Blaming Public Employees is Not the Solution to State's Pension Challenges

Blaming Public Employees is Not the Solution to State's Pension Challenges

By William Hutchinson, President – Palm Springs Police Officers' Association

California, police officers and firefighters are being scapegoated for the financial challenges facing some California communities -- so much so that pension "reformers are embracing a proposed ballot measure advanced by San Jose Mayor Chuck Reed that would completely eliminate our vested retirement benefit rights and invalidate existing contracts made in good faith.

This comes despite the fact that the average public employee pension in California's Public Employees Retirement System (CalPERS) is $31,000 per year, with more than half receiving less than $19,000 annually. And despite the fact that more than 600 new agreements in nearly 400 jurisdictions have been signed where public employees are paying more for their retirement benefits. (Another 175 jurisdictions have reduced pensions for new hires).

The criticism of our pensions comes with an undercurrent that taxpayers should somehow be offended by the benefits we are receiving. For those of us who are willing to work weekends, work while our friends and family are home asleep, and who are willing to risk our own safety to protect a complete stranger or their property, the suggestion that there is something insidious about public servants being provided with a retirement security is offensive – particularly when the salaries and golden parachutes of corporate executives in our community go without a wiff of criticism.

Our pensions are simply deferred salary. These pensions are essential for public employers to recruit and retain qualified, trained and experienced employees. Our police officers will receive multiple injuries throughout their career, and some have or will make the ultimate sacrifice of never returning home to their families.

During their service, our officers contribute salary every month toward their retirement and their health care costs. And contrary to the claims of pension critics, taxpayers don't pay the rest.

According to the latest figures from CalPERS, for every dollar paid in pensions, 64 cents comes from investments. Fortunately, here in the Desert, most elected officials who have worked with us in providing solutions to our challenges are not playing the "blame the public employees game." Unlike Mayor Reed – who plans on spending $5 million in taxpayer dollars to pay lawyers to defend an unconstitutional pension slashing scheme --these elected officials have ironed out their differences with us at the bargaining table instead of the ballot box.

They know that when governments hire teachers, first responders, parks maintenance workers, garbage truck drivers, and other public employees, they make certain promises regarding those employees' retirements. Then, they often have decades to pay for those promises.

It's the same as when a family buys a house — they finance the large amount, and pay it off over 30 years. In California, the California Public Employees Retirement System (CalPERS) pays for most of those government workers' retirements, and it does that by making investments, earning interest, and growing the bank account from which it cuts retirement checks.

Critics of CalPERS contend the system doesn't have enough money in the bank to cover all of the promises it has made. However, it's already sitting on more than 70 percent of the money it will need over the coming 30 years. Should it have 100 percent? Of course not. Many of the workers whose retirements CalPERS is funding are still young and working, so the system won't need to cut checks to them for years or even decades.

The better question is not how much CalPERS has sitting in the bank, but whether it — like that family buying a home — has a realistic plan for paying off its commitments to public employees. The numbers indicate that the answer to that question is a clear "yes."

CalPERS is currently projecting a 7.25 percent annual return on its investments. Critics call that "unrealistic." Some suggest 3 percent is a safer figure. However, the system yielded a 13.3 percent return in 2012, and over the past two decades it has earned an average of 8 percent every year. Any investor would be ecstatic to realize sustained returns on investments like the ones CalPERS achieves. In fact, over a 20-year period prior to the recession, from 1988-2007, the average Wall Street mutual fund investor saw annual returns of just 4.48 percent, according to Dalbar, a financial market analyst.

What's the solution? In addition to Gov. Jerry Brown's changes in pensions last year that are estimated to save $77 billion, we must continue to work with our community leaders at the bargaining table to manage costs. No one has a greater stake in helping our communities during tough difficult times than those of us who serve it.

But Mayor Reed's proposal to eliminate vested retirements and invalidate existing contracts is both unfair and wrong.

Let's hope it never sees the ballot.

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