Monday, March 05, 2012

The Golden State, indeed

LA Times: "Salary 'spiking' drains public pension funds" in California.
Approaching retirement, Ventura County Chief Executive Marty Robinson was earning $228,000 a year.
To boost her pension, which would be based on her final salary, Robinson cashed out nearly $34,000 in unused vacation pay, an $11,000 bonus for having earned a graduate degree and more than $24,000 in extra pension benefits the county owed her.
By the time she walked out the door last year, her pension was calculated at $272,000 a year - for life.
Nice work if you can get it.  Well, I guess those are the rules and Marty played them to the tune of a quarter-million+ a year.  I'm sure the hundreds of students protesting tuition hikes in California state colleges will sympathize.


Anonymous said...

Always nice to see people sniffing at pension tables, Social Security, health care plans, etc. As if they aren't deferred compensation that were specifically agreed to, and budgeted for, instead of simply raising salaries back when.

How would it be if your employer took back his half of your 401(k) because hey, it's a rough economy and things've gotten pretty expensive for companies? It's not like you earned that money, right?

Eric at work said...

The difference is that I've chosen to forego a pension in return for the freedom of investing money into my own privately-owned 401(k). The company cannot "take back" half my 401k - it's completely out of their hands.

Pensions and Social Security, on the other hand, depend on the continuing health of a public entity. Everyone knows Social Security is on track to have automatic 25% cuts in 2037. Public pensions depend on cities and states staying solvent and that's not so sure anymore (see: Harrisburg PA).

They were budgeted for? Fine. Pay them out (as required by law). Just don't act surprised when public expenditures like state college support dries up.

Bram said...

Anonymous - My employer just cut back on their 401k match because it's a rough economy out their.

The nice thing about 401k's - it's my money now and they can't take it back - and they won't owe me another dime when I leave there.

Anonymous said...

In other words, 401(k)'s enjoy a procedural advantage and not an ethical one. Pension funds are borrowed on, so it's not as if their value does not yet exist.

Procedures can be changed. So it would only require political will to partially drain the existing stake of our 401(k)'s.

If one political faction were to enthusiastically support the taking of your money, for austerity's sake, they would be in the ethical right to do so?

Eric said...

No it wouldn't. Except, as I mentioned, here is the main difference: my retirement money is owned by me. The retirement money held by public entities is suspect.

I'm sure when Social Security was set up in the 1930s, FDR assumed it would be there forever. Maybe Reagan believed it when the program was reformed in 1983. Yet it's out of cash in 2037.

Likewise, maybe the cities of Vallejo CA and Harrisburg PA assumed they'd always have cash to pay pensioners. But they don't. So their good intentions are just that: intentions. Crying "no fair" will do little good if the government is bankrupt.

Anonymous said...

As long as we're approvingly citing the "tough titty" theory of U.S. contract law, so will crying "no fair" when taxes get jacked up to make up for any Social Security shortfall. You don't seriously think the checks will stop coming until we're a Weimar Republic, do you?

Eric said...

Go ahead and rack up the regressive payroll tax.

California is only a mirror of the country as a whole: entitlement obligations are crowding out all other kinds of spending. Discretionary spending (you know, the "government") is at an all-time low as a percentage of GDP because all the government does now is transfer money.

I've been arguing for years that Social Security should be reformed into a fairer, flatter system. Instead we're going to have a collision course where younger Americans are going to pay into the system for years AND see payroll taxes increase THEN have their expected benefits slashed by 25-30%.

Well, I guess tough nuts to them. But, as you note, the good news is that we can print money until a latte costs $20. So that's a bonus for the young savers.

$$$ said...

Harrisburg's problems have little to do with entitlement spending, but an incinerator project that wrecked the local economy.

Vallejo's problems also didn't begin with entitlements, but when the Mare Island Naval Shipyard closed in 1996.

Vallejo, CA has moved out of bankruptcy, but still holds nearly half a billion in debt. The city will be paying its creditors as little as 5 cents on the dollar; most of those being robbed aren't greedy pensioners.

Eric said...

There are two issues here: one is whether pensions are a strain on states and cities. Clearly they are:

"But it can be a huge burden for states and municipalities to provide even a modest, $26,000-a-year pension to hundreds of thousands of people, at least in today’s economic environment, and especially if those people are able to retire well before 65 and collect that money for many years."

The second point is whether municipalities can renege on these pension obligations - NO MATTER how good their intentions or fervent the promises. In at least one city (and surely not the last) the answer is yes.

"A federal bankruptcy court has approved an agreement that will allow Central Falls, a bankrupt city in Rhode Island, to slash the pensions of police and fire retirees while paying its bondholders in full."

Anonymous said...

And all that means is that the government kneels down to the banks, which we already knew.

Which brings us back to the hypothetical 401(k) comparison... if the government, strapped for cash in this brave new recession, happened to affix a brand new fee to 401(k) accounts to the tune of the "outside" money previously contributed by agencies other than the account holder, then what? We'd just throw up our hands and say, "Hey, whattaya gonna do?"

And if that's not our reaction, then why the dismissive attitude towards pensioners having their money stolen? You wouldn't be so cavalier if you were the suck-ee.

