PensionWatch

October 14th

The column that sparked this website: ‘Land a State Job and Become an Instant Millionaire ‘

By Jack Dean

In 2004, I read an article by Ken Mandler in the Capitol Weekly promoting his seminars on how to land a job with the State of California. I was astounded at what I read and began to investigate the world of public employee pensions. This website and its companion e-mail list was the result (Pension Crisis News Headlines is a daily headline summary that now goes out to more than 1,100 members of the media who write about pensions and benefits).

Last week, Ed Ring at EcoWorld used the article as a basis for his excellent editorial “Abolish Public Employee Pensions” and I’ve been receiving inquiries about it ever since. So I decided to print the piece in its entirety right here so you, too, can be astounded. As an interesting aside, Ken Mandler has become a good online friend and regular correspondent on this issue.

Following is a more recent version of Ken’s amazing article as it was published last year in August (reproduced here with his permission):

Land a State Job and Become an Instant Millionaire

By Ken Mandler

It’s a tough job saving for retirement. Most of us have difficulty even putting away $500-1000 a year in our retirement accounts. And when the car breaks down — that money goes as well!

Others have access to 401(k) programs at work and employers sometimes match the contributions with up to $4-5,000/year. Then again, during bad profit or no profit years, the employers utilize that ubiquitous phrase “subject to change” and provide no match. Or they merge and change the “plan”.

But California state government employees have an employer who regularly and by law provides a $40-50,000 contribution to each employee’s pension account — year in and year out — good budget times and bad. (And in bad years they borrow the money!)

The California state government provides a “defined benefit” pension plan to each of its employees. Such “defined benefit” pension plans are far more generous than any 401(k) or defined contribution pension plan available from any other employer in the state! In fact, the plan is so generous that it makes the average state employee a millionaire after only 22 years of work!

Here’s how it works. Say you start working for the state at age 41 and retire at 63. The average state employee makes $55,625/year in salary — and that’s before benefits! At the age of 63, you’d be able to retire on 55% of your pay rate — 67.5% if you purchase 5 additional service years at a pretty nominal cost.

That’s 67.5% of your final pay. Let’s say you retire at the average state employee pay rate of $55,625/year — your annual pension for life would be $37,546/year. Currently state employees are saving $1.8 billion of their money in the State’s Pooled Money account which pays only 2% per year in interest. However, Let’s say you were able to earn an interest rate of 3% on your retirement account — how much would you have to have in that account to yield an annual benefit for life of $37,546?

Here’s how you calculate that amount — you divide $37,546 by 3% ($37,546/0.03= $1,251,562). To provide this level of annual pension on your own would require you to save $1,251,562 during your 22 year working career between the ages of 41 and 63. Could you do that on your own?

It would require putting $56,889 ($1,251,562/22 years = $56,889) into your 401(k)/IRA or other retirement account every single year during those 22 years! When you work for the state, the state does this for you!

Is the state’s pension plan overly generous? The Sacramento Bee and Governor Arnold Schwarzenegger have been whining about it lately — are they jealous? The state’s own Legislative Analyst has determined that California’s pension plan provides nearly twice the benefit of the next highest state.

Other comparisons are in order. The vast majority of American corporations have now eliminated “defined benefit” pension plans — only 6% of Americans in the private sector have access to such plans. American companies have terminated over 17,000 such plans in the last 20 years. IBM, one of the bluest of the blue chip companies, terminated its “defined benefit” pension plan in 2005. Hewlett Packard, a major California employer, followed by terminating its plan later that same year.

You’ve seen the headlines this year about possible changes in the state’s pension plan. However, that shouldn’t stop you from signing up today as your pension is guaranteed the moment you land a state job. They can change the benefit for future employees — but not you!

Landing a California state government job is not an easy process as everyone wants to be a millionaire! And you are a millionaire the moment you land a state government job. Capitol Weekly’s How to Get a State Job Workshop provides valuable insights into landing a California state government job. Sign up for the August 28th class today!

Ken Mandler teaches a monthly workshop on How to Land a State Job. The workshop focuses on a variety of tactics and strategies designed to make the state job process an effective one for you. The workshops are 3 hours and include over 400 pages of information for your review. The cost is $84. You can sign up at www.statejobworkshops.com or by calling Ken Mandler at (916) 443-6788 today. You can e-mail Ken Mandler at ken.mandler(at)capitolweekly.net.

