Last year CalPERS reported that the city of Fullerton is facing an unfunded pension liability of $37,531,831 on our public safety employees’ retirement plan. That’s the amount that we currently owe our public servants above and beyond all future budgeted payments.
Of course, many professional actuarials believe that CalPERS’ figures are purposefully understated. They’re just being nice. What we’ve learned over the last few years is that CalPERS and the unions have been feeding our politicians a big fat load of lies, which were used to pump up their pensions. The figures are derived from proven unrealistic investment returns that can never be achieved. Studies conducted by Stanford grads and the NCPA agree.
So we asked an industry insider to recalculate Fullerton’s unfunded pension liability using a realistic rate of return for a government pension system. While he could not do a detailed actuarial report for our city, he stated that using a more realistic 5% long-term rate of return “would raise the unfunded liability by somewhere between 60% to 120% in most pension systems.”
Based on those figures, it’s safe to say that Fullerton’sreal unfunded pension liability is somewhere between $60,000,000 and $83,000,000. That’s just for the police and fire unions, which has about 250 currently employed members.
Wrap your head around that. Sixty million dollars of unfunded, unplanned debt just for our little city of Fullerton. That money will not be spent on roads, parks, infrastructure, libraries or public safety. It will be given away to retired public employees, long after they’ve stopped serving our city.
If we don’t do something about it now, it’s going to get worse.
The other day we challenged retired police chief and $215,000 public pensioner Pat McKinley to put some real meat behind his dubious claim that he will “work to reform public employee pensions.”
Over the weekend we discovered a letter posted to McKinley’s website purporting to declare his position on pension reform. Exciting… until we read it. The letter actually commits to nothing and woefully understates the changes necessary to even begin correcting this problem.
Just say anything
Let’s run through Pat’s suggestions one by one. It’s important to note that McKinley’s letter says pension reform must contain ONLY ONE of the following:
Increase the amount contributed to the plan by Employee Contributions – Necessary, but wholly insufficient. While giving taxpayers some breathing room, demanding employees pay a little bit more does nothing to address the core issue, which is the unsustainable nature of pension guarantees when combined with the power of public employee union lobby. By itself, this change only slightly delays the pain.
Increase the amount contributed to the plan by Employer Contributions – Unbelievable. Increasing employer contributions is another way of saying we should raising taxes to pay for pensions. So now it would be safe to say that Pat McKinley wants to raise your taxes, but it’s really hard to believe he would write anything this dumb. For now, we’ll just assume that he has no idea what he’s talking about.
Slow the accrual of pension benefits by returning the formula to its previous level – Legally a change like this change can only be made for new employees, which would do nothing to address the massive unfunded liability that we have already accrued. Furthermore, it leaves the door wide open for future abuse when the unions become more powerful.
Slow the accrual of pension benefits by increasing the normal retirement age to reflect the longer life expectancies of our City employees – Same problem as above. The commitments we’ve made to current employees cannot be changed without a bankruptcy. The only lever we really have left salary and to a lesser extent, contributions. Cut salaries, raise employee contributions… or go broke.
Slow the payout of retirement benefits by lowering the Cost of Living Adjustment in retirement – The cost of living adjustment is about 2% a year. Reducing that, if it’s even legal in California, is hardly enough to sustain hundreds of public safety employee’s earning 90% of their final year’s pay for the next 30 years. And once again, there’s nothing to prevent another band of RINO’s from reinstating this benefit the next time CalPERS overstates its assets.
So what have we learned? McKinley has thrown out a bunch of half baked ideas to fool you into thinking that he wants pension reform, but it really boils down to almost nothing useful. And of course, even after writing this letter, McKinley has not committed to any pension reform.
Woefully inadequate
We’ll say it again: Taxpayer-funded defined benefit plans must come to an end. The private sector learned long ago that they are completely unsustainable and also unnecessary. All new employees should be given defined contribution plans, while current employees should be made to pay as much as possible towards their own retirement, in order to mitigate the damage caused by their own unions and CalPERS through deception and poor planning.
On Saturday Ed Royce and the CRA hosted a forum for Fullerton city council candidates. I’ll spare you the agony of redundant and predictable answers to the not-so-relevant questions on illegal immigration, gun rights and abortion. As expected, all of the candidates stuck to the party line.
So let’s get down to the two major issues where the candidates diverged and that actually affect Fullerton: Public employee pensions and redevelopment abuse. Candidate positions were carefully filtered into the following matrix:
Pension Reform
Committed to serious pension reform
No commitment to pension reform
Redevelopment / Eminent Domain
Rein in redevelopment abuse and eminent domain powers.
Bruce Whitaker
Greg Sebourn
Barry Levinson
Use tax dollars to fund developer projects through redevelopment and allow eminent domain for taking private property when “necessary.”
Marty Burbank
Roland Chi Don Bankhead
Pat McKinley
The candidates split into two camps, with Don Bankhead leading his team of big-government RINOs who’ve never met a redevelopment boondoggle that they didn’t like. That’s not really surprising, given that Bankhead and McKinley benefit from the current system through enriched government pensions.
On the other end of the spectrum, a few candidates acknowledged Fullerton’s most serious problems and promised to take action and fight taxpayer abuse.
Overall Bruce Whitaker dominated the forum with his calm, well-reasoned responses. Barry Levinson took some good shots at Bankhead, for which he was reprimanded by the moderator but applauded by this blog. Greg Sebourn also targeted the current bureaucracy with facts and figures which caused Bankhead to become visibly aggravated. Roland Chi spoke well but avoided making any strong statements. Marty Burbank and Pat McKinley both wore funny hats and stumbled through their answers. Aaron Gregg was a no-show and Tony Fonte was a colorful guy but it was hard to follow his responses.
