there has been no action whatsoever by the court thus far.

    Taxpayers are, and have always been, responsible for the decisions made by their elected representatives. That’s how a constitutional republic works. Remember those wise words from the court in the recent case? “Imprudence, however, is not unconstitutional.”

    Rex also ignores what is known as the “Stripping Doctrine,” in which the 11th Amendment is bypassed for legal purposes by providing that injunctive relief can be sought and obtained to prevent a state officer from doing exactly what he suggests, i.e., committing an illegal act.

    Unless CalPERS itself were to enter bankruptcy, there would be no impact on existing pension obligations at all. If CalPERS did enter bankruptcy, the outcome would be that the state and the member agencies would be forced to provide sufficient funding to keep the system solvent and paying its legal obligations. Take a look at the government code covering public pension agencies if you doubt me.

    As to your admonition that public employee unions are obligated to “do something” about the pension funding issue, I believe you have the shoe on the wrong foot. Public employees have made significant concessions as a result of our current economic circumstances, and they will no doubt make others before things are better. There have been no concessions made by “the taxpayers” or their representatives to do the right and moral thing by raising revenues sufficient to cover the legal obligations they have made.

    You know all of this, just as Rex does, but are still making proposals like that in this article to see if there’s some way to weasel out of the debt you and all of us owe. It’s simply not going to happen, unless you’re able to convince the courts that contracts aren’t really contracts after all. Then no contract would be worth the paper it’s printed on.

  • Editor

    There are two issues here, SkippingDog. One is the moral issue, and the other is the legal issue. Morally, you may continue to believe that somehow it is ok for taxpayers, who have had to endure the twin challenges of globalization and economic stagnation caused by over-accumulation of debt, to still pay for you to live as if globalization never happened and debt-fueled economic bubbles can last forever. You use some pretty arrogant words – “weasel,” “spin” – but you would have a pretty tough time in the light of day telling those of us who work 50+ weeks per year and pretty much can never retire that you’re allowed to have 30-40 weekdays off (or more) per year with pay, can make a salary that was never adjusted downwards from 2000 levels, and will retire with 2/3rds (or more) of your highest rate of pay when you are in your mid-50′s. And don’t try to suggest that you’ve made concessions – I’m talking about people who make HALF what they used to make, not people who deferred their “cost of living” increases. That is the reality of economic stagnation caused by the debt hangover and globalization combined. But you’re exempt from that, while we pay you?

    Try to explain to someone who is self-employed, and pays over 50% taxes on every additional dime they make (state 10%, federal 28%, empl/empl FICA and medicare, 13.5%) that their taxes should pay for a college professor to take summers off, teach a few classes a week, and retire by age 60 with a pension equivalent to 2.5% times the years they worked, applied to their final salary. Explain to someone who has to pay 100% of their health insurance premium, and is lucky if they can even get coverage, why public safety officers and many other public employees participate in premium group plans that they pay ZERO for, and are offered for life, and are even extended to family members?

    Do you actually think you have a moral case? Because if you do, you are delusional.

    We can discuss the legal arguments forever. But why bother?

    The problem isn’t that you lack empathy, because you probably have empathy. But if you do, your empathy is misplaced and misguided, because based on the tone of your comments, you must think that the solution is for EVERYONE to have the benefits you have. But have you done the math on that, SkippingDog? Let’s suppose every one of the ten million Californians over the age of 55 received a pension equivalent to the average pension paid out in 2010 to state workers who retired after a 30 year career in government. That would cost $680 billion per year. It would consume 43% of the entire economic output of California. Do you think we can afford that? What about retirement health care on top of that? Are you kidding?

    Did you even read the post? At 5,100 words, it is lengthy. But it lays out in painstaking thoroughness exactly how impossible it is for investment returns to sustain the retirements of government workers who represent 20% of the workforce. How on earth could we extend those benefits to everyone else as well? Who would pay for it? This is the empty core that any empathy directed at “lifting up the rest of us rather than pulling the public sector benefits down” rests upon. It is economically impossible.

    Your tone suggests I have an agenda. What would that be, SkippingDog? The agenda of somebody whose actually bothered to analyze the data, instead of engaging in wishful thinking? The agenda of somebody who has realized they are a slave to public sector unions? That their taxes are to support the lifestyles of people who make 2-4 times what they could earn in the real world? That their vote is meaningless because their taxes fund union government employee union political action committees who purchase every local and state election?

    For those of us who have done our homework, the intransigence of the public sector unions in the face of overwhelming economic evidence smacks of tyranny, plain and simple. And it is a shame. Because not all of us are libertarians. Not all of us wish to have the innate respect we feel for teachers, nurses, firefighters and police undermined by the fact that so many of these public servants have been utterly brainwashed by labor unions into adopting a simple-minded, greedy and resentful world view that is completely out of touch with reality. We want to see our public sector workers share in the same sacrifices we have to make, as we confront globalization, an aging population, and a debt hangover. Instead we are being told “a deal’s a deal,” and we’ll all have to pay MORE taxes, not to build roads, not to build energy and water infrastructure, but to allow you all to live as if it is still 1999.

    You should really think about how you come across. Because economic reality will assert itself no matter what arguments you may win in a courtroom.

  • SkippingDog

    When is a deal not a deal, Ed? When it becomes inconvenient? That’s really the basis of your complaint, it would seem. Do you think my mortgage company cares any more than yours would if I decide that the deal I made with them just isn’t convenient for me anymore?

    At this point, how I come across to people who don’t want to live up to the “deal” that myself and others have made with them in exchange for our service doesn’t really concern me. No matter how kind, empathetic, thoughtful, collegial, or transcendent I may be, people like yourself and Rex would still do anything possible to backpedal on your side of the deal now that I’ve fully completed my obligations to you.

    How should I come across in the face of that kind of outrageous suggestion? How do you think you’d come across in the same circumstance?

    Public employee pensions are not gratuities from a benevolent employer; they are the deferred payment of earned compensation. My pension is my personal property, just like my car, furniture, bank account, and whatever equity I may have in my home. You may not agree with the compensation I’ve received for my work, deferred or otherwise. That is your privilege.

    We all make life choices that we believe will best serve our goals. I chose a life of public service, first in the military and then in law enforcement. Others make different choices, but we all must live with the consequences of our choices and actions, be they good or bad.

    How much of your own salary, rent, savings, or other property are you willing to give up?

    The law is not clear on whether public employee pension formulas can be changed going forward, but it’s very clear that such formulas can’t be changed going backward. The economic reality is that you must now pay the overdue bill for services you’ve already received before you will be able to buy the new roads, schools, and other infrastructure goodies that you want. Or, you could support the proposition that a legally binding obligation is just that and agree to pay the additional taxes necessary to fund the nice new stuff you want, just as you would in your own household.

  • Rex The Wonder Dog!

    As to your comment about bankruptcy eliminating contracts, you’ll need to do some more reading about how Chapter 9 differs from the other bankruptcy statutes. You should also check into the fact that in California, as in most large states, the pension system is not part of the same government for which it provides a service. For example, CalPERS is a completely separate entity from both the state and from the various cities, counties, and special districts for which it provides pension services
    So what?????…. as if that makes any difference whatsoever.

    Calpers is a CREDITOR, creditors take it in the shorts in a BK, muni, 7 9 or 11. Makes no difference if they are independant of the state or not. But you are flat out wrong, Calpers IS a division of this state. It says it right in its name; CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM

    Since the Calpers states it is a state agency in its own name the claim it is not sunject to a BK court is ridiculous and shows you are living in some sort of fantasyland. Besides, it is a moot point-If the money is not there for these pensions, and it won’t be at some point in the near future, then the pensions are getting hair cuts, just like Central Falls RI. ANd in CF RI public safety took the biggest hit in the shorts-55%

  • Rex The Wonder Dog!