Jack Dean is president of the Fullerton Association of Concerned Taxpayers and editor of PensionTsunami.com.

Posted in Uncategorized at October 14th, 2008 by Jack Dean| Comments Off

October 12th

Comments on The Housing Crisis and the Credit Meltdown

I just received this outstanding comment from Less Antman on the causes of the current financial meltdown. Less is a long-time friend who is also a CPA and a registered investment advisor:

Many people say the housing crisis and subsequent credit meltdown were caused by inadequate regulation: they’re right. In a free market, business behavior is severely regulated by the potential to lose money when bad decisions are made. What the government did was eliminate that regulation by guaranteeing people against losses, thereby encouraging outrageously risky behavior:

(1) Two government-sponsored enterprises, Fannie Mae & Freddie Mac, bought mortgages from banks, eliminating the risk to banks of lending to people with poor credit and inadequate down payments.

(2) An implicit guarantee by the government that it would bail out the FMs (make up your own obscene alternative meaning for the initials), allowed them to borrow at extremely low rates and profit from accumulating TRILLIONS of dollars of debt to acquire mortgages: they were able to borrow amounts equal to FORTY TIMES their net worth.

(3) FDIC insurance has caused depositors to pay no attention to the soundness of the banks where they keep their money. Thus, prudent behavior by banks not only isn’t rewarded, but is actively discouraged, as they make more money by taking on risk and don’t need to fear a loss of confidence when they engage in irresponsible behavior.

(4) Having a central bank (the Fed) with the power to create money in unlimited quantities creates a false sense of security throughout the banking industry, one which will last until a hyperinflation that destroys the buying power of those dollars makes it clear that the government can’t create wealth just by printing it.

The bottom line is that past government interventions have destroyed the regulatory nature of markets, and the current proposed ones only make it worse. We SHOULD regulate bankers and punish bad behavior. By ENDING government intervention.

Posted in Financial at October 12th, 2008 by Jack Dean| Comments Off

September 5th

Two Fullerton council members criticize Register columnist Steve Greenhut for not asking questions they wouldn’t have answered anyway

By Jack Dean

Two members of the Fullerton City Council have written a letter to the publisher of the Orange County Register criticizing editorial columnist Steve Greenhut for his coverage of the 25% pension formula boost that is being discussed with the city’s employees. While I don’t believe the letter has been printed yet, the fact that I was sent a PDF copy yesterday from City Hall via e-mail indicates to me that it’s okay to put it online, so here it is.

The letter, signed by council members Don Bankhead and Pam Keller, is exceedingly strange in that it takes Greenhut to task for using “misleading information and factual errors” in his columns and editorials, and for not asking questions to clarify information on the negotiations. It’s strange because we all received a special lecture at the August 19th council meeting on labor law, the Brown Act and the importance of confidentiality to contract negotiations. So they are lambasting Greenhut for not asking questions that they would have refused to answer anyway.

The letter cites eight “egregious errors” made by Greenhut that it lists along with an accompanying “fact” for each. But I don’t see anything new here. Instead, I see each of these “facts” as red herrings that are attempts to distract citizens from the key issues.

Interestingly, the one person that Greenhut says he did place a call to — Mayor Sharon Quirk (she never returned his call) — did not sign the letter. Most likely this is because she’s seeking re-election in November and wants to remain above the fray. But she can only avoid the spotlight (hotseat?) of public opinion until it’s time to vote on this pension boost. Then she’ll have to pick a side. Will she align herself with the taxpayers, or with the unions that she’ll be depending on to help her get re-elected? Bets, anyone?

The motivating factor for this letter appears to be anger at Steve Greenhut for exposing the issue, and its main thrust is an attempt to discredit him in the eyes of his employer and with the readers of his columns. But the accusations that he has been irresponsible or violated any journalistic codes of ethics ring hollow — especially coming from elected officials who have chosen to hurl them while hiding behind the shield of secrecy they have constructed by perverting the Brown Act, a law designed to promote openness in government.

Jack Dean is president of the Fullerton Association of Concerned Taxpayers and editor of PensionTsunami.com.

