3 @ 50. What Does It Mean?

Jeez, retirement's going to be sweet...

Some of our loyal readers have asked about the 3 @ 50 pension formula that many, if not most “public safety” employees receive. It’s pretty simple. You get to retire at age 50. The 3 is a multiplier applied to the number of years you have been employed. The guy or gal who works for 30 years would get 90% of his or her highest salary as a pension. For life. Pretty sweet gig, eh?

Go ahead have three. Somebody will pay for them later...

Many public agencies also tack on other benefits as income, boosting pensions even higher. The worst scam of all is foisted on the public by the agencies that consider the taxpayer’s payment of the employees’ share of pension paycheck deductions as income counted toward their pensions. This charming little ripoff is known colloquially as “PERS on PERS,” PERS being an acronym for Public Employee Retirement System.

So, what is the tie in to Fullerton?

Well, let’s start with the Three Dyspeptic Dinosaurs, Bankhead, Jones, and McKinley. Back in 2001, at the behest of Andy Goodrich and his union, these two voted to give the 3 @50 formula for the Fullerton Police and Fire Departments. The decision was voluntary and wittingly done. If that weren’t bad enough, of course the benefit was applied retroactively, meaning that many cops and firemen who had worked for decades under the previous formula were suddenly handed a titanic bonanza of taxpayer confiscated wealth, with the single stroke of Mayor Don Bankhead’s pen. And that single stroke of glaring incompetence has contributed to a massive unfunded pension liability that Fullerton citizens will have to carry indefinitely.

Yep, that's me!

And who is one of the principle beneficiaries of this generosity with the public purse? You guessed it. Former police Chief and current councilman Pat McKinley, who has picked up the moniker “Pat McPension” for his $215,000 a year pension – far more than he ever made working.

They may be dumb but they sure are slow...

Now this profligate behavior with public funds is typically the sort of behavior attributed to liberal Democrats. In Fullerton the heist was perpetrated by allegedly “conservative” Republicans who believe wearing stupid lapel pins is what really matters. Well, they sold us out, folks.

Bankhead, Jones and McKinley.


Fall Out of a Chair, Get a Tax Break. Bankhead Discovers “Chief’s Disease”

Some say Mayor Don Bankhead retired from the police force too early, unfortunately missing out on the last decade’s massive pension spikes that have driven modern public safety pensions well into six figures. As a result, Bankhead’s annual CalPERS pension is only $81,351.16, still about three times what the rest of us might be able to get from Social Security.


But Bankhead found another way to boost his pension. Through a series of dubious disability claims filed towards the end of his career, he was able to make at least 40% of his retirement tax-free. The injuries were allegedly suffered when Bankhead fell down some stairs and then later worsened when he fell out of a chair, according to this LA Times article from 1990.


View the article

“Chief’s Disease,” as these disability pension spikes are commonly called, were all the rage in law enforcement circles in the 80’s and 90’s. At one point, eighty percent of senior CHP retirees had curiously developed debilitating injuries in the last two years of service, which made up to 50% of their pensions tax-free for the rest of their lives.

So how much does Bankhead get tax-free? The city won’t tell us, and neither will CalPERS. Bankhead’s case file was recently destroyed by the workers’ comp court where his case was heard, and no journalists bothered to follow up on the story.

In my day, we didn't have 3 at 50. We had to be creative.

One thing we do know: Bankhead didn’t “throw in the towel” due to alleged injuries. He quit after he had been passed over for the Police Chief job, and promptly announced his ambition to run for the Fullerton City Council. Then he tried (unsuccessfully) to run against Brad Gates for Orange County Sheriff.

That’s a lot of ambition for a guy who doesn’t pay his share of income taxes because he’s “totally disabled.”

Some Numbers

It’s almost April. Our wise and courageous city council is already wading through wage negotiations with the city employee unions for the upcoming budget year. How did we get this far without adding up Fullerton’s total unfunded pension obligation? Oh well, here it goes…

Pension Plan
Total Liability
Market Value of Assets
Unfunded Liability
Fullerton Public Safety
Fullerton Miscellaneous

That’s a grand total of $192 million in what is essentially “pension debt” for which we have no foreseeable plan to pay, even when we include all of our future contributions and expected market gains.

The pension plans are already paying out $9 million more per year to retirees than they are taking in via contributions, so there’s no help there. But our required contributions are increasing significantly, starting this year.

With no perceivable way out of this hole, maybe it’s time to hit the road and put it all on black.

I think I'm getting the fear.

All of these numbers came from the 2010 CalPERS reports for Fullerton’s Public Safety and Miscellaneous pension plans.

Kaboom. One Hundred and Twenty-Seven Million Dollars

Fullerton’s public safety pension debt just exploded.  Numbers from a new report just released by CalPERS pin the unfunded pension liability for Fullerton’s police and fire at $126,843,150.

Hey little guy. Cash or credit?

The new figures represent a first look at Fullerton’s pension crisis after the market crash of 2007 (yes, CalPERS is that slow.)