    Rex also ignores what is known as the “Stripping Doctrine,” in which the 11th Amendment is bypassed for legal purposes by providing that injunctive relief can be sought and obtained to prevent a state officer from doing exactly what he suggests, i.e., committing an illegal act.
    NO, the states cannot be “stripped” by a federal court. You are, once again, wrong. You seem to think because you took a few entry level crim law and procedure sessions at the police academy you are an expert on federal law, you’re not- and your comments like this one on the “stripping” doctrine prove it. You are just flat out wrong.

    Unless CalPERS itself were to enter bankruptcy, there would be no impact on existing pension obligations at all. If CalPERS did enter bankruptcy, the outcome would be that the state and the member agencies would be forced to provide sufficient funding to keep the system solvent and paying its legal obligations. Take a look at the government code covering public pension agencies if you doubt me.
    Another ridiculous comment. Calpers is not a debtor, they are a CREDITOR, what part of that do you not understand? If the money is not there to pay from a member muni (or the state) Calpers will lose in BK court. Same with the state, Calpers does NOT enter BK as a creditor, Calpers as a CREDITOR loses when the DEBOTR does not have the money to pay-why is that so hard for you to understand?

    You know all of this, just as Rex does, but are still making proposals like that in this article to see if there’s some way to weasel out of the debt you and all of us owe. It’s simply not going to happen, unless you’re able to convince the courts that contracts aren’t really contracts after all. Then no contract would be worth the paper it’s printed on.
    Exact same thing the cops and FF in Central Falls RI said, and then they would not negotiate a lower pension with the trustee-guess what happened????? They took a BIGGER hit when the trustee had to go to court to FORCE the pension cuts.

    You’re the CF RI cop, you just can’t figure that out yet.

  • Rex The Wonder Dog!

    Your tone suggests I have an agenda. What would that be, SkippingDog?

    Anyone who faces down public employees over these very issues has an “agenda” or is a “hater”, a “troll” or a “weasal” or a “[insert derogatory term here]“.

    That is just another talking point Skippy parrots.

    BTW Skippy, I found that post from last month about how you claim piolice salaries were kept artificially LOW during the 1980′s and 1990′s, one of the biggest whoppers I have ever heard.

    Police compensation has gone up at 2-3 times the rate of inflation. In 1986 the HIGHEST paid police department in this state was San Jose, they had a cash salary of $38K, that was just 25 years ago. Pensions were 2%@55. Today Richmond PD has a high cash salary of $161K when all the extra pay is added onto the $123K base pay. The sick leave is 12 days, vacation is 20 days and holidaysis 14 days, boost it another 17%-18%, the pension value using a real ROI is at least equal to the base pay IMO. So lets do the math, $161K + paid time off of 17% ($27K)= $188K + pension costs ($161K)= $350K. That is for an entry level rank and file cop, not a supervisor. Richmond PD in 1986 had a base pay of $33K. They had NONE of the “extra” pay then except for college degree bumps. The paid time off value ALONE is equal to nearly the median salary in this state – $31K.

  • Editor

    SkippingDog – Even if we were to assume that voters had any idea what sort of “deals” were being negotiated back in the late 90′s and ever since with respect to public employee pensions, here’s the problem: These services that are “already received” were supposed to cost a certain amount. But then this amount kept getting increased, as the actuaries and fund managers gradually realized their projections were optimistic. It’s as if someone sold you a car, that you drove for a few years and purchased with a loan, then the seller kept coming back and saying the loan payments have to double, then triple, then quadruple, and so on. Are you actually telling me that the buyer wouldn’t have a moral right to have a problem with this?

  • SkippingDog

    Here’s an easy diagram of the 11th Amendment and the stripping doctrine for you, Rex. Information is the cure for ignorance, so you should take it when it’s offered to you. Look up the term yourself if you have the inclination. There are many cases and law journal articles available online.

    http://classes.lls.edu/archive/manheimk/fedcts/echarts/11th-f.htm

  • SkippingDog

    What I’ve previously posted was correct about public sector salary depression in California throughout the 80′s and 90′s. You don’t have to look far for confirmation.

    You’ve never provided one shred of evidence for your claim that a non-supervisory police officer at Richmond PD makes $161k per year. I’ve repeatedly posted the MOU between the city and POA for you to review, and nowhere in that document can you come up with base pay, speciality pay, or anything else that remotely comes close to the claim you continue to make. The only reasonable conclusion is that you’re intentionally making a false claim just to enflame people who might read these posts without knowing better.

  • SkippingDog

    Rex – If CalPERS itself were to enter bankruptcy it would be a debtor, just as I posted earlier. If the municipal agencies using CalPERS for their pensions enter bankruptcy, CalPERS would be a creditor. In either event, Chapter 9 would only provide for a court supervised work out plan for the debts, not the dissolution of contracts.

    You need to think these things through a little better if you ever hope to make sense on these boards.

  • SkippingDog

    One final point, Rex, before I leave you to your ignorance for another day. CalPERS is a constitutionally separate entity from both the state of California and from the various government agencies for which it provides services. If any of those agencies were to enter Chapter 9 bankruptcy, CalPERS would be a creditor and would be directly involved in the workout plan. In the meantime, CalPERS would continue to pay all of its existing obligations to retirees, increasing the assessments on non-bankrupt agencies if necessary to balance the books or requiring the state itself to make up any shortfalls in its funding. That’s how public retirement law works.

    CalPERS is not merely a “flow-through” agency for state and local pension contributions. It is an independent investment agency, with all that implies, and operates under the full faith and credit of California and the municipal agencies it serves.

    As to your continuing claims that the 200 or so employees of Central Falls are some harbinger of the future for California, you should probably review the latest news. The Receiver has apparently worked out some kind of pre-bankruptcy plan with retirees there. The details haven’t been published yet, but we’ll probably know in the next day or so what they are. In the meantime, you should remember that the only thing Central Falls has done is to file a bankruptcy petition with the court there. The court has taken no action at all, and it’s not yet clear that the court will even allow Central Falls to enter bankruptcy protection. If you keep up with the news, you’ll know that the bankruptcy petition of Harrisburg, PA was rejected by the bankruptcy court a few days ago, so filing for Chapter 9 protection doesn’t mean the court will agree with a municipality’s claim of insolvency.

  • SkippingDog

    Ed – to answer you question, the issue of whether an improvement in retirement benefits is an unlawful payment for past services rendered has clearly been put to rest by the California courts. It is not, and we can thank Orange County for spending the money to provide that piece of legal certainty.

    Your comparison to a car purchase is flawed, among other reasons because to use your example you would also have to include the fact that the buyer also received additional benefits or consideration during the course of the deal. In most cases, the municipalities that opted to increase pension benefits did so in exchange for a period of no salary increases to their employees. Those foregone salaries generally had about the same present value as the cost of the increased retirement benefits, at least as calculated at the time of the agreements.

    To return to your example, the taxpayers received the additional consideration of having either lower tax obligations, due to the abandoned cost of living raises or the “super funded” status of the pension fund, in return for providing the benefit of an enhanced retirement formula for their public employees. It was most certainly not a one-sided deal at the time. It just worked out better in the long run for the public employees.

    Doesn’t nearly every business deal eventually work out a little better for one side than the other? That is, after all, the nature of our business commitments and why our founders recognized the need to protect contracts from buyer’s remorse interference like that you propose.

  • SkippingDog

    Here’s another CalWatchDog article where Rex claimed to know things about which he is ignorant. Go ahead and read the links I’ve provided there by people who actually know what Chapter 9 bankruptcy law does and does not do.

    http://www.calwatchdog.com/2011/08/09/could-cal-pers-be-drained-if-cities-default/

  • Rex The Wonder Dog!

