Retired Public Employees Earned Every Dime

morguefile beach chairs

Dear Editor,

I am retired teacher and live on a pension that was negotiated through my union and public employer. I get attacked on a regular basis for having my nose in the government trough. My answer to those with that attitude (including a sibling) is the following:

Years ago, I was forced to change careers. My private employer of nearly 10 years sold the company, made a bundle (enough to start a local bank) when they sold to Big Business and left me without employment and benefits. I looked at my career options in Shasta County and decided on a plan. I would get my teaching credential so I could seek middle-class level employment with benefits including healthcare, sick leave, vacation and pension.

Spending two years, I took summer school and semester work at Shasta College. I commuted to CSU Chico, charged living/education expenses on credit cards and time-managed two young children, husband and household. This was not by accident, but specifically done for the benefits and pension at retirement age.

I tell those that bad-mouth my public employee retirement earnings that I regret that they didn’t make the same choices that I did. I looked into the future with my desire to stay in the Northstate during old retirement and planned ahead. I took losses in wages in the short term for guaranteed secure retirement income in the long term. Obviously, I could not see into the future that a Republican Administration was going to take the country to the brink of economic disaster. I did not know that the stock market would tank and investments/retirement accounts/property values would plummet. Many American middle-class families were devastated during those years. Because of decisions that I had made, my financial security was not affected too much.

Now that I have retired, early in old age by most measures, I do not apologize to anyone for my public employment retirement earnings. My planning ahead had no affect on your choices, or your planning. So, I will not feel sorry that I hope to have a long, financially secure existence and collect publicly funded retirement income for many years to come.

Anita Brady lives in Redding.

 

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29 Responses

  1. K. Beck says:

    I have friends who are retired fire fighters. They get the same non-sense. Every time someone says “unfunded mandates” I reply, “Do you mean employee benefits?” It isn’t the workers fault their employers didn’t plan financially. I am sorry you have to put up with this.

    • T.i.m. says:

      In economics it is called the agency problem.  Public employees work for an agent of the government/public, but the public ultimately foots the bill.  The interests of the employee, agent, and public are never aligned.  Thus managements, particularly in union shops, tend to bow to pressure and agree to demands any rational person can see are unsustainable in the long term.  Union agents, on the other hand, are under continual pressure to accomplish something in return for their dues so they don’t look too closely at what will happen twenty years down the road.

      In 1998, Democrat Gray Davis succeeded Republican Pete Wilson as governor of California, thanks in large part to millions in campaign contributions from public unions.  During the midst of the massive 1998-2000 stock bubble, he signed sb 400 into law which allowed some employees to retire at 55 while collecting 90% of their pay.  Initially limited to public safety positions, pretty soon everybody wanted in on the action and sweetheart deals spread rapidly.

      At the time, CalPers was a relatively small pension fund and it had been doing very well.  Convinced their success was entirely their own doing, CalPers projected that they could earn an 8.3% return.  For comparison, the stock market averaged 6.88% since 1871 and 6.22% since 1971 (as markets become more efficient, expected returns should continue to decline).  Using such lofty predictions allowed CalPers to announce that they were, get this, over funded.

      In 1999 Ronald Seeling, CalPers chief actuary, warned of “catastrophic” consequences if CalPers achieved just half of the projected return (which, by the way, would still be better than most state pension funds).  With everyone partying like it was 1999, his warnings went unheeded.

      In hindsight, we know the bubble would soon burst and be followed by 9/11.  CalPers managers, heavily compensated based on performance, threw a hail mary and started piling into real estate.  That seemed to work well for a few years, until of course it didn’t and CalPers’ equity fund lost nearly 50% in 2008.  Since then, they’ve managed to match the S&P500’s 6.2% average since 1971.

      No one accepts that the good times are over.  CalPers simply cannot beat the market in the long term because they are so large, they essentially are the market.

      Under CalPers’ current optimistic target (7%), the fund is only 65% funded.  Using realistic target estimates, it falls to under 50%.