Of course these dismal digits are probably optimistic, given that CalPERS is still using the ridiculous rate of return that the unions used to cook up these obscene benefits in the first place. We did, however, take the liberty of removing the absurd “smoothing” calculation that adds a magical $73,000,000 to the fund, even though that money does not exist anywhere.

Warning: 76 pages of boring

$126,843,150.00. Let’s put that number in perspective: it’s enough to fund the entire Parks and Rec department for the next 27 years, re-pave six million square/ft of deteriorating roadway or completely staff Fullerton’s libraries until the year 2058.

Paying that debt (assuming it doesn’t get worse) will require an additional $3,000 from each Fullerton household, above and beyond our current taxes. That’s just for unfunded public safety retirement debt, which allows these public employees to receive 90% of their highest pay at age 50 for the rest of their lives.

CalPERS Delays Scary Pension Reports Until After the Election

A senior CalPERS attorney just told me that the annual pension liability reports for local agencies, which are normally distributed every October, have now been delayed until after the November elections. The delays are allegedly due to furloughs, but conveniently prevent local pension watchdogs from using the data to promote fiscally conservative candidates and pension reform leading up to the November 2nd.

I bury'd it.

This year’s reports would be the first to calculate pension liabilities after the disastrous market crash of 2008/2009 which caused CalPERS to loose a large portion of its holdings, which in turn has caused cities’ unfunded liability and annual contributions to skyrocket. But the damage to each city is unknown until the individual reports are released.

How bad will it be? Here’s one example: rough calculations show Fullerton’s “non-smoothed” unfunded liability for itspublic safety plan will soar past $100,000,000 this year, nearly three times the amount presented last year. Throughout the state, the debts shown in these report are likely to be shocking compared to previous filings.

The data would have undoubtedly been used to draw more attention to the dire pension situation in cities throughout California. The reports would have come just in time for local elections, which makes CalPERS’ stated cause for the delay extremely suspect.


The annual “Actuarial Valuation” reports are prepared by CalPERS actuaries for each participating agency to justify annual increases in required contributions. Here is a example of Fullerton’s public safety report for 2008, which is the most recent year available.

Fullerton’s Real Unfunded Pension Liability: At Least $60 Million

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’s real 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 $215,000 Man

What valuable piece of manpower is worth paying over $200,000 per annum not to do anything?

I'm your man...

If you guessed former Fullerton Police Chief Patrick McKinley you’d be right on the money. If there was ever a poster boy for out of control police pensions it would be Chief McKinley. See, the big guy pulls down a cool $96K a year from his old job at the LAPD that he’s been collecting since he left 17 years ago; then there’s the $118,000 he now rakes in from CalPERS, presumably from his time as Fullerton’s top cop.

Yipes! $215,000 a year in pension receipts; or about $18,000 a month; or $4100 every single week. More than he ever earned actually working. For the rest of his freaking life. If he lives another 20 years that’ll add up to $4,300,000 on top of what he’s already got, not counting cost of living increases.

Why is this important, apart from the obvious illustration of public safety pensions run amok? Because the word on Commonwealth Avenue is that Mr. McKinley is being promoted for City Council appointment to replace Shawn Nelson by Don Bankhead and Dick Jones – two other public pensioneers, one of whom is also a former cop.

In the RINO world of Bankhead and Jones this sort of thing is just hunky-dory. But for a lot of people – liberals and conservatives alike, the thought of this massive double dipper making pension decisions that affect Fullerton taxpayers is reminiscent of the fox guarding the hen house.

And of course we also remember McKinley as the police vest carney and vocal backer of the hideous Linda Ackerwoman creature.

Sorry guys. No sale.

Cal State Fullerton’s Pension Tsunami Shell Game and Our Kid’s Future

Titan waste

After showing you how management lives in the lap of luxury last week, I received an email from a Friend who brought to my attention a Cal State University system business practice that forces out qualified, lower paid part-time lecturers and untenured faculty, and brings back higher paid, semi retired faculty. The faculty and management at our own Cal State Fullerton know this practice as FERPing. Just the sound of the acronym sounds like something they should apologize for and we haven’t even said what exactly FERPing is.

The Faculty Early Retirement Program, as the name implies, allows faculty to retire early and then come right back to work. On the surface it creates a lower fiscal burden on local university funding which looks like a cost savings for guys like Milton A. Gordon, who gets $302,042 per year while living rent-free at the El Dorado Ranch. The reality is that it costs taxpayers and students more than if the schools utilized the lower paid, part-time faculty who are otherwise forced out under FERP.

Retirement never looked so lucrative. While everyone else must take furloughs or are getting laid off outright, the FERPers receive FREE parking, ALL of their retirement benefits, and 50% of their last salary. That’s part of the reason why your kid’s tuition continues to rise and classes are getting canceled. This Cal State double-dipping program is brought to you by the public employee unions as a result of the spineless leader who is content to live in his rent-free mansion with an inflated salary and the entitlement attitude of senior public employees. Some FERPers have been milking us for more than 5 years!