    Here’s an easy diagram of the 11th Amendment and the stripping doctrine for you, Rex. Information is the cure for ignorance, so you should take it when it’s offered to you. Look up the term yourself if you have the inclination. There are many cases and law journal articles available online.

    http://classes.lls.edu/archive/manheimk/fedcts/echarts/11th-f.htm
    Nice cut and paste, the problem is it does NOT do what you are claiming. And your Googling and cut and paste jobs will never change that.

    What I’ve previously posted was correct about public sector salary depression in California throughout the 80′s and 90′s. You don’t have to look far for confirmation.

    You’ve never provided one shred of evidence for your claim that a non-supervisory police officer at Richmond PD makes $161k per year. I’ve repeatedly posted the MOU between the city and POA for you to review, and nowhere in that document can you come up with base pay, speciality pay, or anything else that remotely comes close to the claim you continue to make.
    I have posted the RPD salary and benefit schedule REPEATEDLY and will do so a again just to make a lair out of you- once again;

    http://www.ci.richmond.ca.us/DocumentView.aspx?DID=4869
    Now do the math, or have Mom help you do the math.

    Rex – If CalPERS itself were to enter bankruptcy it would be a debtor, just as I posted earlier. If the municipal agencies using CalPERS for their pensions enter bankruptcy, CalPERS would be a creditor. In either event, Chapter 9 would only provide for a court supervised work out plan for the debts, not the dissolution of contracts.
    Calpers would not enter BK because they are not a debtor- they are a creditor, it would be the member muni’s and the state who would enter BK-although as I have repeatedly stated the state does not need federal BK ocurt protections because there is no legal remedy to force them to pay their debts, including pensions. Chapter 9 is a BK, it disolves and voids contracts. So your claim there is no “dissolution of contracts” is once again factually wrong. Indeed Vallajo found that out in BK court. There would be a “workout”, just like there was a workout in Central Falls RI, and it would include haircuts on pensions.

    In the meantime, CalPERS would continue to pay all of its existing obligations to retirees, increasing the assessments on non-bankrupt agencies if necessary to balance the books or requiring the state itself to make up any shortfalls in its funding
    So now you claim Calpers coudl FORCE non BK member muni’s to cover costs of BK muni’s??? Bwhahahahahaha…..I swear, you are living on another planet. Calpers could not force other healthy members to pay for the short falls unhealthy members. Another ridiculous assertion.

    As to your continuing claims that the 200 or so employees of Central Falls are some harbinger of the future for California, you should probably review the latest news. The Receiver has apparently worked out some kind of pre-bankruptcy plan with retirees there.
    It is well known fact that Central Falls ALREADY filed BK, in July, it is a well known fact that the cuts were already given, 55% to public safety, that is done and over with and was with the authority of the BK court. It is not and never wil be a “pre-bankruptcy plan” because they already filed for BK and the reitrees had the cuts IMPOSED on them, bigger cuts than originally because the reitrees fought-and lost- that battle. It is now precedent since BK courts are federal, what happens in a BK court in RI can be applied in So Cal.

  • Rex The Wonder Dog!

    SkippingDog
    November 30, 2011 at 1:16 pm
    Here’s another CalWatchDog article where Rex claimed to know things about which he is ignorant. Go ahead and read the links I’ve provided there by people who actually know what Chapter 9 bankruptcy law does and does not do.

    http://www.calwatchdog.com/2011/08/09/could-cal-pers-be-drained-if-cities-default/

    Oh Skippy, why must I spank you so bad in public???? Did you even read the thread you linked to??? Here is what you said in post #30;

    #30 SkippingDog says:

    August 13, 2011 at 12:05 pm

    The 11th Amendment means a state can’t be sued by a citizen of ANOTHER state. It has nothing to do with a state resident filing a lawsuit against the officers of the state in which they live,. and pay taxes.

    Skippy claims the 11th Amendment ONLY applies to lawsuits against the state from citizens of OTHER states. Reallyyyyyy Skippy!

    See, there is that GED cop mentality poking its head out once again. Slippy takes a few hours of criminal law and procedure and is an all knowing expert in all of the law. OK Skippy here you go;

    Until the period following the Civil War, Chief Justice Marshall’s understanding of the Amendment generally prevailed. But in the aftermath of that conflict, Congress for the first time effectively gave the federal courts general federal question jurisdiction, and a large number of States in the South defaulted upon their revenue bonds in violation of the Contracts Clause of the Constitution. As bondholders sought relief in federal courts, the Supreme Court gradually worked itself into the position of holding that the Eleventh Amendment, or more properly speaking the principles ”of which the Amendment is but an exemplification,” is a bar not only of suits against a State by citizens of other States, but also of suits brought by citizens of that State itself

    Man, I hate being right all the time :P

  • Rex

    If you keep up with the news, you’ll know that the bankruptcy petition of Harrisburg, PA was rejected by the bankruptcy court a few days ago, so filing for Chapter 9 protection doesn’t mean the court will agree with a municipality’s claim of insolvency.

    No, it was not rejected on the merits of insolvency-which is your claim. Harrisburg was rejected on techincal grounds that had nothing to do with the merits of insolvency.

    More spin from Skippy, and more spin from Skippy shot down.

  • Editor

    What would we do without you Rex? Thank you for staying on point. You said it better than I could, although we are considering doing a study of compensation trends during the 1990′s – I have little doubt the U.S. Census data will confirm that safety employee compensation exceeded the rate of inflation in that decade as well. But we like to verify things independently here using source data.

    Where you and I may disagree somewhat is on what level of compensation is appropriate for public safety personnel. I believe that over the past 20 years the requirements of the job have become more complex, as well as the premium we place on our own safety and the safety of our first responders. So the fact that public safety compensation over the past 20 years has exceeded the rate of inflation is not necessarily unjustified. The question is where you should draw the line.

    For these reasons I try to avoid personal slurs when commenting or writing posts. It is disappointing, bitterly disappointing, to be frank, that the faith we have in our government institutions has been so severely undermined because these institutions have been taken over by labor unions. In my opinion labor unions should probably be illegal in the public sector, and far more strictly regulated in the private sector. The idea that our public safety personnel, all of whom are armed to the teeth and trained to enforce our laws, are receiving political indoctrination from labor unions is literally sickening. The curbs on police power that are necessary in any democratic society are severely challenged when you add to the considerable powers police already have the additional political power of union organizing. It must be opposed, but hopefully in a way that never abandons the respect that public safety personnel nonetheless deserve.

  • Charles

    Editor,

    So what is your answer? Eliminate public employee representation? When Caltrans had no employee representation and low salaries Caltrans was a revolving door for Junior Civil Engineers. Fresh out of college with an EIT under their belt they put in two years for professional experience to take the Professional Engineers exam and became Registered.

    Then about 2/3rds of them started looking for jobs in the private sector and left. In today’s dollars Caltrans spent about $60,000 to train a person so they could go to work somewhere else.

    If you were to institute some kind of combination retirement plan that anyone could carry with you to another job Caltrans would be bleeding jobs in good times and still not be able to hire during a hiring freeze in bad times.

    You need to think long term, like 20 to 40 years out. You can’t cut salaries and benefits without undermining your own recruitment efforts.

  • Editor

    Charles – We should offer every working citizen in the U.S. the same taxpayer funded formula to calculate their retirement benefit. We should eliminate the special government worker pensions so government workers are not trapped in their jobs, waiting for their pensions. And then we can make government worker salaries competitive with private sector salaries so they can compete on that basis for excellent, long-term employees on a level playing field. I think you will find that government worker salaries are already competitive with the private sector, although they may not have been 40 years ago.

