Close to the hearts of every government watcher from Tom Paine to Howard Jarvis is the inability of government to treat our money as if it were their money. Santa Clara County contracts with the California Public Employees’ Retirement System (CalPERS), which invests county contributions and makes pension payments to retirees. To be fully funded, CalPERS needs a rate of return of 7.75 percent. When they do not get that, the county—we, the taxpayers—are responsible; and there, my friends, is the rub.
The immortal line of Senator Everett Dirksen, “a billion here, a billion there and pretty soon you’re talking about real money!” could be the motto of such bureaucratic and political miscues. The surplus in CalPERS has turned into a massive deficit statewide due to stock market declines. However, there are more culpable reasons: the foolish and fiscally unwise public policy decisions that pushed the county to the brink of the precipice—unions have ruled, County Executive Pete Kutras has been compliant, and bad things have happened. In the meantime, the supervisors have held their spears as bit players and covered their eyes.
Much of this has been going on in county government for many years. County officials operate in the dark, suffering little of the scrutiny paid San Jose City Hall. In fairness, though, the mendaciousness and sheer mindlessness and vacuousness of the last mayor and council made exposure in the press like shooting lobbyists in a barrel—not a challenge, but still a very worthwhile endeavor. Meanwhile, the deluded county government went on its merry way while those who tried to balance politics with common sense were given little attention.
We had a recent addition to that hallowed group of Dirksenisms when Bob Stern, President of the Center for Governmental Studies in Los Angeles, complimented the Board of Supervisors and said: “This problem is the tip of the iceberg and Santa Clara County deserves a lot of credit for facing the problem right now.” Right now, indeed. Tip of the iceberg? These problems do not crop up all of a sudden. They are built a “tip” at a time—from one bad decision to the next. All share in the blame, although some more than others.
The most frightening aspect of the entire mess is that in order to overcome financial problems, the supervisors must make the hard decisions and try to deal some tough love to the unions and other special interests. Finance Chairman Pete McHugh better begin to pay attention as his term ends or he will truly repent in leisure under a great deal of condemnation. And if the supervisors decide to become developers and build music halls, sports complexes and other pie-in-the-sky projects, then their delusions will have turned to mania. It seems that fixing the fiscal mess is not in the scope of their job description. I hope they see the forest soon. Those trees are falling down around them.
Shamefully, last year, the county seemed to realize that something was wrong with its finances. Unfortunately, the mental midgets at 70 West Hedding felt that the only solution was a sales tax increase, penalizing the taxpayers for their ineptitude. However, the voters smelled a rat and declined to approve the tax increase. Now they’re going to try again next year. I hope the voters hang tough and vote “no.”
Tom:
Your Daddy used to say that if you CUT the pay of the public employees by 10%, not one of them would quit!
That is the solution! Cut their pay enough to put the budget back into the black! But, that pay cut must include ALL who draw a check.
OT
Though I agree that our pandering politicians have saddled us with some frightful obligations, I consider it unfair to address the issue of public employee wages and benefits absent the fair and necessary context.
First of all, the wages we pay to our local employees should not be judged solely by the economic realities of the moment. The current wages are, for the most part, the end-result of the realities of previous decades; decades of crippling inflation (the 70’s), wage stagnation coupled with soaring home prices (the 80’s), boom town prosperity and option-dangling job offers (the 90’s), and dot com delusions and bursting bubbles (the 00″s). To believe that our public employees’ current enviable position (the first in my memory) renders them worthy of our scorn requires that we delude ourselves into believing that we paid any attention to them during their many decades of unenviable conditions.
Of course, I could be wrong. Maybe you spent the dot com boom fretting over the fact that public employees were missing out on the gold fever wages, signing bonuses, and stock options. Perhaps you were the one who thought, “Gee, with all this money is driving up the cost of everything—even housing; what are public employees supposed to do?”
If you were that one person, then I apologize for sweeping you into my generalization. But my experience is that we’ve ignored public employees’ lean years in much the same way we’ve ignored the lean years of landlords. When public wages are low or rentals go empty it always seem to go by pretty much unnoticed. No public outrage over cops moonlighting or landlords defaulting; no Mercury News human interest stories or pompous editorials. But let the firefighters or street sweepers get a wage increase, or improved benefit, and suddenly everyone in town is a bean counter. Likewise, when rentals get scarce and landlords cash in, it instantly becomes worthy of news coverage and unrestrained vilification.
