The City Hall pay scandal in Bell adds another count to the growing indictment against California’s extravagant public employee pension benefits.
Robert Rizzo may be out as city manager, but he qualifies for an annual pension of $600,000 for the rest of his life. With cost-of-living increases factored in, that could easily add up to $20 million for the 55-year-old Rizzo.
We regularly hear from public employees, not to mention CalPERS officials, that the average pension is about $25,000 and fewer than 2 percent of retired public employees collect pensions of more than $100,000. That’s true – and it’s largely beside the point.
The number of $100,000-a-year pensions is increasingly rapidly – growing by 49 percent between 2009 and 2010, according to a watchdog group’s review of CalPERS records. And the list is dominated by people who share something in common with Rizzo: They’re far younger than the average private-sector retiree, so they’ll be collecting those pensions for many years to come. Cops and firefighters can retire at age 50. For many other employees, it’s 55, though cities, counties and the state are negotiating new contracts that raise the minimum age and require employees to pay a larger share of pension costs.
Still, if the pension funds that support the retired employees fall short, the taxpayers are on the hook for the difference. Unlike a 401(k), there’s no risk to the employee for bad investments or a downturn in the market.
When state legislation authorizing bigger pension benefits was passed in 1999, CalPERS assured legislators that investment earnings would cover the increased cost. However, legislators weren’t told that CalPERS actuaries warned the pension board that if investment forecasts fell short – and they did – it would be costly for taxpayers. Ed Mendel, who runs calpensions.org, dug up a CalPERS benefits committee report from 1999 with a “startlingly accurate forecast” of the effects of a bear market. You can read it here. And you can expect to hear more about it as the pension debate continues, including a Sonoma County Board of Supervisors vote next week on a proposal to borrow money to cover a shortfall in the county’s pension fund.
— Jim Sweeney