California's Pension, Education Costs: Out of Control

From AP writer Judy Lin:

Funding for K-12 schools and community colleges accounts for roughly half of annual state spending.

Funny how we haven't gotten smarter, but we've definitely gotten poorer. Meanwhile, California's state worker pension fund--which includes teachers' pensions--is still worth $177.7 billion. (Yes, that's billion with a "b.")

After years of staying mostly neutral, the San Jose Mercury News (July 7, 2009) finally issued an editorial opinion asking Sacramento to enact pension reform:

The unfortunate truth is that the Democrat-controlled Legislature has been too quick to increase pension benefits and will resist reconsidering them unless it's forced to. Now is the time to do that...

Now, because of stock market declines and rising costs of health care, retirement costs are already siphoning $3.3 billion from the state budget, just when California is facing substantial cuts in education and services to the poor. That cost is expected to rise steeply. [Emphasis added]

By the way, in case you're wondering, state workers get the following benefits: "3 percent of pay for every year worked, up to 90 percent maximum after 30 years for safety officers and 60 percent for other employees."

Where can non-government workers get 60% of their salary guaranteed in retirement? If you discover a place that allows non-executives to claim the 60% retirement bracket, let me know. I won't be holding my breath.

Comments

[look closer:]

Teachers are already some of the lowest paid workers in govt service, now you want to wipe out their pensions, yea GREAT!!! now we'll have to outsource for teachers too. God help the kids, this article was written by an idiot.

Jul 12 09:35 AM

[MainStreetJoe:]

The Federal Government has put $185 billion with a B into AIG. Now they pay out hundreds of millions in bonuses to those who created this mess. I agree, lets take away the retirement of teachers and public safety officers to make up the difference. That will confirm how upside-down our society's values have become.

Jul 12 09:45 AM

[lastboyscout:]

"God help the kids, this article was written by an idiot.

Wait one minute, The author wrote1 sentence that was his opinion "Funny how we haven't gotten smarter, but we've definitely gotten poorer". The rest was 1) Fact 2) AP writer 3) the San Jose Mercury News (July 7, 2009).
As usual, when the facts sting, the person who points out the truth gets attacked.
The truth, pensions are costing a tremendous amounts of money. The truth, California does not have any more money.

Jul 12 11:05 AM

[JohnB:]

Pensions (especially public safety) are out of control at city level, too:

Six-figure pensions for hundreds of retired San Jose cops, firefighters
www.mercurynews.com/to...

The taxpayers who have to pay for this have, for the most part, no pension plans or retirement health benefits at all. It's crazy.

Jul 12 11:52 AM

[Jimbo:]

Mainstreetjoe: I don't believe it is reasonable to consider the disgusting fiasco at AIG as equivalent to the pension issue in California. AIG is a federal shame. I don't know whether pensions are out of control and out of proportion in California but the San Jose Mercury has always seemed to me to be a reliable liberal member of the MSM.

Jul 12 01:13 PM

[Gregman2:]

Perhaps we need to do with K-16 ed what is being proposed for health care reform. No doubt, businesses and employers are being subsidized when they hire graduates (to the extent that taxpayers have in large part paid for student educations). At least this is the case with public institutions. It would also be interesting to compel students to do public repayment in the institutions that they've gone through, i.e. the California state public school system...for 2-3 years following graduation. Then again, these programs have been tried and tend not to work because we do not pay professional
teachers in public schools well at all. How to change the unions, the state prop 13 system, etc.? I'm still waiting for divine insight to come down and touch me on this one.;-)

Jul 12 01:17 PM

[Northstar10000:]

I work at 2 separate government jobs. One at the state level and one at the county level. The tax payers are getting ripped off big time. It is our powerful unions and weak kneed tax payers that allow this to continue. You can't vote for democrates and expect anything else.
You guys want it both ways, the compassion of government without the cost of doing it. Keep voting for hope and change and I'll keep collecting checks.

Jul 12 02:34 PM

[Matthew Rafat:]

For the record, I favor increasing teachers' salaries as long as pension costs are eliminated. Why not replace teachers' pensions with 403b plans (the public-sector equivalent of a 401k)? If a 401k/403b is good enough for a Google/Apple/Target employee, why isn't it good enough for government employees, too?

The average government workers should not have better retirement benefits than the average non-government worker. Is a secretary or lawyer who works for the government "better" than a secretary who works for Pfizer or Pepsi? I don't think so, especially not when the modern economy is so inter-connected.

Retirement benefits like lifetime pensions and lifetime medical care are inherently unstable b/c you have to predict how long a worker will live--that's not an easy task. As a result, costs are unpredictable, which makes accurate budget planning difficult. Why not create a budget framework that allows us to definitively ascertain employee costs without worrying about the ticking time bombs of unfunded, unpredictable long-term liabilities?