Our public employees are not manufactured in a sweatshop in Asia. They come to us from the same job market in which we all once tread; the same market in which we all sought out the best deal, or settled for conditions of the time; or chose between cash and calling. Forty years ago, in a job market crowded with baby boomers, public employees came cheap and no one, inside or outside government, voiced a peep. But job markets change, and the price we pay for public employees today is more a reflection of those changes than anything else, and we do them all a disservice when we confront the obligations of the future by denying the reality of the past.
Defined benefit retirement programs are a disaster. They have destroyed the US auto industry and there is a building disaster for governments of all levels. Granting benefits out in the future may be an easy way in the short term to keep the peace but in the long run it leads to ruin. Good managment in the auto industry would have taken the strikes required to keep the industry solvent for the long term. They just punted the problem down the road.
Similarly, the county is taking the path of least resistance by borrowing to close the current gap. So what happens when we have the inevitable bear market again? More borrowing?
We need to move all employees off the defined benefit model and onto a defined contribution model. All else is folly.
First of all, thank you frustrated finfan for your thoughtful post towards public employees. Unless you are a veteran and public safety employee like myself, you have absolutely no right to be calling for an end to defined benefit retirements (WG Dad) or cuts in pay (Mr. Old Timer). Must be nice to be living fat on stock options and signing bonuses, all while public safety employees like myself protect and serve you.
Dear Mr. Public Safety Dominquez:
I did not say it, Mr McEnery the Elder said it. But since you mention it, he was right! Would you quit if your pay was cut 10%?
Would you quit if it were cut 20%? Or 5%? At what point would you decide to quit protecting and serving?
OT
Frustrated Fin Fan is one of my very favorite SJI bloggers, usually with a well-aimed dart, and often in rhyme. But “scorn” for public “service” employees isn’t anyone’s complaint today. Aside from guaranteed bene-
fits, retiring at 90% pay, painting a new “honey” into your golden years with retroactive beneficiary “entitlements”, San Jose is even ahead of the generous old folks at the County. Certified, meaningful performance evaluations of ALL employees, first, then insurance contributions the City and the employee can afford, not to mention a comparison of “public” and private wage scales, would be unfair to no one, and would quickly erase the current deficit. Wanna bet that “retired” public service employees don’t know how to clip a coupon or two? I wouldn’t take that bet. Also, I recall that Sunnyvale, once hailed as the best managed city in America combined the public service folks into one group—police and fire—paid them lots, and saved much on the unduplicated payroll. As for the cost of govt., the SJ City Council was half as large, with half the staff—until Terry Christiansen fixed everything to be “more” representative. NOT. He’s still celebrating. Lots of “interne” positions to fill, using his poli sci kids, all vetted by the unions.
I don’t think it’s scornful to suggest that city employees would likely take a 10% cut in pay and still keep their nifty jobs, nor is it hard to argue that the unions destroyed the auto industry, and not just because of defined benefits. George Green
Mr Dominquez,
I am not fat with stock options or signing bonuses but I do pay the bills for public employees. Consequently, I have all the right in the world to comment on how public employee compensation is structured. There is a little thing called the 1st Amendment to the Constitution of the United States of America that grants me that right.
You sir are not an authority above that document.
# 6 California constitution gives taxpayers absolute right to tell elected officials what to do with our tax money and to end to future employee defined benefit retirements which are cause of service and staff cutbacks and possible local government bankruptcies
Public safety unions after you started employment lobbyied politicians to increase government employee retirement plan
Who are public safety employees like you protecting and serving yourself or taxpayers?
Many people who have no, less or lost pensions since government did not protect private pension plans believe your political lobbying for recently increased pension plans to be unfair They will have to work into late 60’s or 70’s to live and pay for your early retirements since few live fat on stock options and signing bonuses
Media articles
California policy is indisputably at the extreme end of generosity, granting pensions that give Highway Patrol officers and most local
police and firefighters 90 percent or more of their final salary for life and allow them to retire with full benefits as early as age 50. – Sacramento Bee
April 23, 2007. Pension Fund in Santa Clara County, California Is Short $1 Billion
The Center for Government Analysis estimates that retiree health care costs for public employees in California will be $31 billion per year by 2020.