    There is nothing wrong with workers migrating from the private sector to the public sector and back again. I think it would be healthy for our industry, for our government agencies, and for society in general if people migrated back and forth between the public and the private sector. The best way to encourage this would be to normalize the retirement benefits between the public and private sectors. And from a fiscal standpoint, this has to happen anyway. From a moral standpoint, taxpayers should not have to support retirement benefits for public sector workers that are literally five times better than what is offered by social security.

  • SkippingDog

    Once again, Rex misapplies the information readily available to reach another outlandish and unsupportable conclusion. To wit:

    The Richmond PD recruiting poster you’ve attached includes all of the possible enhancement pay to reach the $123k level. It’s not $123K AND the other potential enhancements. You also conveniently neglect to acknowledge that it is physically impossible to receive all of the different pay enhancements at the same time. For example, an officer can’t be a detective, motor officer, FTO, or other speciality at the same time. He/she would get only one of those enhancements for the particular assignment they were working. Read the actual contract for a change, instead of the recruiting poster RPD put out.

    The diagram was only for the purpose of showing you the 11th Amendment “Stripping Doctrine” which you have claimed doesn’t exist. You and I both know it does, and the remedy to prevent a state officer from committing an illegal act, such as not paying a legally required pension benefit, would be a federal court injunction. That is clear and well established law that’s a century old.

    There is no dissolution of contracts under Chapter 9 of the bankruptcy code. If you’d bother to read the information provided by both the bankruptcy court and the American Institute of Bankruptcy, you’d find that renegotiating existing labor agreements is possible, but there is no automatic contract nullification and those activities don’t apply at all to anything other than executory contracts, i.e., those currently in force in which the performance by both parties is incomplete.

    You simply don’t wish to acknowledge the reality of bankruptcy law, nor the limitations of the 11th Amendment on your plans and ideas. As to the Editor, I don’t know what you’d do without Rex either. He brings a level of willful ignorance and often malicious falsehood to his posts that few in all of cyberspace could possibly match. You should definitely rely on him for real insight on the existing law and ongoing obligations held by your city, state, and other government agencies. His predictions were clearly correct about the outcome of the Orange County lawsuit, as can be seen by the fact that the 3@50 pension program was found unconstitutional and the deputy sheriffs had to pay for the County’s legal expenses.

    Oh, that’s right, it didn’t happen the way Rex predicted at all….

    You’re always entitled to your own opinions, but you’re never entitled to your own facts. Learn it, live it, love it.

  • SkippingDog

    Here’s the relevant language from the link I provided regarding the 11th Amendment and the “stripping doctrine” -

    “Suits Against State Officials

    Mitigation of the wrongs possible when the State is immune from
    suit has been achieved under the doctrine that sovereign immunity,
    either of the States or of the Federal Government, does not ordinarily
    prevent a suit against an official to restrain him from commission of a
    wrong, even though the government is thereby restrained.\88\ The
    doctrine is built upon a double fiction: that for purposes of the
    sovereign’s immunity, a suit against the official is not a suit against
    the government, but for the purpose of finding state action to which the
    Constitution applies, the official’s conduct is that of the State.\89\
    The doctrine preceded but is most noteworthily associated with the
    decision in Ex parte Young,\90\ a case truly deserving the overworked
    adjective, seminal.”

    Here are the Bankruptcy Court requirements for a Chapter 9 filing:

    “Only a “municipality” may file for relief under chapter 9. 11 U.S.C. § 109(c). The term “municipality” is defined in the Bankruptcy Code as a “political subdivision or public agency or instrumentality of a State.” 11 U.S.C. § 101(40). The definition is broad enough to include cities, counties, townships, school districts, and public improvement districts. It also includes revenue-producing bodies that provide services which are paid for by users rather than by general taxes, such as bridge authorities, highway authorities, and gas authorities.

    Section 109(c) of the Bankruptcy Codes sets forth four additional eligibility requirements for chapter 9:

    the municipality must be specifically authorized to be a debtor by state law or by a governmental officer or organization empowered by State law to authorize the municipality to be a debtor;
    the municipality must be insolvent, as defined in 11 U.S.C. § 101(32)(C);
    the municipality must desire to effect a plan to adjust its debts; and
    the municipality must either:
    obtain the agreement of creditors holding at least a majority in amount of the claims of each class that the debtor intends to impair under a plan in a case under chapter 9;
    negotiate in good faith with creditors and fail to obtain the agreement of creditors holding at least a majority in amount of the claims of each class that the debtor intends to impair under a plan;
    be unable to negotiate with creditors because such negotiation is impracticable; or
    reasonably believe that a creditor may attempt to obtain a preference.”

    Here is the current MOU between the Richmond Police Officers Association and the City of Richmond California. Please show us where a non-supervisory officer can make $163k per year.

    http://ca-richmond2.civicplus.com/DocumentView.aspx?DID=1079

  • SkippingDog

    Here’s the MOU for non-management police officers in Richmond. The MOU posted above is for command ranks.

    http://ca-richmond2.civicplus.com/DocumentView.aspx?DID=1083

  • Rex The Wonder Dog

    The Richmond PD recruiting poster you’ve attached includes all of the possible enhancement pay to reach the $123k level.

    Actually the $123K is the “TOP STEP”, it does not include any of the “extra pay” below it. The pay listed below the TOP STEP of $123K+ is EXTRA PAY on top of the “top step” pay pay $123K+.

    As a cop Skippy, I am presuming you understand the concept of “Step Raises (increases)”, present in nearly all government jobs in this state for rank and file gov employees, maybe it is different where you live, but I suspect it is the same, that you have “step” increases too. Those step increases are why there is a range of $91K+ to $123K+. The steps are usually 5% bumps every 6 months until the “Top Step” is reached, at the 3 year point. If you do the math, start at $91K and give a 5% step bump every 6 months you end up at the $123K amount after the 6 bumps.

    So, to summerize, the $123K is BEFORE any “extra” pay is added in, it is the “top step” which is reached after 3 short years of employment.

    So the 20.5 year old son of the RPD chief can get hired at RPD and at the ripe old age of 23.5 be pulling down $161K (or close to it) in salary alone if he gets all of the extra pay. Add in the rest of the comp and it is doubled. Add in some OT and he could exceed $400K in total comp at age 23.

    Those are the facts.

  • Rex The Wonder Dog!

    There is no dissolution of contracts under Chapter 9 of the bankruptcy code. If you’d bother to read the information provided by both the bankruptcy court and the American Institute of Bankruptcy, you’d find that renegotiating existing labor agreements is possible, but there is no automatic contract nullification and those activities don’t apply at all to anything other than executory contracts, i.e., those currently in force in which the performance by both parties is incomplete

    In the first sentence you say contracts are not disolved, then in the next you amdit they are, they are “renegotiated”, as in the original is voided and a new one replaces it.

    So, you are wrong, contracts are voided in BK courts every day, and chapter 9 is no different, it happened in OC, in Vallejo and in Central Falls.

  • SkippingDog

    I posted the current contract for Richmond police officers above, Rex. Please show me anywhere in the contract where you can come up with a total amount higher than $123k, including the premiums paid for motor officers and detectives. It’s not in there, but I’d love to see you come up with something to support your wild claims for a change.

    Renegotiating a contract doesn’t “dissolve” the existing agreement. By mutual agreement a contract can certainly be amended, but that wasn’t ever your claim. Your claim was that in filing for Chapter 9 bankruptcy protection, the existing labor contracts are suddenly modified.

    As to your weasel above about being able to add up overtime for a 23 years old officer and come up with $400k in total compensation, that’s simply preposterous and you know it.