Go ask Funk and Wagnalls. If you're actually "entitled," they can't take it away. And if you CAN take it away, then "entitlements" aren't killing you.

Sue Nommy said...

Harrisburg's incinerator project ... Vallejo's Mare Island Naval Shipyard closed

Japan's Miyagi Prefecture is also having trouble paying its entitlement programs. Damned unions!

The Reality Based Community said...

Those hypothetical cuts to 401(k)s are much worse than the actual haircuts happening to public pensions.

When will the madness, um, start?

Anonymous said...

Yes, RBC, it's a speculative comparison between an unfeasible fiscal policy and a "necessary" one. Two retirement plans that share many financial and ethical characteristics - and yet whose looting would inspire wildly different reactions from conservatives.

You sure did spot the dichotomy, Eagle Eye! 10 points to Gryffindor!

Those hypothetical cuts to 401(k)s are much worse than the actual haircuts happening to public pensions.

To find real-life examples of pension agreements that have been slashed by more than the hypothetical 50%, you would have to, uh, look.

Eric at work said...

Quite right: the salaried workers at Delphi lost half their pensions during the auto bailout.

The UAW pensions were untouched.

By the way, the "looting" of public pensions is taking shape from Jerry Brown's California to Andrew Cuomo's New York. Why do they hate America?

Anonymous said...

Darn those Democrats who are destroying pensions while simultaneously coddling pensions, depending on what we feel like yelling at!

Eric said...

Yeah! I remember how those principled liberals went all "Scott Walker" on Andrew Cuomo.

Anonymous said...

Maybe that's because Gov. Cuomo's "pension looting" has nothing to do with looting pensions, but with hardball negotiations that include 3-year wage freezes, a 2% increase in health coverage pay-ins, state furloughs with uncompounded deferred pay, and a proposal (not yet passed) to lower pensions for future employees?

And maybe because Cuomo didn't do the part about surprise-breaking the unions' spines with out of the blue "right to work" legislation and a unilateral end to collective bargaining?

I don't know for certain, I'm just spitballing the tiny little differences between Cuomo and Walker here. Potato, potahto.

Yoko Cuomo said...

What an absurd comparison. In December 2010, in advance of Andrew Cuomo's inauguration, the New York Times wrote: "He will also have to negotiate less-generous pension plans for state workers."

Can you find a similarly specific claim in 2010, either in the Wisconsin press or from the candidate, announcing Scott Walker's upcoming need to bust the unions?

Eric said...

Oh man, I know it's hard to believe, but sometimes politicians don't make their intentions explicit.

And some politicians do the EXACT opposite of what they said during the campaign.

Anonymous said...

Awesome point. Irrelevant to the discussion, yet undeniably true.

First, pensions were being drained by Andrew Cuomo - well, anyway, it felt like they should be. And now, "principled liberals" are somehow failing to attack a politician for dealing straightforwardly with them.

Why, pray tell, isn't Cuomo getting the Scott Walker ass-whipping, as punishment for behaving completely unlike Scott Walker? What a puzzler!

Oh man, I know it's hard to believe, but actions sometimes have consequences. But many people do make their intentions explicit; over one million of them currently reside in Wisconsin. Perhaps you can make little Jerry Brown sticky faces to put on your TV screen on June 12, the night Scotty gets booted into early retirement.

Eric at work said...

Brave talk: I'll add that one to "Elizabeth Warren beats Scott Brown" and "Obama gets re-elected" fantasies all swimming upstream.

Anonymous said...

Obviously Obama is getting reelected. The tsunami of shock and rage will be exquisite. The Warren-Brown race is probably Brown's. More people signed the petition for Scott Walker's recall than voted against him in 2010. He'll be sending a Facebook Friend request to Gray Davis.

Anything else you need to know, or would you rather be surprised?

Anonymous said...

The Scott Walker Miracle:

Alone among the 50 states, [Wisconsin] has lost private-sector jobs for six straight months, raising the political and economic stakes of the next jobs report, due Thursday for the month of January.

Even feeble job creation would bring a sense of relief to a recession-weary state and a pro-business governor who campaigned on a promise to add 250,000 new private-sector jobs in his current term.
The United States as a whole has added private-sector jobs 23 months in a row, including almost a half million jobs in the past two months.

But Wisconsin has been moving in the opposite direction, a trend that not only threatens Gov. Scott Walker's campaign promise but could cloud any message of economic renewal as the state heads into an all-but-certain recall election this summer.
Wisconsin's job losses can't be readily explained as part of a broader pattern involving Midwestern or industrial states. Wisconsin's neighbors are all outperforming the state when it comes to job growth over the past six months.
Walker declined an interview request, but he and his administration have painted a much brighter economic picture than these numbers suggest.

"Governor Walker's policies have helped turn Wisconsin around," said his communications director, Chris Schrimpf.

And the January report is in!

Despite the estimated increase of 15,700 private-sector jobs in January 2012, the state has seen a net increase of only 6,000 private-sector jobs under Walker, who set a goal of 250,000 new such jobs in his first four-year term.