Posted in Fullerton at September 5th, 2008 by Jack Dean| Comments Off

September 4th

California’s attorney general doesn’t understand pension lawsuit, says Orange County supervisor Moorlach

Yesterday John Moorlach, chairman of the Orange County Board of Supervisors, made the following comments about Attorney General Jerry Brown’s announcement that he would involve himself in the deputy sheriffs’ pension lawsuit:

Jerry Brown seems to be on the campaign trail. His press release of yesterday reflected a misunderstanding of our retroactivity law suit.

Granting retroactive pension benefits has nothing to do with recruitment (no “discouraging” here). And the state does not routinely grant 50 percent retirement benefit increases, retroactively, for its employees.

I’m sure the Attorney General’s response would be “don’t confuse me with the facts while I’m running for governor and pandering to those who will finance my campaign.”

If Brown were interested in the facts, he would have met with me and our legal counsel, too. Oh, well. So, it’s not surprising that our former Governor has not developed a legal strategy against our case. And it’s telling that he’s doing the amicus brief on behalf of the California Public Employees Retirement System (CalPERS) and not the State of California.

But, when you’re the Attorney General and you issue a press release, you will get media coverage.

The stories by the Los Angeles Times, the Legal NewsLine, and the City News Service (in the North County Times) are provided below, respectively.

On a positive note, former Gov. Jerry Brown was in office when I was in college and his signature is on my diploma from California State University, Long Beach. Who would ever imagine, thirty years later, that we would both be mentioned in the same article? What a fun life.

On a negative note, the County of Orange (the taxpayers) contributes some $300 million per year into its retirement system. Public employee union leaders like to tell you that the investment income from the retirement system generates most of the revenue to cover their benefits. Well, I have some disconcerting news for you. Our retirement system lost some $294 million . . . in the month of June, giving us a year to date loss of nearly a quarter billion dollars! We are talking about a very serious fiscal issue. One that you are responsible for paying.

I heard Jerry speak at a Bond Buyer Conference a few years ago. He lamented that he had to deal with the dumb laws he signed while Governor as the Mayor of Oakland. It was a throw away gag line. But, if he is Governor again, he will have to deal with these pensions. I hope this odd pattern in his life is not lost on him.

Posted in Orange County, California at September 4th, 2008 by Jack Dean| No Comments »

August 27th

Police ‘deserve’ high pay — firefighters do not

By Richard Rider

Public safety salaries often get lumped together, supposedly reflecting the “critical” need to pay six figure incomes (including overtime, but not counting benefits) for both police and firefighters. But the two occupations are not the same in terms of qualified applicants.

Police work is more demanding, less popular with the public and otherwise not a particularly attractive choice as an occupation — at least by enough qualified applicants. Hence police have a case that they are in high demand relative to the supply of job seekers.

In addition, police can easily leapfrog to different jurisdictions. Much as the police talk about being there “to protect and serve,” it’s their own well being that they are most interested in serving.

So?

That’s the way most employees — public and private — think. It’s human nature.

All I’m saying is that while police (indeed, all government employees) like to portray themselves as selfless public servants, they are just folks looking for good jobs with good pay — like the rest of us.

One of the great mistakes we voters made with much public employment was to design their pension plans so that they are totally portable among government agencies and jurisdictions. As a result, most government employees can switch jurisdictions and lose nothing in pensions. Indeed, for police and firefighters, usually they can switch employers to get only a single year of higher pay — on which their final pension is calculated.

We forgot the purpose of pension plans — to RETAIN employees. Instead, the portability of government pensions encourages our employees to go elsewhere if the grass (money) is greener. And to retire earlier.

Speaking of firefighters, there’s a huge difference in the supply-demand equation between police and firefighters. A union urban firefighter position is perhaps the best job in the world. I won’t go through all the reasons that is true — I’ve covered this ground before. (To read more on firefighters, see my North County Times columns.)

But my opinion on the desirability of firefighting jobs doesn’t matter. What matters is the number of people who show up for these urban semi-secret job openings. In spite of ever-tighter pre-employment firefighter applicant qualifications, cities can easily end up with a lot more applications than they care to process.

Consider this quote from government policy wonk (and good friend) Dr. Steve Frates, in describing the difference in the supply of wannabe firefighters vs. police applicants:

“That’s not the case for firefighters,” Frates said, recalling how a recent [single] opening in the Newport Beach Fire Department drew a crowd of 600 applicants, including some who camped overnight. “What the market is telling us is that you don’t have to offer 3% at 55 to get qualified applicants.”