      When CalPers finally lowers their target rate, the recognized unfunded liabilities will go up, and public employers will be asked to contribute more to fill in the gap.  This is a large part of the reason it costs the city of Redding $184,000 to hire police officer Bounpon Kongkeoviman despite a nominal salary of $76,000.  These massive gaps will only get worse.

      Eventually, cities will decide they just can’t afford to pay $200,000 for a police officer and leave the CalPers system, as Loyalton, CA did recently.  In response, CalPers cut benefits to Loyalton retirees.

      Currently, CalPers is attempting to get approval to borrow money to invest, juicing its returns to reduce employer obligations.  But margin like this is precisely what made the 1929 and 2008 stock crashes so severe.  Worse, they’re attempting to borrow money precisely as the market is exceeding the relative valuation that preceded the 1929 crash! http://www.multpl.com/shiller-pe/  But, again, CalPers managers are incentivized to overperform yet face no personal consequences if they manage to blow up the fund.

      Almost zero of this blame lies at the feet of Anita Brady – she was probably buying school supplies out of her own pocket while her union reps were sowing the seeds of their eventual destruction.  But she should recognize how fortunate she is — her successors simply cannot have it so good.

      • Carla says:

        Good analysis

      • Jim Gore says:

        Thanks for the thoughtful and thought provoking comment.

        Readers may also find the wikipedia entry for CalPers of interest   -https://en.wikipedia.org/wiki/CalPERS which provides some history and context.

        Two other aspects of the problem come to mind – pension spiking and provision of health benefits.  Changing the benefit amount based on the single highest paid year opened the door wide to spiking, especially from those on the top end of compensation, who were most able to work the system.

        While the health care provision gets less attention, payouts for health care are more than 37% and presumably growing.

        I agree that it’s wrong to place the blame for this problem on Anita Brady or those like her, who deliberately traded lower wages and larger contributions for security, and  may have gotten a better deal than they expected.

  2. cheyenne says:

    Anita, I too am retired on a public pension, CALPERS, only I get blasted because I, gasp, left California.  What you fail to mention about those who complain, you’re being nice I won’t, that to work for a school district an employee has to pass a drug test as well as a background check and many of those who complain can’t.  Also, whether certified or classified, one doesn’t just get hired by a school district.  You have to sub and be on call.  I saw this personally as I tried to get people who complained about no work to sign up as subs but they wanted a full time job.  They said subbing would hurt their unemployment, Medical, food stamps.  And I contributed to my CALPERS just like Social Security, which in effect meant 15% of my salary went toward retirement and because I collect SS my CALPERS was reduced even though I paid into both.  Those who complain need to make the same choices early that we made.

    Did I have to change my lifestyle to get hired by the school district.  Yes I did.  I realized that if I wanted to work toward a secure retirement I had to follow their rules.  Those who complain don’t want to follow those rules.

  3. James Montgomery James Montgomery says:

    It is a curious fact that there appears to be a clear split of opinion on this subject between government employees and taxpayers.

    • T.i.m. says:

      LOL!  Curious indeed…

    • cheyenne says:

      Government employees are taxpayers.

      • T.i.m. says:

        *Cough* Says the expatriate collecting a CalPers pension without paying any California income tax… 😉

        • cheyenne says:

          I paid California taxes while I worked in California, did or do you?  I fled California like many other retirees because the current California government has raised taxes with nothing to show for it.  So those who couldn’t pass the tests to work as a public employee complain about those who could.  Am I supposed to stay in a place where there are no jobs for the young, even with college education or are you going to blame my kids for fleeing California for work opportunities?  And guess what, Cheyenne has a lot of retirees, workers and businesses that have fled California.  Instead of blaming those who left, look at why they left.

          • T.i.m. says:

            I don’t fault you for leaving, but the fact remains your pension is ~50% funded and California’s remaining taxpayers are stuck with the bill.

             

        • cheyenne says:

          Tim, if I had stayed in California I wouldn’t be paying California state income tax.  Many states don’t charge income tax on retirees.  The difference is in the other taxes fuel, property, sales which are highest in California.