Pensions for public employees are another big problem. San Diego was the poster child for the problem. The city’s pension fund was nearly $2 billion upside down last year, and it threatened every city program, including public safety.
Tom,
I’d hazard a guess that nearly every large city in California is in the same mess. It wasn’t too long ago that the subject of pension and health benefit liabilities was discussed at San Jose City Council meetings.
If memory serves me correctly, the unfunded liability was something on the order of 15 billion dollars. In our case, too, the deficit was largely a result of union pressures. My gosh, when public safety officers can retire with a fully indexed pension at 80 or 90% of salary, what can one expect but disaster?
As well, I believe that rank and file City employees enjoy similarly lucrative pensions. It used to be that folks sought Government careers for long term security and pay scales were significantly less than the private sector. That’s no longer true – public and private sector salaries are nearly at par with one another. Yet private sector employees seldom enjoy any pension at all and health benefits terminate with retirement.
We really must examine our plight, and quickly, or San Jose and other cities and counties will fall like dominoes and face overwhelming liabilities and bankruptcy much like the San Diego situation.
If the case against defined benefits is so obvious, why is it that it was not made sooner? Why did it take a looming crisis to put this issue front and center?
The answer, folks, is because those defined benefits have been an integral component in government hiring and compensation strategies. And before any of you go blind with anger and resentment over what public employees get today, you need to accept that the current situation is the product of decades of political and managerial decisions made in your name. Every government entity in this nation has, during years of lean budgets or ambitious expansion, offered improved benefits to satiate wage-hungry workers. Often these benefits were deferred, both in effective date and cost to the public entity, thus allowing the entity to go on spending unrestrained by either the existing reality or the bounds of fiscal responsibility.
Yet, I don’t remember hearing anyone complaining about the public service now, pay later philosophy.
So now what? Shall we convince ourselves that the current situation can be attributed to union pressure, or delude ourselves into thinking our public servants deserve a 10% pay cut? Shall we forget that every employee contract ever agreed to by this city was hammered out by high-paid professionals in the city manager’s office working under the oversight of elected decision-makers? Shall we pretend that we, the voters, have had no say in any of it during all these years?
Put yourself in the position of a city firefighter. How would you feel if, after years of doing a good job, a stranger walked up to you and dared you to take a 10% pay cut—insulting you with the insinuation that he, a total stranger, knows enough about you to know that not even a pay cut would cause you to quit your job? That he even knows that you chose your job—the job you pursued with a passion and single-mindedness from childhood—for the same reason all government workers chose their jobs, wages and benefits. How would it feel to know that you’re being insulted not because you’ve done anything wrong, but because prevailing wages and benefits in the private sector have changed significantly?
If that’s not scorn, what is?
# 4 FF that was good reading.
# 5 WGdad Your suggestion that good management would have saved the U.S. auto industry is correct. Had Ford, GM and Chrysler taken a lesson from Japan, and start building quality fuel efficient vehicles in the 70s, they might still be on solid footing with the auto market.
Detroit probably knew they were headed down the wrong path by continuing to feed the public fat gas guzzling caverns on wheels; the profit margin was irresistible. And besides, it’s what the public wanted! Look around you. When I ride my bike through Willow Glen, many of the vehicles I see are massive gas guzzlers!
Toyota pays a fair wage plus benefits and has overtaken GM as the world’s largest auto maker. Why is that?
I want to work long weekends, graveyard, and holidays. Oh, wait, I already do. Except as a “professional” I’m salaried so I don’t get gobs of time-and-a-half or double-time overtime pay to add to my base, so I can be one of those top-100-in-the-City wage earners.
Instead, in the corporate world we face the constant guillotine of job reductions to make profitability numbers. Ever been fired before? Almost everyone I know in the private sector has. Surely it doesn’t compare to burning buildings (though it feels like it), but believe me, there are plenty of mental health cases in private industry. Undiagnosed, that is.
I’d like to know – give me a number – how many times you have done each of those heroic acts. And I use the word heroic seriously. But I want to know – how many times in a 30 year career does one face such situations? Once a week? Once a month? Twice a year? Give me some numbers, please.
The point is, there’s tremendous job security in the public sector, and the benefits are still way out of whack with the rest of society.