    Look at the contract again when you sober up. You’ll quickly find that an officer with less than 5 years of service, such as your 23 year old, tops out at a little over $90k per year. That junior officer wouldn’t be eligible to be a detective or motor officer, nor would they be in a position to have an Advanced Post Certificate but, just for the sake of our discussion, let’s assume she/he is. In that case, the total amount of their salary premium would be 7.5%, or about $6700 per year in additional pay. Even adding 37% for indirect costs such as vacation, health and pension benefits only brings that officer’s total compensation up to slightly more than $130k per year, far below the $163k in direct pay you claim and light years away from that $400k compensation number that you’ve magically pulled out of your nether regions.

  • Rex The Wonder Dog!

    Renegotiating a contract doesn’t “dissolve” the existing agreement. By mutual agreement a contract can certainly be amended, but that wasn’t ever your claim. Your claim was that in filing for Chapter 9 bankruptcy protection, the existing labor contracts are suddenly modified

    Contracts are not “amended” per a “mutaul agreement” in BK court. The contracts are VOIDED, and a workout is put into place in their stead.

    Where do you come up with this stuff-really? If the contracts could be amended via a mutal agreement Centrall Falls would not have ended up in BK. The retirees there refused to budget on a renegotiation, so then the court stepped in and FORCED the cuts on them, it was not by amendment nor mutual agreement.

  • Rex The Wonder Dog!

    You’ll quickly find that an officer with less than 5 years of service, such as your 23 year old, tops out at a little over $90k per year.

    I see no base salary information in that MOU, what page is it on? They have salary listed i th eindex on P. 38 but I could not find any salary info at all on P. 38, just basic increases. I have to laugh at the MOU because in it they refer to court appearances at “municipal” courts. Municipal courts were merged with the superior courts more than a decade ago, so tha MOU has some serious flaws in it.

    BTW, the $161K would not be out of the blocks, but at the TOP of the pay scale, which I have stated would be after all six step increases have been secured, at the end of thee years.

  • Rex The Wonder Dog

    http://ca-richmond2.civicplus.com/DocumentView.aspx?DID=1079

    Just went through the entire RPD MOU, there are no base salaries listed in it. So your claim that a 5 year cop is only making $90K under that MOU is bunk.

    I did find some interesting, and very disturbing, info in it, like;

    1) The RPD were given, in this depression, 5% annual bumps over the 4 year contract, at least double the cost of inflation.

    2) The RPD pays HALF of the EMPLOYEES contribution to CalPERS, that is ridiculous.

    3) 14 paid holidays, quadruple what the VERY best private sector employers allow.

    4) An average of 4.5 weeks paid vacation over 30 years of service. 0-2 weeks is normal in the private sector, maybe 3 in a Fortune 500.

  • SkippingDog

    Don’t be disingenuous again, Rex. The salaries are listed on the very last page of the MOU, right after the signature page.

    The rest of your claims are equally false. Read the contract.

  • Editor

    Rex – don’t let me down with the facts. You say that “the best private sector employers” only offer 25% of 14 paid holidays? I don’t think so. Most private sector employers will offer New Year, Memorial Day, the Fourth of July, Labor Day, Thanksgiving and Christmas off with pay. That is six days. That is probably a good average, although if you include self employed people I agree the average probably comes down to four or five days. But that still only makes the 14 paid holidays in the public sector employment agreement about three times as good as a good (average or better than average) private sector deal, not quadruple.

  • Rex The Wonder Dog!

    Don’t be disingenuous again, Rex. The salaries are listed on the very last page of the MOU, right after the signature page.

    Only upper management is listed on the last page afetr the signitures, and they total well over $130K in base salary for the management-BEFORE any extra pay is added in;

    http://ca-richmond2.civicplus.com/DocumentView.aspx?DID=1079

  • Rex The Wonder Dog!

    Most private sector employers will offer New Year, Memorial Day, the Fourth of July, Labor Day, Thanksgiving and Christmas off with pay. That is six days.

    I think the Fortune 500 may offer those 6 paid holidays, for F/T employees, but that accounts for only a small segment of the private sector. 80% of all newly created jobs come from small businesses today, and there is now way they offer that kind of paid time off.

    WalMart is the largest private employer in America today, I doubt they offer 6 paid holidays for their F/T employees ( but I don’t know for sure), and they limit F/T employment so they do not have to pay benefits. Remember, 41% of America works at minimum or near minimum wage (when not including the public sector that number goes up 15-20%), and most minimum wage jobs offer no benefits-including paid holidays/time off, and this is especially true for part time employees.

    When I worked at Trader Joes going through college (when they only had 21 stores) they only had 7 or 8 F/T employees per store and about 25-30 part time employees. They did that for a reason, they did not pay ANY benefits to the part time employees- who were 75% of their work force in absoulte [employee] numbers.

    In any event I think 6 paid holidays is the exception, not the rule. I think 14 is ridiculous, especially when you add on the sick and vacation paid days off. I did the numbers (in my head) for RPD vacation pay and it averaged 4.5 weeks paid vacation per year over the 30 year career. I don’t know ANY private sector employer who gives even 4 weeks paid vacation for rank and file workers.

  • SkippingDog

    I posted the non-management link above, Rex, so now you’re just trying to be cute. Here it is again, on the last page. Please show us how a non-supervisory police officer makes anything close to what you claim.

    http://ca-richmond2.civicplus.com/DocumentView.aspx?DID=1083

  • SkippingDog

    “Rex – don’t let me down with the facts.”

    That’s exactly the problem, Ed. People like Rex play fast and loose with all of the facts to enflame the anti-government contingent that’s always lurking around us. When confronted with real facts, Rex just pretends he doesn’t see them or they don’t exist.

    That’s why anything he posts is worthless.

  • Editor

    SkippingDog – my point to Rex was a bit more nuanced than you are suggesting. From the standpoint of those of us who pay 46% taxes on any extra work we’re lucky enough to earn (self-employed people in California who make over $74K pay on their additional earnings tax rates of 8.0% state, 25% federal, 10.5% social security and 2.5% medicare), we are just as outraged that the average number of paid holidays for government workers is TRIPLE what the average private sector worker gets (including those of us who are self-employed, who get zero paid holidays), as if the average number of paid holidays is quadruple. In general, I find Rex’s command of the facts to be credible.

  • Rex The Wonder Dog!

    OK, so lets do the math, OK Skippy. Try to keep up.

    We will start with the LOWEST cop pay scale Police Officer 300- with the 9% longevity;

    $8238 x 12 = 99,936 in 2007,, when this contract was executed.
    Now lets add in the 5% pay bumps the contract called for until we get to December 4, 2011, OK :)

    2008= $99,936 + 5% bump= $4,997= $104,933

    2009= $104,933 + 5% bump= $5,246= $110,179

    2010= $110,179 + 5% bump= $5,509= $115,688

    2011 (this year)= $115,688 + 5% bump= $5,784= $121,472

    The 1% spread between the $121,472 and $123K is in there somewhere, but the amount is about 1% so it is very obvious I am correct-again, and you are wrong, again.

    Skippy, next time you point to an MOU try to add up the pay increases from the date the MOU is signed (2007) and the current date (2011) and then COMPARE THE COMPENSATION AND SALARY to the CURRENT (2011) RPD police recruitment flyer, which is obviously accurate.

    There you go Skippy, simple math, well, simple for those of us with some level of intelligence :P

    Just for fun, lets do the rank and file Police Office 300C and see what we come up with;

    2008= $106,224 + 5% bump= $5,311= $111,535 ($8,852×12)

    2009= $111,535 + 5% bump= $5,577= $117,112

    2010= $117,112 + 5% bump= $5,856= $122,967

    2011 (this year)= $122,967 + 5% bump= $6,148= $129,115

    OK Skippy, lets see you spin this one.