Jul 12 03:51 PM

[William Bra...:]

I don't know about the rest of CA's employees but teachers pay into their pension funds and the funds are invested by fund managers. It appears that you are proposing the same thing the federal government has done with social security, raid it for other purposes. I do agree that CA should not guarantee levels of benefits at the taxpayers expense if the investments have too much loss to sustain promised benefits, but I do hope that you are not implying that CA should raid the funds. CA teachers do not take part in social security and if they have contributed in other jobs, their earned social security benefit are dramatically reduced. On top of this CA cannot print money to pay it's debts (social secutiry for one)

Jul 12 05:21 PM

[Stan Sutfin:]

Two more examples of pensions that are completely out of line, both retirees from small fire departments in the east bay area of California:
One retired after 26 years with an annual pension of $241,000, 46%above his salary. Even better, the other person retired after 29 years with a pension of $284,000 per annum, 47% higher than his salary. Oh yes, let's not forget these pensions are increased each year by cost of living adjustments.

The problem is that upermost in the mind of most politicians who grant these benefits is to get reelected and the best way to do this is to keep the backing of the public service unions. Only when we taxpayers get tired of this and vote them out of office will the situation be changed.

Jul 12 06:49 PM

[W.E. Heasley:]

The point you are making is: this is merely one budget item, on the world's longest list of over spending budget items, that is California and its fiscal irresponsibility.

Texas is the poster child for fiscal responsibility. California is not a poster child, its the first child of the Federal Government over spending.

Jul 12 07:23 PM

[Valley Boy:]

California voters passed Proposition 98 back in 1988. This proposition mandated that at least 39% of General Fund tax revenues be spent on K-14 (kindergarten through junior college) operations. It was writen as an amendment to the state constitution so that voters would be locked into the long-term fiscal consequences.
The current state government budget is saddled with these kinds of legal restraints.

Jul 12 11:38 PM

[lickbush:]

Didn't I recently read a recent WSJ article that mentioned the annual pension of a small CA town supervisor that is $499,000+? Now, That's a PENSION! And I doubt that he was in a union, but perhaps he was. OTOH, I guess that isn't a state liability.

Jul 13 12:58 AM

[squawk:]

The bottom line is that the State of California can no longer afford certain practices of the past that now burden all of us. It's time for a change. Unfortunately, we have a State legislature that does not have the political will to change the status quo, as they have benefitted from such past practices in a significant way on the backs of taxpayers.

Jul 13 12:55 PM

[alaskaeagle:]

I have to agree with William Brandon. I have paid into the pension fund for the County of Los Angeles. My pension is also invested by fund managers. The County does split the contributions with the workers. Our pension has lost some money in this last crisis and we are required to pay additional funds to make up for the loss. Madoff did madoff with some of our money. I do not agree with the author that I am costing the State of California money. The author is correct to say that education is costing the State a lot of money but it is not going to the children or the teachers. The money is being wasted on all the managers and middle managers.


On Jul 12 05:21 PM William Brandon wrote:

> I don't know about the rest of CA's employees but teachers pay into
> their pension funds and the funds are invested by fund managers.
> It appears that you are proposing the same thing the federal government
> has done with social security, raid it for other purposes. I do
> agree that CA should not guarantee levels of benefits at the taxpayers
> expense if the investments have too much loss to sustain promised
> benefits, but I do hope that you are not implying that CA should
> raid the funds. CA teachers do not take part in social security
> and if they have contributed in other jobs, their earned social security
> benefit are dramatically reduced. On top of this CA cannot print
> money to pay it's debts (social secutiry for one)

Jul 14 12:33 AM

[levin70:]

California teachers are actually the highest paid in the nation. Certain teachers in teh K-12 system earn in excess of $100K annually, before including benefits. Not only that, but teachers have tenure, essentially guaranteeing them lifetime employment. Only should a teacher commit a felony can he/she be fired. Teachers don't have to care one whit about performance, as again they can't be fired.

So adding up all those salary, benefits and lifetime guaranteed employment, there is no wonder that there is an outcry from everyone other than teachers about them being underpaid.


On Jul 12 09:35 AM look closer wrote:

> Teachers are already some of the lowest paid workers in govt service,
> now you want to wipe out their pensions, yea GREAT!!! now we'll have
> to outsource for teachers too. God help the kids, this article was
> written by an idiot.

Jul 16 06:46 PM

[M. Leslie J...:]

Finally, someone realizes what a scam teacher pensions are. The private sector has all but abolished defined benefit pensions in favor of 401ks. The average private sector employee makes less than the average teacher. Why should he/she support through his/her tax dollars teachers retiring in their 50's as they work into their 70's just to make ends meet. Screaming unfair that this publicsegment (teachers) of our population have privileges denied to their private counterparts! We have become a nation of the haves (teachers) and the have-nots (the rest of us). Reform, please!! Governors of states, where are you??

Jul 27 10:15 PM