That “3% at 55” refers to the pension benefits as a per year percent of highest pay, payable as soon as age 55. Of course, as my rant readers know, in California the normal pension for firefighters and police is 3% of pay (90% for 30 years of service) paid as early as age 50.

Bottom line: We’re stuck with paying high salaries and great pensions to police, but we should be paying our firefighters much less — and far lower pensions. With over 26,000 volunteer fire departments around the country, it’s clear that we are overcompensating our union urban firefighters.

Richard Rider is chair of San Diego Tax Fighters. E-mail him at RRider@san.rr.com.

Posted in California, San Diego/City at August 27th, 2008 by Richard Rider| No Comments »

August 25th

The Brown Act and the letter vs. the spirit of the law

By Jack Dean

Last Tuesday night’s Fullerton City Council meeting was interesting. Register columnist Steve Greenhut had predicted that agenda Item #15 would be used to publicly lambaste councilman Shawn Nelson. I had predicted that it would probably just be a lecture on the Brown Act validating the council’s right to be secretive regarding discussions with the employees’ union about a major pension boost. Both things happened, so I guess that means on balance that Steve won.

I had planned to make some pointed comments at that meeting, but after seeing how it was playing out I decided to hold those for later and instead simply asked to have the city attorney read the preamble to the Ralph M. Brown Act. The preamble clearly states the true intent of the law and cuts to the heart of this controversy. Here it is:

In enacting this chapter, the Legislature finds and declares that the public commissions, boards and councils and the other public agencies in this State exist to aid in the conduct of the people’s business. It is the intent of the law that their actions be taken openly and that their deliberations be conducted openly. The people of this State do not yield their sovereignty to the agencies which serve them. The people, in delegating authority, do not give their public servants the right to decide what is good for the people to know and what is not good for them to know. The people insist on remaining informed so that they may retain control over the instruments they have created.

If you have some time to kill and want to watch the relevant portion of the meeting online, you can do so here. You can “Jump to…” agenda Item #15 using the pulldown menu under the picture, or just slide to 1:03:30 on the horizontal bar.

Posted in California, Fullerton at August 25th, 2008 by Jack Dean| No Comments »

August 22nd

New documentary I.O.U.S.A. helps us comprehend our $9.5 trillion debt

By Jack Dean

I met David Walker last September when he spoke at a breakfast meeting of the Orange County Forum. He was part of a four-member team that was traveling the country presenting what they called a Fiscal Wake-up Tour. At that time, he was the Comptroller of the United States and head of the Government Accountability Office (GAO), and he was part of a distinguished panel which also included Robert L. Bixby of The Concord Coalition, Alison Acosta Fraser of The Heritage Foundation and Isabel V. Sawhill of The Brookings Institution.

In March, Walker left the GAO and assumed the helm of the Peter G. Peterson Foundation in New York where he has been busy working on ways to better sound the alarm about the financial Armageddon that is looming. His appearance in a new documentary titled I.O.U.S.A. which made its debut in theaters yesterday will help tremendously in getting that message out.

For more information, you can visit the movie’s website. Or read the review in the San Jose Mercury News, or the one in The Economist. Here’s the movie trailer:

Posted in National Debt at August 22nd, 2008 by Jack Dean| No Comments »

August 19th

Santa Ana gives employees a pension boost despite a $28 million budget deficit

The Orange Juice Blog just reported that the City of Santa Ana, California gave a pension boost to its employees last night at its city council meeting:

Want more police officers for your neighborhood?

Too bad — Santa Ana has got no money.

Want your street paved or trees trimmed?

Too bad — Santa Ana has got no money.

How about Sunday hours at the Library or a new park?

Too bad — Santa Ana has got no money.

How about a huge boost to the retirement plans of city worker?

Oh look, we just found this stash of almost a million bucks!

By a vote of 6-0, Carlos Bustamante being on vacation, the Santa Ana City Council last night gave a huge boost to the pensions of city employees that takes our wonderful city one step closer to bankruptcy.

Santa Ana is running a $28+ million deficit, but they found a hidden pot last night.

Blogger Thomas Anthony Gordon is obviously not amused. Read more.

More details to come . . . .

Posted in California, Santa Ana at August 19th, 2008 by Jack Dean| No Comments »

August 19th

Fullerton places pension boost on the City Council meeting agenda — sorta

By Jack Dean

Last Thursday I asked that the 25% pension boost allegedly being discussed behind closed doors be put on the agenda for public discussion. Well, I got my wish — sort of.