    • Carla says:

      “Government employees” are also taxpayers. The 3 big employment sectors in Shasta are medical, education and government. Take those away and this area really drops like a rock. Seems counterproductive for people to blame each other in this way. I do agree that CALPERS is totally unsustainable though.  But  I’m not sure the political will exists to change it.

  4. Robie Rich, MA says:

    I too am a retired educator, however having worked in the Public and Private sectors nearly equally over the past five decades, I was appalled when my Social Security was reduced by 400 dollars per month because of being a public servant!  REPEAL WEP GPO is the best answer to this.  It is unfair that what we have paid in and the sacrifices we have made are not returned to us.

  5. Steve Steve says:

    Hear! Hear! Guest Speaker.  And what a beautiful photo!

  6. K. Beck says:

    …never been a public employee, my employer, of nearly 30 years, provided NO pension benefits, we got the 403b! I socked away everything I could and when I retired I had plenty of money. Everything was fine until 2008. You want a rip off? That money is gone and since I am retired, it won’t come back because I have to use what is left to supplement my SS (you cannot live off of SS by itself, just in case you don’t know that). Those of us who retired before the 2008 crash are all now working, or looking for work. Lost houses, etc. There is no easy answer to this problem. But beating up on the former employees of some government agency seems counter productive. In the end, we are all in this together. And we should all be working to find a solution because the next generation will be in worse shape given all that is going on, or not going on, with jobs in the US.

  7. Gary Ault says:

    Anita, we pretty much disagree on everything over at the RS, but in what you say here, I totally agree!

  8. Cheryl McMillan says:

    Anita,  please research what led up to the financial crisis of 2007-2008.  I think you will find that Bill Clinton, among others, played a big part in the sub-prime meltdown fiasco

    • Joanne Lobeski Snyder says:

      Great article Anita.  I remember the day when I was working a job I loved building,  repairing and selling computers at minimum wage and realized that, while my husband and I were barely getting by, there would be a day when we would no longer be able to work.  We were contributing nothing to our future.  When I was fired from my  computer job because of a random comment I made to a co-worker with whom my boss was infatuated,  I realized that in Redding the good jobs are with the city, county, state, Federal Government, hospitals and schools.   There is security in knowing you can’t be fired on a whim, and there is security in making enough money to put some aside and pay into a retirement fund.

      Teaching is the hardest job I’ve even had.  You deserve everything you worked for.  I would love to see anyone, from any profession step in and  create lesson plans for 5, often different classes,  5 times a week for each week for the whole year while supervising up to 40 people in each of those classes.

      By the way, you never had “vacation time”.  You just weren’t paid when school wasn’t in session.

      Great article.

       

  9. cheyenne says:

    For those who want to see public wages, benefits and pensions google Transparent California.  My $12,000 a year pension, no benefits, is there as well as the multi million dollar pensions of others.  If CALPERS is hurting so much I’ll take a 10% cut as long as everybody else does.  That should leave enough for future generations of public servants.

    • Steve Towers Steve Towers says:

      You can keep your full pension, cheyenne.  You earned it by making a pact with the school district and the State of California, trading a significant portion of your work career for wages and the promise of a pension.  Pension reform should start with incoming employees, not by breaking the commitments made to retirees who took public servant jobs long ago.

      There are cities in California that have gone the route of contracting out most of their administrative positions to consultants.  They may not save much money on those scores of $200k-per-year salaries and benefits positions, but their long-term pension obligations pretty much disappear into the ether.  Those consultants have 401(k) plans, funded by their private employers and themselves.

      • cheyenne says:

        The city of Cheyenne researched the Mayor/City manager aspect and determined that having the mayor run the city, with council input was more cost effective than an extra salary and future pension for a city manager.  And Debra Orr, the first woman mayor in Cheyenne history, believes in fixing roads before all the feel good projects that some want to change Cheyenne into North Fort Collins.

