Public employee pensions, benefits not sustainable

By Union Democrat staff June 09, 2010 10:54 am
     That government employees’ retirement costs are out of whack is not news. As our economy worsened through much of 2008 and ‘09, it has become increasingly obvious that generous benefits paid in the public sector are not sustainable.
    What is news — and good news — is that Tuolumne County is doing something about it.
    At the recommendation of County Administrator Craig Pedro, the Board of Supervisors approved the first of what ideally will be a series of benefit cuts and retirement-age increases that could over many years save the county significant money.
    The savings would at first be modest: The pension changes would apply only to workers hired after Jan. 1, 2011. Full savings impacts would not be realized until the county’s entire workforce of more than 700 turns over.
    Also, the plan won’t go into effect unless unions representing all employee groups sign off. So far, only employees in the county’s executive management bargaining groups have agreed to the deal.
    Unions representing other, larger employees groups will in the weeks ahead be asked to approve the arrangement.
    Key points of the county’s proposed “second tier” of Public Employee Retirement System (PERS) benefits:
    Shares: Employees would actually pay the employee share of their own retirement plans. As strange as this might sound, the county has paid both employee and employer shares for about a decade.
    “It’s not unusual,” said Eric Larson, the county’s human resources chief. “It was something that was negotiated, probably in much better economic times than we’re in now.”
 Retirement calculation: The PERS retirement benefit would be based on a percentage of the average of employees’ salaries for the final three years of tenure. Now its based only on last year’s pay, which can lead to salary “spiking” for the sole purpose of increasing retirement payments.
 Percent per year: Safety (fire and law enforcement) could retire at 50 and would get 2 percent of their averaged ending salary annually for each year worked. Under this 2/50 plan, for example, a 30-year employee retiring at 50 would get 60 percent of his ending pay in each year of retirement. Under safety employees’ present 3/50 plan, the same worker gets 90 percent of his or her pay after retiring at 50.
    For other, non-safety employees, the present 2/55 becomes 2/60.
    The case of a top-line, $100,000-a-year safety employee who retires at 50 illustrates potential savings. Under 3/50, that employee could be getting $90,000 a year for 30 years or more — or $2.7 million. Under 2/50, that total would be $900,000 less.
    We don’t at all begrudge paying safety employees superior benefits, as their jobs are stressful and they put their lives on the line for the rest of us on a daily basis. But the present 3/50 plan is excessive, especially when compared to the riskiest jobs in the private sector.
    It was once thought handsome benefits were needed to lure top candidates to typically lower-paying government jobs. In today’s economy, this is no longer true. Public jobs seldom go begging, and the 2/50 and 2/60 plans Tuolumne County’s second tier would offer are still far more generous most private-sector plans.
    Moreover, soaring public retirement costs are a huge issue across California:
    Annual pension costs for state employees are now $6.1 billion — 7 percent of the governor’s $83 billion general fund budget — and growing. The state is facing a $19 billion deficit,  revenues cannot sustain retirement payments and Gov. Arnold Schwarzenegger is rightfully insisting that pension reform be part of any budget package.
    Here in Tuolumne County, Pedro, the Board of Supervisors and the executive employees should be commended for their foresight and for doing the right thing.
    Likewise, we encourage other county employee unions to see the big picture and follow suit. The second tier program will not put members’ existing benefits at risk, and in the long run it will lead to a county budget and workforce that are far more stable.