Here is an example of the compensation structure that FERPers use to determine just how good retirement might be:

Age: 63 1/2 years (CalPERS retirement age percentage factor: 2.5%)
Length of Service: 27 years
Highest Salary: $87,500(during any 12 month period of CalPERS covered employment)(minus $133.33 monthly deduction for Social Security = $1,599.96)
Calculation: 27 years x .025 (age factor percentage) = 67.5% of highest salary
Estimated CalPERS retirement salary: $85,900 x .675 (age factor percentage) = $57,982
Plus estimated FERP salary: (half of faculty base $70,800) $35,400
Total estimated retirement salary plus FERP salary: $93,382

It’s time to wean the leaches off our sweet cream before all we are left with is sour cream for our kids. Email Milton Gordon at [email protected] or you can call him in his CSUF public employee office at (657) 278-3456. Tell Milton Gordon it’s time to act fiscally responsible with our tax dollars.

Below are some links I stumbled over which helped put FERPing in perspective for me:


Fullerton’s $100,000 Pension Club Welcomes 15 New Members

It’s been almost a year since we published the original list of retired Fullerton public employees earning over $100,000 per year in pensions.

Since then we have learned that our state’s unfunded pension liability has grown to over $500 billion dollars. Our Friends over at California Pension Reform have updated their list of CalPERS pensions, bringing on fifteen new “hundred grand” members from Fullerton this year. That’s an increase of 40% in a single year.

So let’s see who is getting the most from largess from taxpayers. New members are in bold:

Name Annual Pension Position
JAMES “JIM” REED $166,781.88 Fire
GEOFFREY SPALDING $149,852.88 Police
GREGORY MAYES $148,889.40 Police
MICHAEL MAYNARD $140,317.20 Police
DANIEL CHIDESTER $139,416.72 Fire
FRANK PAUL DUDLEY $133,821.00 Development Services Director
ALLEN BURKS $133,782.36 Police
DOUGLAS CAVE $130,761.36 Police
GLENN STEINBRINK $127,533.00 Administrative Director
ANTONIO HERNANDEZ $127,402.20 Police
H SUSAN HUNT $126,970.80 Director of Park and Recreation
STEVEN MATSON $126,430.68 Police
RONNY ROWELL $125,168.40 Police
TERRY STRINGHAM $123,482.28 Fire
GEORGE NEWMAN $121,410.60
RICHARD RILEY $121,113.36
MARK FLANNERY $120,934.68 Director of Personnel
DAVID STANKO $120,279.84 Police
ROBERT HODSON $119,956.08 Director of Engineering
ROBERT “BOB” RICHARDSON $119,720.88 Police
PATRICK MCKINLEY $118,446.48 Chief of Police
DANIEL BECERRA $116,917.20 Police
NEAL BALDWIN $116,740.68 Police
PHILIP GOEHRING $115,076.04 Police
BRAD HOCKERSMITH $115,053.84 Fire
JEFFREY ROOP $113,618.88 Police
KURT BERTUZZI $109,255.08 Fire
LINDA KING $108,168.84 Police
DONALD “DON” PEARCE $107,972.76 Police
CAROLYN JOHNSON $107,179.80 Library Director
PAUL TURNEY $105,747.12
RONALD “RON” GILLETT $105,499.56 Police
ARTHUR WIECHMANN $104,153.76 Police
JONATHON “JON” MCAULAY $102,034.80 Fire
JOHN PIERSON $101,524.92
HUGH BERRY $100,488.84 Assistant City Manager
WILLIAM KENDRICK $100,194.48 Police

Remember… public employee pensions are negotiated between the unions and our city council. It’s time to figure out who has been representing the taxpayers and who has been sticking up for the unions.

Teachers’ Pension Fund Lying Low, Set to Explode

Certain Fullerton school board members have taken issue with our characterization of the CalSTRS teachers’ pension system as being underfunded and unsustainable.  Our resident pension expert suggests that that the board may be reading a few too many rose-colored newsletters emanating from the retirement system itself. Perhaps some illumination is necessary.

This is as clear as it gets.

Before the market crash, CalSTRS was facing a $22.5 billion dollar shortfall. Since then, the market crash has killed about 30% of its assets. At this point, nobody knows how short the fund will be until it is recalculated in the spring. But the results are guaranteed to be frightening.

It’s true that CalPERS is getting all of the attention lately, but that’s only because CalSTRS doesn’t have the same power to levy rate hikes without legislative approval. Rest assured, the teachers’ union has already begun its lobbying effort to boost taxpayer contributions for teachers who retired long ago.

Some estimate that the fund will need to increase contributions by 75% next year. Pension apologists love to claim that “teachers pay for their own retirement”. The truth: payments to the teachers’ pension fund are primarily made by taxpayers, with only about 40% coming from teachers.

Well, maybe sometimes it's too late to be smart.

Further efforts by CalSTRS to distance itself from the problems at CalPERS were hindered again this week as Moodys cut debt ratings for both agencies.

After the bomb goes off next year, the smoke will clear and taxpayers will be reaching into their wallets to clean up another mess. Who is to blame? State legislatures past and present, ignorant school boards across the state, the all-powerful teachers unions and their deceptive actuarials.

For regular updates on the pension crisis and its affect around the nation, visit Fullerton’s very own PensionTsunami.com. School board members should subscribe to email updates, lest they remain uninformed as the tidal wave approaches.