In these tough economic times, Americans have been loath to open those 401(k) statements that arrive in the mail. With falling investment values and struggling private-sector retirement programs, most people understand that they will have to work later into their lives to afford a few comfortable years in a condo near some golf course. Yet there is a group of Americans that is immune from these concerns.
I’m not referring to the relatively small number of successful corporate CEOs, but to the large number of government employees who receive pension benefits far in excess of those earned by private employees. Recent pension increases have come largely under the radar. The results are dramatic as cities and counties struggle with pension-related debt. One Bay Area city, Vallejo, is facing bankruptcy thanks to a quarter of a billion dollars in pension and health care debts for its retirees. Many Californians have been taken aback by the Vallejo situation, yet the dynamic there isn’t much different than the one at play throughout the United States.
For perspective, think about your retirement plan, and now take a look at how the elite caste of government workers lives in the county where I work, Orange County, California. For instance, police, firefighters, and other “public safety” workers receive what is called a “3 percent at 50” retirement plan. They can retire at age 50 after 30 years of work with 90 percent of their final year’s pay, guaranteed forever courtesy of the taxpayers. Taxpayers, in fact, make all the contributions for these workers over the course of their careers. (There is a variety of ways to spike those pensions in the last year of work, one of the most frequent being the discovery of a “disability” approximately a year from the employee’s retirement date, which shields 50 percent of retirement pay from taxes.)
It used to be that government workers received lower pay during their working years, in exchange for higher retirement benefits and more job security. But these days they get it all: higher pay, benefits that are an order of magnitude higher, immunity from firing except under the most egregious circumstances. Consider that deputies in the scandal-plagued Orange County Sheriff’s Department — where a grand jury recently detailed deputies who watch TV, sleep on the job, and abuse prisoners, and where the ex-sheriff is preparing for a trial on seven federal corruption charges — often earn more than $150,000 a year, according to a recent Orange County Register report. Deputies abuse the overtime system to enhance their pay. In 2000, the sheriff granted the deputies’ union what it had long wanted: a 3/12 workweek. They work six 12-hour shifts and one eight-hour shift every two weeks.
That workweek was sold as a means to enhance public safety by reducing the fatigue of long hours on the job. But because deputies have so much time off they work additional hours, which are all overtime. Almost all OC deputies now earn over $100,000 a year in pay and more than 100 of them earn more than $150,000 a year. OC firefighters have an even better deal. Their average pay and benefits package is approximately $175,000 a year and their workload is less than punishing. (The local fire union rep asked for a correction after I reported that firefighters are paid for sleeping. They are paid while sleeping, he explained.)
In 2001, the entirely Republican Board of Supervisors voted to retroactively increase pensions for deputies. In fact, the five board members practically tripped over themselves to offer the resolution to do so. They argued that the spike was necessary for recruitment reasons, but then why grant a gift of public funds to those who are about to retire soon by granting the retroactive portion of the benefits? In reality, police and fire unions have exploited the 9/11 tragedy to portray themselves as de facto heroes who always deserve more taxpayer loot. And few politicians can say no out of fear of the political repercussions come election time.
But it’s not just public safety employees who score what amount to multi-million-dollar benefits. Once public safety gets higher pensions, everyone else wants them also. In 2004, the Orange County Board of Supervisors retroactively increased pensions for the remaining categories of government workers, elevating them to a 2.7 at 55 system (2.7 times the number of years worked, available at age 55). The run-of-the-mill OC bureaucrat can now retire with 81 percent of his final year’s pay. These pension spikes — even when they are based on false promises — are binding contracts that cannot be changed short of bankruptcy.
In Orange County — where the 1994 bankruptcy still looms as a significant discussion point during any fiscal debate — the unfunded pension liabilities went up $400 million thanks to the latest pension vote. Last month the board voted to put any pension increases to a county-wide vote. It’s a good idea, but as one supervisor who opposed the last pension spike pointed out, it’s a few years too late. His point: there’s no more room to increase pensions now that the liabilities are so high and public awareness is growing.
Just recently, however, I learned that the city of Fullerton is looking at increasing its government workers’ pensions by 25 percent. It’s the same story everywhere. Government workers live in a different world, oblivious to the difficult economic times all around them. When asked what it is he ultimately wants in negotiations, a union leader famously quipped: “More.” Unfortunately, there are always plenty of politicians to give it to them.