Last week Pacific Coast Homes, a subsidiary of Chevron Texaco, filed suit against the city of Fullerton for it’s recent denial of the West Coyote Hills development project.
Down boy
The suit was preceded by a claim for damages of “$1,000,000 plus” in which Chevron says Fullerton is responsible for breach of contract, breach of good faith and fair dealing, violating the civil rights act, and a few other things expressed in legal mumbo-jumbo beyond the vocabulary of this blogger.
If you feel like wading through it yourself, here is the claim and the complaint:
So it looks like Chevron is attempting to apply pressure prior to bringing the project back in front of what will likely be a more favorable city council in 2011. I’ve also heard that the suit was preceded by Chevron making no-so-veiled threats towards a councilmember regarding future re-election possibilities. That’s just not very nice.
The other day Fullerton school board candidate and self-described “fiscal conservative” Janny Meyer joyfully announced her acceptance of the Fullerton teachers’ union endorsement.
Well, it's kind of a gray area.
This registered Republican must not be interested in GOP support, since that party has forbidden candidates from taking any union money.
But more importantly, Janny’s campaign is now backed by the very same teachers’ union that has repeatedly sacrificed your child’s education at the alter of paycheck protection. The result? Furlough days and increased class sizes, not good education.
It’s also the same union leadership that fights to protect bad teachers at all costs while refusing to allow schools to reward good teachers. They will boycott anyone who attempts to help parents evaluate teacher performance. They’ve instituted a system which puts young, energetic teachers up on the chopping block while coddling tenured teachers without any regard for job performance.
It makes my head hurt.
Of course, the union would love to pass a new property tax in Fullerton next year so they can keep shoveling money into this flawed system. Any idea how that conflict would churn in the head of a self-styled conservative who is also beholden to the union?
The other day we had a look at Pat McKinley’s ballot statement and something surprising popped up. Well, not really. Squeezed into the middle of his I-riddled statement was the curt phrase “I will work to reform public employee pensions.”
That's what they told me to say.
That’s a vague assertion, and frankly it’s hard to believe when it’s coming out of the mouth of one of the pension system’s most noted abusers – a double-dipping bureaucrat who pulls down well over two hundred grand per year in retirement thanks to a ridiculous 3-at-50 pension system that’s now bringing the city to its’ knees.
So what does McKinley mean by “pension reform” anyway?
It’s hard to tell at this point. That’s good for Pat; bad for the rest of us. You see, as long as he can keep all this pension reform talk clouded in empty platitudes, he can pretend to be a reformer and maybe nobody will notice that he hasn’t promised to really change anything.
So Pat, here’s the gauntlet: You need to commit 100% to serious pension reform. That means two things:
A mandatory 401(k)-style plan to replace the defined benefit for all new hires
Current safety employees must pay the full 9% towards their own retirement, as required by state law.
Take a look at our city’s unfunded pension liability and do the math. Any lesser reform will amount to nothing more than a laughable gesture to taxpayers, ensuring that even more pain awaits us down the road.
Register reporter Adam Townsend dropped a bomb early this morning with an in-depth report on Fullerton’s astounding overtime costs.
The report summarizes the $3,000,000 spent on overtime last year, listing the top 102 overtime earners (view the Register’s list). Among them, a paramedic named Timothy Hartinger worked the most overtime in 2009 with 1,160 hours at time and a half pay, bringing his total earnings to a glorious $138,117.
Notably, these wage figures do not include an additional 33% in pension contributions or thousands of dollars in health insurance premiums for public safety union members.
Naturally, the overcompensated fire and police union members came up at the top of the list and made their best efforts to deflect criticism with emotional falsities. One fireman played the classic union card, repeating the claim that he would die 10 years earlier because his job is so dangerous. Nice try pal, but CalPERS actuarials have proven that public safety employees live just as long as everybody else.
FFFF favorite Jack Dean made his way into the report, saying “Considering the unemployment situation, it doesn’t appear to be right that there’s so much overtime when so many people are unemployed,” concluding “there appears to be something wrong with this structure.” Something wrong, indeed.
Even the city manager got in on the fun when asked about minimum staffing for firefighters, which significantly boosts their expensive overtime pay. “The provision is there because of the union. If I had my preference, I’d do away with it, but it’s sacred to the firefighters,” said Chris Meyer.
We’ve been hard on Register reporter Adam Townsend in the past, but it’s great to see that there’s still some life left in the Register’s local coverage. It takes a little bit of courage to rock the boat of public safety employees, and hopefully we’ll see more of this in the future.
Last week the LA Times released an in-depth analysis of LAUSD teacher performance data which shows a wide variance in teacher quality that can greatly detract from a child’s education.
The analysis angered the teachers unions, who have spent decades lobbying to hide teacher performance data from the public in order to protect bad teachers. As retribution for the LA Times’ disclosure of public information, the unions are attempting to organize a boycott of the newspaper.
State Assemblyman Chris Norby, who was a teacher himself for 17 years, sent out an email blast encouraging these disclosures and asking the public to pay attention to this story.
“Shielding poor-performing teachers hurt both the kids and the teacher. Recognizing and emulating high performers will help us all,” wrote Norby. He also highlighted another major find in the report: the discovery that the educational disparity between teachers within a given school is much greater than disparities between schools, suggesting that education can best be encouraged by holding teachers more accountable, rather than just pouring money into under-performing schools.
Perhaps someone will attempt disclosure and analysis of teacher performance in Fullerton school districts, although the unions would probably fight it every step of the way. For the good of the children, of course. What we really need are school boards and state legislators who will fight union efforts to coddle bad teachers.