  10. wmw says:

    One of the often overlooked beauty of Economics, is it is non-partisan.  It is an equal opportunity killer of inefficiency, waste, and unaligned market forces.  Wish what you may, but eventually, chickens come home to roost long run (in the long run).   Currently the CalPERS system (CalSTRS) is non sustainable.  Its top heavy, and not going to last in its current incarnation, not even those who feel they are entitled to its benefits will remain aloof and untouched.  Cities will slow down or stop hiring, or back out of the system completely because of exorbitant costs.   This might take decades, but its coming with the current framework in place.  You can only transfer so much wealth before those that actually generate it, start to leave, and take their pocketbooks with them.  This exodus has already started in CA, and its picking up steam.   Unfunded liabilities, be damned……

  11. Steve Towers Steve Towers says:

    My wife is a former teacher and is now a school administrator, while I have spent my career on the private side.  I recognize in myself the envy of those who look at public employee fringe and retirement benefits.  On the other hand, we would not be living in a lovely house in Palo Cedro with an orchard, creekside acreage, custom pool with a waterfall, etc., without my peak years on the private side.  It’s a trade-off, and educators who trade high wages for benefits and retirement, I don’t resent at all.

    The 60+ City of Redding employees making $200,000+ per year in salary and benefits?  Maybe I have just a little resentment there—especially regarding those who pretend to be arch-conservatives/libertarians. Get effing real, boys and girls.

    Something else that vexes me:  My wife has paid into Social Security her whole life, and continues to do so now in her second job (as our company’s chief financial officer).  Because she will someday receive a teacher’s pension, she is ineligible to collect Social Security—that’s been labeled as “double-dipping” by the powers that be.  Somehow, that only applies to teachers—so far as I know, all other public pension recipients get to collect the Social Security they’ve earned on top of their pensions.  What a blatant rip-off of teachers, many of whom will have had multiple careers by the time they retire.

    An aside:  The picture accompanying Anita’s opinion piece is a bit impolitic—unless it’s a purposeful ploy to stir the pot.  Not many former teachers can afford to spend their retirement years lounging next to the ocean on white beaches.

     

    • Hey, Steve, regarding the photo, we posted that, not Anita. I asked Joe to find something that looked like a happy retirement pix.

      • Steve Towers Steve Towers says:

        I figured, and my comment contained a little tongue-in-cheek snark.  It looks like a happy retirement picture, to be sure.  But I can imagine some thinking it suggests a high-on-the-hog retirement lifestyle, funded by the public.

        In truth, retiring to a beach in Central America on a teacher’s pension isn’t a bad idea, given how far your money goes there compared to beach communities in the USA.  The downside—which doesn’t apply to everyone for various reasons—is moving so far from family.

    • Gary Ault says:

      You are wrong Steve…..All retirees who receive a Public Defined Pension fall into the WEP category of the IRS, which basically cuts our Social Security by 2/3, we still get 1/3 of it……..the Republicans supposedly are trying to overturn this, but so far nothing has changed!  I retired from CDCR and it affects me the same as it does your wife.

  12. Linda Jones says:

    I am a retired public servant. I made choices in my youth for an education which I paid for out of my own pocket with a minute amount of scholarship or financial aid. I chose to pursue career in law enforcement. I made that decision as a freshman in high school with no knowledge as to wages, benefits or retirement. It was a calling. How fortunate I was to do a job that I loved and in the long run paid well and had great benefits. I made huge sacrifices in my life for my career. Yes, I worked holidays, birthdays, nights, missed important family functions and kids events, etc.  I, also, sacrificed sleep to not miss all those same things. I tire of being berated for having benefitted for my and my family’s sacrifices. I earned every damn dime of my retirement. My children were not eligible for financial aid for college because their parents were achievers. They have all gone on to serve as public servants at some point in tbeir lives. They too make sacrifices. No one should belittle those who have made wise choices for careers in public service and have rightfully earned a decent retirement.

  13. T.i.m says:

    The average California teacher retires at 59, draws a $40,000 pension, and will live another 26 years.  An equivalent annuity would cost $900,000 — which suggests the average retiring teacher who has her own home is a millionaire.

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