CalPERS, (California’s Public Employment Retirement System), the largest pension plan in the nation ($370 billion in assets), is in the news every week somewhere. It’s a fiasco, but that is California these days.
Stories of missed investment goals, fraud, sexual abuse, and tapping participant counties and cities for more money litter the Internet. Who would voluntarily turn over any portion of their lives to be managed by the government – not even the mentally ill? There are no departments free of waste, mismanagement and boondoggles. This is socialist stupid-think up close. California is now a deep pockets Venezuela.
A good friend, preparing to retire from Caltrans as a manager in electrical maintenance said that he wasn’t eligible for any of those “$100,000-plus pensions.” He was referring to the fact that CalPERS says the current 596,000 public pensions in the state average about $35,000 each per year. However, averages are misleading since they include many people at the lowest salaried positions with the minimum years vested.
CalPERS pensions also include 1,200 that exceed federal limits. What’s that mean? Nine years ago Lee McDougal retired as the manager of a small Southern California city and started collecting the pension he was promised for 38-plus years of employment.
Last year, McDougal collected $337,000 — nearly a third more than the federal maximum for public pensions. The excess portion then must be paid from his former employer’s annual budget instead of the state’s public retirement system. And taxes on the portion of the pension exceeding federal limits also cost cities and counties extra, draining revenues that could go toward street maintenance, parks, or public safety. You didn’t know that? That was the idea.
The list of pension federal-limit-busting annual payments totaled $197 million and is growing despite a 2013 state law that capped the pensions at the federal limit.
Four years ago, 684 retirees were on the list. Since the 2013 capping law applies only to workers hired after January 1 of 2013, the list of pension-limit-busters will continue growing for decades.
Many of the retirees on the list were managers in cities, counties and special districts that now pay money out of their operating budgets for their excessive pensions. To comply with tax law, the jurisdictions provide benefits above the federal limit by paying the remainder as wages from their general funds, further crippling operating budgets.
“A government’s obligation should end at the federal limits,” said Dan Pellissier, president of California Pension Reform. “If you want to do more, do more, but the government shouldn’t be responsible for subsidizing luxury spending in retirement.”
In 2018, 774 of the 1,205 retirees on the luxury pension list had retired from local governments.
McDougal, 68, is receiving the largest supplementary payment of all the retirees on the list, although his overall pension isn’t the largest CalPERS pension in the state. That notoriety goes to Michael Johnson, a former Solano County administrator who gets $402,000 per year.
Retired Sacramento Police Chief Sam Somers Jr., who retired in 2016, gets $205,000 in annual pension benefits in line with IRS limits plus $14,000 in payments above the cap. Former Public Works Director Jerald Way is paid $152,000 from CalPERS plus $14,000 as wages from the city.
Eight Sacramento Metropolitan Fire District retirees receive a total of $1.97 million in annual pensions including $196,000 in above-limits payments. Four Sacramento Municipal Utility District retirees have pensions worth a total of $973,000 per year, with $157,000 in benefits above the IRS limits.
Meanwhile, CalPERS announced that it earned a paltry 6.7 % return on its investments for the last fiscal year ending June 30 missing the 7% target needed to put – off demanding additional contributions from the budgets of cities and counties.
CalPERS reported an 8.6 percent investment return in the 2017-18, and 11.2 percent in the 2016-17 and missed its target in 2015-16, when it earned an embarrassing .61 percent.
CalPERS’ assets are worth about 70 percent of its total obligations to public employees and current retirees. That means it cannot currently afford to keep its promises. So, it must rob the taxpayer of additional funds to pay the overpromised government employees.
Any competent finance expert outperforms CalPERS because its board’s investment guidelines are more concerned with saving seals, transgender rights, and adjusting the world’s thermostat than it is making money to pay retirees.
(Get Lou’s podcast at “No Hostages Radio” and his articles at nohostagesradio.com
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