  • Rex The Wonder Dog!

    BTW Skippy, you yourself have even admitted that the salary on these MOU’s are the base salary, not the total salary with all the extra pay added in, which is clearly laid out in the MOU contracts.

    So add in the extra pay and my $161K figure for rank and file cop is on the money.

  • Rex The Wonder Dog!

    You also conveniently neglect to acknowledge that it is physically impossible to receive all of the different pay enhancements at the same time. For example, an officer can’t be a detective, motor officer, FTO, or other speciality at the same time. He/she would get only one of those enhancements for the particular assignment they were working.

    Sorry Skippy, I guess you did not read the flyer.

    The EXTRA PAY listed on the flyer does not include detective, motor or speciality being collected at the same time. None of these are even listed in the extra pay. The extra pay listed on the flyer involve 5 categories and they can all be collected at the same time;

    1- College degree
    2- Bilingual
    3- Longevity
    4- Shift differentials
    5- Investigations

    ALL can be collected at the SAME TIME
    http://www.ci.richmond.ca.us/DocumentView.aspx?DID=4869

    So your claims of FTO, motor, detective being part of the extra pay and not being subject to collection at the same time are false – and IF those duties pay EXTRA in addition to the 5 categories already listed then that $161K can go up another $15K or $20K. That would be $181K in salary alone. Skippy, stop posting this nonsense, you’re just shooting yourself and your argument in the foot.

    But the bottom line is that your claim that HS educated rank and file cops are not paid more than doctors, lawyers, CPA’s and dentists-even if they do not make $123K in salary- is pure folly, it really is.

    Skippy-I know MEDICAL DOCTORS who are making less than $100K in salary working for Kaiser, with 10 years of college under their belts, 3 years of residency, half a million in student loans and SAT, GRE and MCAT test scores in the top 5% in the nation – and they make less than a 21 year old rank and file Richmond cop who could not graduate from a community college. So please Skippy, please try to explain why that is so. It is not supply and demand b/c there are 1,000 applicants for every job, of which at least 75% qualify based on the P.O.S.T. set standards. Me thinks it is political cronyism-AKA campaign payoffs.

    Rex The Wonder Dog!

  • factchecker

    Rex-

    Who are these doctors at Kaiser?

    Plenty of NURSES at Kaiser make well in excess of 100k, and most of them don’t have
    to live anywhere near the Bay Area, either.

    http://www.payscale.com/research/US/Employer=Kaiser_Permanente/Salary

    Please stop making up “facts.”
    Thanks.

    BTW, Doctors don’t typically take the GRE. Please reserve your comments for statements
    that are actually grounded in reality.

  • Rex The Wonder Dog!

    factchecker- MANY docotrs have graduate degrees before going to medical school, the standardized admissions test for college graduate school is the GRE. Sorry to burst your “factchecker” bubble. I see you did NOT argue that these highly educated doctors are in the top 5% in these stadardized tests like the SAT or MCAT, which proves my point.

  • Rex The Wonder Dog!

    “Currently, most working nurses have a minimum of an Associate Degree in Nursing and the average pay is around $50,000 per annum.”

    BTW-even using the bogus payscale website entry level nurse is $35K, and DOCTORS are at $48K entry level, man I hate being right all the time!!!!

    http://www.payscale.com/research/US/Job=Physician_%2f_Doctor%2c_General_Practice/Salary

    http://www.payscale.com/research/US/Employer=Kaiser_Permanente/Salary

  • factchecker

    Rex-

    Good try.

    A resident is an entry-level MEDICAL DOCTOR, and yes the salary is 45-60k for 3-4 yrs.
    Residents do not train at Kaiser.

    So how many doctors at Kaiser “with 10 years of college under their belts, 3 years of residency, half a million in student loans and SAT, GRE and MCAT test scores in the top 5% in the nation” making less than 100k do you really know?

    It hurts to be called out on one’s fiction, doesn’t it?

  • SkippingDog

    Sorry Rex, but you’ve worked yourself into a corner once again. Remember, your point was that an officer with 3 years on the department was making $163K in base pay per year. If you take the time to read the contract, you’ll find that an officer isn’t even eligible for the first 2% longevity pay increase until they have 5 years on the department.

    Including the pay increases since the contract was created, our 3 year officer is now making a base pay rate of $105k per year. Add on the 7.5% pay for Post Certificates or education and you get a total of $112k per year, still far below your oft repeated but still incorrect claims to the contrary.

    The 9% longevity rate you posted doesn’t apply to officers until they have 25 or more years of service with Richmond PD itself, so very few people are being paid at that level.

    Now, if you want to take a look at the compensation of a 25 plus year RPD officer, who also has a college degree, and advanced Post Certificate, is bilingual and works in the detective division, we can compare those numbers as well. What you’ll find is that, in aggregate, that officer is making a base salary of a little over $131k. That’s after at least 25 years of service, and with exceptional skills and qualifications in one of the highest cost areas of California.

    Drive through Richmond or San Pablo sometime and see for yourself what a safe and upscale neighborhood it is….

  • SkippingDog

    Sorry, Ed. I work in the private sector now and receive 12 paid holidays per year, in addition to vacation leave of 2 days per month or 24 days per year. Now I recognize that as a senior manager my benefits are a little better than our non-managment employees, but they also receive 12 holidays and at least 10 vacation days per year.

    My company is not unique, but it’s obviously a place where people like Rex wouldn’t be likely to work.

  • Editor

    SkippingDog – I’ve worked in the private sector all my life. The most paid holidays I’ve ever had in a company were 12, like yours. This is not unusual with large corporate employers. In the smaller companies where I’ve worked the norm was between 6 and 8 paid holidays per year. And as a self-employed person, you get ZERO paid holidays. If you don’t work, you don’t get paid. What’s your point, anyway? Are you disputing Rex’s assertion that public sector workers get far, far more paid time off?

  • SkippingDog

    I’m disputing Rex’s continual “all or nothing” claims. As someone who purports to conduct objective analyses of civic finance topics, I’m surprised you wouldn’t do so too.

    Being self employed is a choice many people make so they don’t have to be accountable to a “boss.” I understand that completely, having grown up in a small business family. I also understand that all choices come at some cost, whether one wishes to be self-employed, work for another in private enterprise, or work for some type of public service organization. Each choice has benefits and costs, tangible and intangible.

    I spent more than three decades in government service and would be the first to agree there are many inefficiencies. I’ve spent the last several years in the private sector and there are many inefficiencies there as well. My recollection from growing up in a family business is that there were many inefficiencies in that endeavor, but my father enjoyed the intangible benefit of “being his own boss.”

    There’s nothing particularly special about any of those employment realms. Each has competent people with the best of intentions who go about their business each day to serve their clients, whomever those clients may be. Each has a risk/reward component, and the potential rewards for private enterprise far exceed those available to even the employees at the highest level of public service.

  • Editor

    SkippingDog – Just so we’re clear. “Self employed” means you get a 1099 instead of a W-2. It does not necessarily make you your own “boss.” In most cases it simply means you work for a fee based on the time you log, or the work you complete, or a combination of both. Typically, you still have a boss, you just don’t have any benefits. When you adjust for taxes and benefits, a person making $100K per year is making about the same amount of money as a person making $40K per year in the public sector. That’s just wrong.