The topic will be on the agenda, all right, but apparently it won’t be there for public discussion purposes. Instead, it looks like the city’s legal counsel will be giving a lecture on the finer points of California’s Brown Act. Here’s the agenda item:

15. COLLECTIVE BARGAINING AND BROWN ACT RULES
At the request of City Council members, the City Attorney and labor attorney will present information about collective bargaining legal requirements and Brown Act rules.
Recommendation by the Office of the City Clerk:
Pleasure of the City Council.

Orange County Register columnist Steve Greenhut stated in a blog entry last Friday that he believes the purpose of this item is to chastise and/or censure council member Shawn Nelson for divulging that a pension boost was being considered. This idea was expanded upon in an editorial on Sunday. But since this element of the negotiations has been common knowledge around city hall for some time, we doubt that a censure is going to be the thrust of the presentation. If it is, it will most likely backfire on the council anyway.

No, we suspect this presentation is going to be a CYA operation designed to provide legal cover for the rest of the council. It will sanction their silence and explain why they were planning to spring this on taxpayers at the last minute in the dog days of August when there surely would be little awareness that it was happening, let alone opposition.

If this is indeed the case — that the lecture will be on the Brown Act — then the council should cancel the agenda item and save the few hundred bucks (thousands?) that the attorney’s time will cost us taxpayers. We understand the Brown Act. Our concern is that the current closed-door negotiations over such a major, irreversible increase in liability for city taxpayers violates the spirit of the law, though perhaps not the letter of it.

What we would rather have legal counsel do tonight is explain to the council members and taxpayers in the audience what the possible ramifications of this 25% giveaway could be for the city should the council pass it and the county’s lawsuit on retroactive pensions be successful. It’s extremely likely that the city would then find itself the subject of a lawsuit over the very same issues.

Jack Dean is president of the Fullerton Association of Concerned Taxpayers (FACT) and editor of PensionTsunami.com.

Posted in California, Fullerton at August 19th, 2008 by Jack Dean| No Comments »

August 14th

Fullerton City Council should put proposed 25% pension boost on the agenda for discussion

By Jack Dean

August is the favorite month of the year for public employee unions everywhere because voters are away on vacation or otherwise pre-occupied. And this year it’s even better for them, what with the added distraction of the Olympics being broadcast in mesmerizing HDTV over a two-week period. What better time to launch a sneak attack on the local treasury and boost pensions?

So I should not have been surprised to learn that a proposal is before the Fullerton City Council to increase the employee pension formula from “2.0-at-55″ to “2.5-at-55″ — a factor of 25%.

No, seriously, I mean it — I should not have been surprised. No taxpayer should have to be surprised. A major change like this — which dramatically increases liability and is irreversible to boot — should not be sprung on citizens after the fact, which is apparently what was going to happen here.

Yesterday on the Orange County Register’s blog, editorial writer Steve Greenhut reported that Fullerton council member Shawn Nelson plans to recruit a legislator to sponsor a bill to amend the Brown Act to eliminate such surprises in the future:

Nelson wants to find a legislative sponsor for a bill that would require cities to at least tell the public when they are negotiating for pension increases with public employees. The agenda item in the Fullerton closed session simply mentions contract negotiations, and the pro-pension-spike council members and city staff have done all they can do to stealthily increase these benefits.

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October 14th

The column that sparked this website: ‘Land a State Job and Become an Instant Millionaire ‘

October 12th

Comments on The Housing Crisis and the Credit Meltdown

September 5th

Two Fullerton council members criticize Register columnist Steve Greenhut for not asking questions they wouldn’t have answered anyway

September 4th

California’s attorney general doesn’t understand pension lawsuit, says Orange County supervisor Moorlach

August 27th

Police ‘deserve’ high pay — firefighters do not

August 25th

The Brown Act and the letter vs. the spirit of the law

August 22nd

New documentary I.O.U.S.A. helps us comprehend our $9.5 trillion debt

August 19th

Santa Ana gives employees a pension boost despite a $28 million budget deficit

August 19th

Fullerton places pension boost on the City Council meeting agenda — sorta

August 14th

Fullerton City Council should put proposed 25% pension boost on the agenda for discussion