If you write about public employee pension programs, it’s not unusual to be accused of “pension envy.” After perusing the state legislative analyst’s report on Gov. Jerry Brown’s reform plan, I may understand why. “While there have been some reductions in benefits recently, some California governments still offer the most generous defined pension benefits available anywhere in the United States public or private labor market today.”
OK, it’s a cheap shot.
But the report – read it here – does provide some valuable analysis that gets beyond counting how many people are collecting six-figure paychecks for not working.
One common theme I hear goes something like this, “How am I supposed to make my house payment and pay my kid’s tuition with less than a full paycheck?” As the analyst’s report points out, retirement has traditionally implied that houses are paid for and children educated. With reduced expenses for travel and work attire and a lower tax bracket, the report notes that most people can maintain their standard of living with 65 percent to 75 percent of their working income. Academic research backs that conclusion. “In many cases,” the report says, “California public pension benefits for career employees – couple with other sources of retirement income – can replace far more than the 65 percent to 75 percent income replacement ratio …”
The report also shoots down one of the most common and most misleading arguments against pension reform. That is, with an average benefit of about $25,000 a year, pensions aren’t excessive. The trouble with that number is it masks the significantly larger benefits being paid in recent years. The average CalPERS benefit for an employee with 25 to 30 years of service who retired in 2003-04 was $39,600 – well above the overall average. And by 2008-09, as enhanced benefits took hold, the figure had increased 34 percent to $53,100 a year. An added factor, not addressed in the report, is that the enhanced benefits adopted since 1999 generally have included a younger retirement age as well as bigger payments. With people living longer, that adds up to a lot of money. And taxpayers are on the hook for too much of it.
– Jim Sweeney