    It’s too bad however this comment thread didn’t explore the central theme of the post, which was to propose a sustainable system of retirement security for all Americans. The proposal, to merge social security with public sector pensions, is based on two premises: (1) That we can’t rely on Wall Street returns to take the burden of supporting retirees off of current workers, nor, in any event, should we pour taxpayer’s money into private investments (let individual supplemental 401K plans do that), and (2) Any retirement safety net that we establish for our citizens and fund through taxation should be based on applying the same eligibility and benefits formula to all Americans, whether they are public sector or private sector workers.

  • oz

    “a person making $100K per year is making about the same amount of money as a person making $40K per year in the public sector.”

    Only if the self-employed person making 100K chooses to ignore every single tax incentive tossed his or her way. The tax breaks are there to push folks towards saving more for their retirement, something all workers should be doing, one way or another.

    I guess those incentives still aren’t enough for you to save personally, though, are they, Ed?

    Your arguments might wring truer if you were more personally credible, Ed.
    It’s hard for me to read a guy advocating for merging everyone’s retirement funds together when I know that guy has $0.00 saved up for retirement.

    Think about it. Start saving.
    R/
    Oz

  • SkippingDog

    I certainly agree that the use of “independent contractors” has been largely an effort by established firms to avoid the normal costs associated with employment, and that the category as been vastly misused over the last two decades. Turning yourself into what is basically an itinerant temp with no benefits has never seemed like a very prudent or profitable idea to me, but I guess we have computer programmers and the Tech Bubble to thank for that little decline in civilization as well.

    Comparing independent contractors to those with full time, benefitted employment – public or private – will nearly always be an act of self abuse for those of you in the former category. Attempting to make public benefit policy through such disparate comparisons is nothing more than cheering a race to the bottom for everyone.

    As to your central theme, I certainly agree that a secure retirement system for everyone would be desirable. It is with your suggestion that such a system be created solely by the diminishment of property rights for public employees that I most vigorously disagree.

    Your proposal and the reasons for it do make me wonder if you are a supporter of the Affordable Care Act, since providing all citizens with readily available health care would seem to be an even greater priority than a universal retirement system, which is at least what the foundational purpose of Social Security has always been. If you support seizing the property of public employees to provide a universal retirement system, I would expect you to support some universal tax or levy to likewise support healthcare for everyone.

  • SkippingDog

    One other thought, Ed. Rather than attempting to diminish the benefits and property rights public employees have earned, why not support the concept of allowing those outside the public sector to buy in to retirement systems such as CalPERS? They would be able to take advantage of the investment opportunities open only to an organization that is the largest retirement system in the nation, and would be simultaneously protecting their eventual retirement benefit as well as ensuring the long-term viability of the pension system itself.

    Obviously, a private sector member would need to pay both the employee and employer costs, just as they do now if they are self employed. There’s no reason such a plan couldn’t be funded with pre-tax dollars and, like public employees, the eventual benefit would either have a Social Security offset or one’s Social Security would be reduced at a level commensurate with the final pension received.

    If we were to add something like that to an expansion of healthcare that provided something essentially like “Medicare for all,” we would have solved two of the major concerns for any aging population.

    Think it over.

  • Editor

    Oz – it is good to hear from you as always. We had an in-depth discussion of what tax breaks may be available to independent contractors following an earlier post:
    http://civfi.com/2011/08/22/letter-to-a-california-state-worker/

    As for your suggestion that I have saved “$0.00″ towards retirement, I will assume that you are speculating and have no basis for that comment. In any case, the goal of CIV FI is to discuss formulas towards sustainable financing for civilization, not to compare personal situations. In that spirit, the above post, in my opinion puts forward a proposal that would:

    (1) Deliver a basic safety net of retirement security to every citizen in the country according to the same set of rules and incentives.
    (2) Eliminate the gross inequity between public sector workers and private sector workers in terms of how much benefit they gain from taxpayer-funded government administered retirement programs (I know, we will disagree – you will say CalPERS and their ilk are private institutions, I contend they are a branch of government).
    (3) Remove the government (ala CalPERS) from investing taxpayer’s money in high risk investments, which undermines market performance for individual investors and increases overall market volatility.
    (4) Remove the private sector taxpayer as the bail-out mechanism for government employee pension funds that can’t meet their targeted returns.
    (5) Enable more crossover between the public and private sector workforces by taking away the golden pension handcuffs that trap public sector workers in their jobs for life.
    (6) Strengthen the U.S. currency and creditworthiness by using the social security fund (that would now incorporate all pension fund assets) to purchase T-Bills instead of private equities.

    I would like to question your implicit assumption, however, which is that there are actually safe, relatively high-return investments out there. What, Oz? Where shall a small investor put their money, where they will get a long-term, after-inflation return of 5.0%? Because that’s what these public employee pension funds, managing about $4.0 trillion in assets, claim they can earn, decade after decade. If you read the sections in this post under the headings “The Demographic Challenge,” and “The Debt Challenge” – to name just two places that address this topic – I challenge you to explain to me how funds that big can beat the market in perpetuity. And if they could – which they cannot – why that is equitable for taxpayers if only government workers can reap these rewards?

  • Editor

    SkippingDog – To your first comment, I am going to have to do a post that actually shows, item by item, the basis for a comparison between a private sector independent contractor with no benefits and a government employee with full benefits. The point of such a comparison is not to encourage a race to the bottom, but to simply point out what an apples-to-apples comparison reveals about what public employees really cost taxpayers. If you tell somebody you make $100K per year, it sounds like you’re doing pretty well. If you tell somebody you make $40K per year, it sounds about 40% as good, obviously. But when you explain that a government job paying $40K per year with full benefits delivers exactly the same economic value as an independent contractor’s job with no benefits paying $100K per year, it puts the comparison into an accurate, and very dramatic perspective. What conclusions and policy recommendations may accrue to such a comparison are somewhat secondary – first the comparison needs to be made, and the public needs to understand.

    Your suggestion that, basically, instead of merging public pension funds into social security, we merge social security into public pension funds – I know, that isn’t exactly what you meant – is interesting. Here are some things to watch out for, however:

    (1) You would have to eliminate the taxpayer as the source of a bail-out if the funds didn’t deliver.
    (2) You would still have the huge problem of government administered pension funds being the biggest players in the private equities market, compounding the potential for market distortions and corruption that already exists.
    (3) When you say the independent contractor would have to pay the employer and employee costs, you are revealing one of the primary flaws in the current system of public employee pension funding, which is the employee via withholding almost never pays 50% of the cost of funding. And the employer (the taxpayer) virtually always pays more than the 6.25% employer share that social security charges private employers. Wouldn’t your plan at least require public sector employees to pay at least 50% of the funding costs for these pensions? Even California Gov. Brown is proposing that reform.
    (4) You haven’t addressed the problem of what would happen if rates of return can’t be sustained at the mythical annual 7.75% level, decade over decade. Would benefits be cut when returns didn’t hit their targets?
    (5) You say your solution would help these funds, but I’m not sure how. Unless the ratio of money going in from current workers vs. money coming out from retired workers changed, i.e., unless the benefit formulas were lowered to sustainable levels, you would still have the same problems we’ve got now.

  • Rex The Wonder Dog!

    SkippingDog – To your first comment, I am going to have to do a post that actually shows, item by item, the basis for a comparison between a private sector independent contractor with no benefits and a government employee with full benefits. The point of such a comparison is not to encourage a race to the bottom, but to simply point out what an apples-to-apples comparison reveals about what public employees really cost taxpayers. If you tell somebody you make $100K per year, it sounds like you’re doing pretty well. If you tell somebody you make $40K per year, it sounds about 40% as good, obviously. But when you explain that a government job paying $40K per year with full benefits delivers exactly the same economic value as an independent contractor’s job with no benefits paying $100K per year, it puts the comparison into an accurate, and very dramatic perspective.