#6 AD
I have a great deal of respect and gratitude for those who serve in our armed forces and public safety departments. I also respect all those who volunteer in our community, at no pay. The City needs voluneers because they don’t even have the money for some of our most basic services. My uncle, my fathers younger brother, gave his life in WWII for this country. All the they gave him was a flag for his casket. My father was given a medical discharge while serving during the War, but fought to get back in. He was allowed to return as a fighter pilot. He was later shot down and became a POW. After putting his life on the line, all they gave him was a “job well done and a metal”. He could have received disability payments after the war, but he did not believe in that. Others had given their all with no monitary payment. He always felt it was an honor to have served his country. It was never about money, after all, what price can you put on a life? It was about service. All City employees should receive fair pay and reasonable benifits. But public service should not be about powerful unions, early retirement. or disability. It should be about doing what is best for your community.
#12 So you want to retire at 50 with 90% pay do yah? Then become a police officer or firefighter at 20 years of age, and go through 30 years of: working long shifts, working graveyard, weekends, and holidays, dodge a few bullets from time to time, run into burning homes to save lives, settle domestic disputes, deal with serious mental health cases, cover a few dead bodies from time to time with a white cloth, etc. etc. Public safety officers sure have it really cushy now don’t they. Still want to sign up?
Finfan, who really believes that public sector employees chose that path because of “calling” rather than “cash?” Aside from some of the public safety officers who heard such a calling, most public employees chose job security over cash. Now that public sector salaries are at parity with those of the private sector, it sure appears to be a doubly wonderful career path to me.
Can you recall when we last laid off a significant number of San Jose City employees? I certainly can’t! Reductions in force only result from natural attrition. Cleverly, the City keeps the positions on the books and then, when a budget crunch arises, City agencies eliminate the vacant positions, thereby giving the appearance that they’re effectively controlling personnel costs.
Does any reader of this blog remember the City Council discussions some months back regarding the approximately 15 billion dollar unfunded pension/health care benefit liability? C’mon now, that’s real money – thinking about the consequences ought to raise the hair on the back of your neck!
I want to retire at 50 with 90% pay. Where do I sign up?
End DB plans now. Defined Contribution and that’s it. Like what the rest of us have: Our savings.
#14 FF, is that really you? Your writing has a different tone.
The county deficit really is just the tip of the iceberg. However, the iceberg I’m talking about is the overall financial health of the entire country. When you stop and consider Americans are borrowing literally billions of dollars a day from China and India just to continue to splurge at our favorite shopping malls, a much bigger and daunting task emerges.
I’m not an economics major, but I do know that we need to start looking at how we’re going to solve a variety of funding issues created by the way all government does business. For starters: How are we going to repay our national debt without giving the country away to our debtors? If Japan can buy skyscrapers in New York, is selling our city hall to China in our future?
As a police officer I was nearly shot in the head from a domestic violence suspect shooting through a closed door. I have been in numerous fights with combative suspects high on drugs or alcohol and right out of jail or prison. I have done thousands of patrol shifts working graveyard with 30 pounds of equipment on body getting in and out of a police car hundreds of thousands of times. For this I have 2 bad knees, herniated discs in my back, hernia operation, metal plate in my arm, and hip problems. I still have 10 years to get to 30 years. I love my job because I can help protect society and good people from those that want to do harm to them. It is really that simple. If I make it to 30 years I will have numerous medical problems, as those before me have had. 30 years is brutal to a cops body. Why isn’t there the same outcry over a professional athlete who has a guaranteed contract paying him millions of dollars for not playing a game if injured. Also, I don’t think many people realize that police officers are not entitled to social security payments unless they worked enough quarters in private industry to qualify. I did work enough in private industry to qualify for social security, but if I collect a police pension then I will not receive social security, and that money will be used to pay social security for others. I don’t think that is too fair of a deal for me to not be able to collect the social security I had earned. It is easy to blast pensions for police officers, but you should look more into how devestating the job can by physically and emotionally after 30 years.
#19
Dave,
I have good news for you. First, you will be able to collect social security Check with the social security dept.
Second, all workers that retire on city, county, state and federal pensions are subjected to “offset” which reduces their SS pension amount.
So Dave it is not just policemen that are reduced.