    Skippy would never understand such a comparison, and in the off chance he does get it he will still spout off his regular talking points parroting the public union propaganda :P

  • Rex The Wonder Dog!

    (3) Remove the government (ala CalPERS) from investing taxpayer’s money in high risk investments, which undermines market performance for individual investors and increases overall market volatility.

    There was an EXCELLENT analysis of this in a book that was published at least 20 years ago that was the result of a multi article installment on the dismantling of the American manufacturing base, and how people were looking to the government today instead of the private sector, won the Pulitzer prize for journalism.

    That book hit the nail on the head and like I said, was published at least 20 years ago-excellent book, covers pension funds in great detail and shows how PUBLIC pension funds are undermining and destroying private sector jobs by risky, hedge fund type investments;

    “America: What Went Wrong?”

    http://www.amazon.com/America-Wrong-Donald-L-Barlett/dp/0836270010

  • Rex The Wonder Dog!

    Rex-

    Good try.

    A resident is an entry-level MEDICAL DOCTOR, and yes the salary is 45-60k for 3-4 yrs.
    Residents do not train at Kaiser.

    Hey Factchecker, I guess you failed to “fact check” the job listing, here it is General Practice Physician

    I don’t see the word RESIDENT in that title, do you :P

  • Rex The Wonder Dog!

    SkippingDog
    December 5, 2011 at 5:06 pm
    Sorry Rex, but you’ve worked yourself into a corner once again. Remember, your point was that an officer with 3 years on the department was making $163K in base pay per year

    NO, my point, AGAIN, was that GED educated, rank and file, entry level unskilled/semi skilled RPD cop with the brain power of a circus chimp could make as much as $161K PER YEAR IN SALARY ALONE at RPD, and at least that much in benefits, more than a MEDICAL DOCTOR with 10+ years of college under their belt and in the top 5% of the nation in academic brain power, more 2-5 times more than a mid-level manager at a Fortune 50 company with an MBA from Harvard and 20 years on the job, more than a CPA, more than a lawyer, more than a dentist…………………will they hit the top level of $161K out of the blocks???????? NO, but they will hit hit in in a few years, or close to it.

    You keep missing the point and keep spinning, and I just have to keep tripping you up and shooting down your whoppers. The MAIN POINT is that these employees are GROSSLY over compensated for what they bring to the table. They are not the best, they are not the brightest, they are only getting this compensation because government jobs are not open to the free market, and as I have said many, many, many times, and as you yourself have proven, they do NOT get these jobs on the merits, the MAJORITY get hired because of nepotism and cronyism- the rest-like you-get hired because they give extra ordinary weight to ex-military in the 10 minute fixed and set up “oral interviews”. If these jobs were given out on MERIT based, OBJECTIVE testing the entire police department, fire department-all of government- would be 180 degrees different. RPD even addresses this nepotism in their MOU for crying out loud!!!! This is why you see the sons and daughters, the relatives the friends throughout these government jobs, despite the fact that there are 500-2,000 applicants per job opening. The odds of a government employee having FIVE family members being hired by the same police department- on the merits – where there are hundreds of applicants per opening-as LAPD Charlie Beck has- are millions, if not billions, to 1.

  • Charles

    Nowadays I don’t know for sure but when I went to work for Caltrans in 1969 you had to pass a very difficult test. Promotional exams in engineering were equally difficult. There is no way I know of to pass the written exam. Some relatives passed the written, but not all.

  • Rex The Wonder Dog!

    Nowadays I don’t know for sure but when I went to work for Caltrans in 1969 you had to pass a very difficult test. Promotional exams in engineering were equally difficult. There is no way I know of to pass the written exam. Some relatives passed the written, but not all.

    Engineering and cop are 1) very skilled and 2) unskilled jobs. The “written” test for cop is a 10th grade level reading test, and it is pass/fail-70% to pass. But it is OBJECTIVE, you cannot game it. You can game an “oral interview” all day long- and they do.

  • SkippingDog

    So now, Rex, you’ve abandoned your first point completely in order to create a scenario in which it is theoretically possible for a Richmond police officer with more than a quarter century of service to reach the unsupportable pay rate you first claimed? Talk about spin….

    Once again you’ve proven to be ill-informed, highly confident, and still incorrect. There are very few things that can fix that problem.

  • Rex!

    SkippingDog
    December 6, 2011 at 9:35 pm
    So now, Rex, you’ve abandoned your first point completely in order to create a scenario in which it is theoretically possible for a Richmond police officer with more than a quarter century of service to reach the unsupportable pay rate you first claimed? Talk about spin….

    For the sake of argument lets say an entry level first year cop at RPD only makes the LOW figure which the flyer states- $91K from DAY ONE- and lets estimate the benefits; the days off, medical and pension at the base pay, so that is another $91K. That is $182K for a job that requires nothing but a HS diploma, it is in the top 5% in the nation for compensation, for someone as young as age 21. Lets go with the lower figure for right now, it is still ridiculous and so far out of whack for the skill set being brought to the table it is a scam, even using the lowest possible salary.

    So lets go with that $182K at age 21-just for argument (you know they are going to make much more once you start adding on the “special pay” and overtime), what on earth makes you think ANYONE should be compensated at that amount with NO JOB SKILLS??????? Where they bring NO SKILL SETS with them?????

    I know you will spin and make up some wild crazy reason, but try to keep it within the bounds of reason :P

  • oz

    Ed-

    No speculation.

    You revealed through your bemoaning on that very same post that your savings rate is 0% and that you are in substantial debt.

    Sorry buddy, but this has large implications towards author credibility, and, yes, that is very relevant here. One cannot help but paint one’s bias into one’s theoretical work.

    I say this not to subject you to embarassment, but to prompt you again to make some budgetary adjustments that might get you to save some of your income.

    R/
    Oz

  • SkippingDog

    There you go again, Rex. You claimed that a RPD officer with 3 years of service was making $161k per year in base salary. It’s simply not true and you know it. That’s why your claims can’t be trusted.

  • Rex The Wonder Dog!

    There you go again, Rex. You claimed that a RPD officer with 3 years of service was making $161k per year in base salary. It’s simply not true and you know it. That’s why your claims can’t be trusted.

    Actually I said rank and file cops at RPD, non-supervisors, make $161K in base salary and at least that in benefits, NOT counting any overtime. That is $362K before OT.

    What I said yesterday in my December 6, 2011 at 10:35 pm post was let’s ASSUME FOR ARGUMENT the lower compensation package and compare it – and as usual (because you know you lost) you did NOT take up that challenge. It is OK, you and I know you lost and it doesn’t matter if the number is $182K or $362K.

    In any event the fact remains that these cop jobs these are unskilled jobs (at hire) that can hire anyone with a GED or HS diploma and make more than a doctor with 10 plus years of college under their belts right out of the blocks……

  • Rex The Wonder Dog!

    More abuse in local muni pensions, in the vast majority of the cases the employer-aka taxpayers- pay 98%-100% for the EMPLOYEES costs-like the example below. That is a fact.

    Take Newport Beach as an example, their pensions costs are $46K for a FF at a $100K salary and the FF pays a WHOPPING $1K of that $45K, or about 2%, ridiculous! A MULTI MILLION DOLLAR PENSION and the FF, already grossly over paid in salary, only contributes $30K.

    “For a firefighter who makes $100,000 annually, the taxpayers are now paying about $45,000 toward his pension costs, and he’s paying $1,000. Projected over a 30-year career (and yes, this is a simplification, but still a powerful illustration), the taxpayer would pay $1.35 million toward the pension, and the firefighter would contribute $30,000″

    http://www.dailypilot.com/news/opinion/tn-dpt-1206-commentary-20111205,0,2014360.story