Will talk of big pensions bring reform?

U-T San Diego, 3/31/13.

SACRAMENTO — Revelations about a Bay Area county executive whose base retirement plan will top $400,000 a year have sparked new debates about public employee pensions.

Lost in much of the discussion is a reality for governments across the state: No reform plan in place or seriously contemplated would touch core benefits for current employees, many primed to gain from big boosts granted by governments at the turn of the century.

Although those benefits are at the heart of the coming crisis in pension funding, they are also considered vested rights as sacrosanct as the state constitution itself.

Statewide efforts to rein in costs, so far, have decreased benefits only for new hires, which is not expected to save much money for years or decades.

The $413,000 pension projected for Alameda County Administrator Susan Muranishi — plus cost of living increases, plus a taxpayer-funded 401(k)-style savings account — are likely to be paid out until she dies.

“When you are talking about chief administrative officers, you’re talking about people who are vested in their positions,” said Del Norte County Supervisor David Finigan, president of the California State Association of Counties. “The problem with the state’s pension overhaul is, it’s going to be reformed only for the new entry-level people.”

Last year’s trumpeted state legislation to cut pension costs required public employees hired this year to work longer before they retire with full benefits. It also capped benefits for the highest earners and forced workers to eventually contribute at least half toward their retirement plans.

Some pension experts predict the overhaul will reduce the state systems’ long-term pension funding shortfall by only about 10 percent.

“Everybody knows and acknowledges that something has to be done and where we are trying to start is with the entry-level people,” Finigan said. “But it is a county by county, union by union, bargaining unit by bargaining unit issue unless the Legislature steps in and says, ‘this is the way it’s going to be.’”

News of Muranishi’s $638,000 compensation package and expected pension has drawn widespread outcry and reverberated across the national media. One supervisor quoted in the Bay Area likened the job to being the chief executive of a large corporation in arguing she was “worth every penny.”

Alameda County, which takes in Oakland, Fremont and Berkeley, has about 1.5 million residents. San Diego County, at about twice the size, provides recently retired Chief Walt Ekard a $207,026 pension.

Sue Caro, chairwoman of the Alameda County Republican Party, said the people she’s talked with don’t see the generous retirement plan as a partisan issue.

“When you get this kind of report that the county executive who is 63 years old and healthy is going to have a full pay package promised for life it’s just enraging to everybody,” Caro said.

Muranishi, a 38-year veteran of county government, declined to comment, as did all five elected supervisors.

About 12,340 retirees covered by the California Public Employees’ Retirement System earn pensions of $100,000 or more a year. Some 115 have pensions exceeding $200,000 annually, although the figures do not include counties with their own pension systems such as Alameda and San Diego.

“If people begin to realize that they are working their entire lives to pay their taxes, to put their own kids through college, to save for their retirement and then see that their tax dollars are going to pay for 12,000 people to have $100,000 retirements and a number of people to have multi-hundred-thousand-dollar retirements, it’s going to take those taxpayers getting upset to force the change that needs to happen in Sacramento,” said Assemblyman Brian Jones, R-Santee.

“Hardworking families that are trying to make ends meet, paying their taxes on time, should be outraged by these kinds of stories.”

Steve Maviglio, a spokesman for Californians for Retirement Security, said the administrator’s retirement package is the exception, not the rule.

CalPERS says that among about 514,000 retirees, beneficiaries and survivors, 50 percent have annual pensions of $18,000 or less, 12 percent receive $18,001 to $25,000, 24 percent receive $25,001 to $55,000 and another 12 percent brought in $55,001 to $99,000, according to the latest figures available.

“Two percent of pensions are more than $100,000 — never mind in that stratospheric level — and it gives the rest of the hardworking public servants a black eye when the typical pension in the state is $26,000,” said Maviglio, a longtime Capitol insider whose labor coalition represents more than 1.5 million public employees and retirees. “Progressive people don’t like things like this and union members don’t like things like this because it makes the public think this is typical when it is atypical.”

David Crane, an economic adviser to former Gov. Arnold Schwarzenegger, characterized the planned $400,000-plus annual pension a classic example of a story that grabs the public’s attention but doesn’t move the needle on reforming the system.

“I am with the unions on this one, when they say they hate to see this sort of thing because it paints all pensions as large,” said Crane, a lecturer at Stanford University and president of the nonprofit Govern for California that focuses on reform. “They are correct. Most aren’t that large.

“You could get rid of every single high pension in the state and you would not solve the pension problem. It’s a problem about aggregate math.”

The state’s public pension systems for state workers, teachers, professors and judges estimate owing more than $120 billion more in benefits than will be available to pay over the next three decades. Investment honchos and academics have projected the tab as being much higher than that tally — from $270 billion to exceeding $500 billion.

The problem arises not because of a handful of super-sized pensions, or even pension plans themselves, but from politicians making promises and not funding them, Crane said.

“Everything in the pension world is all about what’s the investment return assumption at the time they make the promise because that’s what determines the size of the contribution they make to meet the promise,” he said. “If pension funds are allowed to use super-high investment return assumptions, which are unrealistic and will never be realized, that will always create large deficiencies down the road.”

He added: “California really hasn’t engaged in pension reform. It’s only addressed pensions with respect to employees effectively still to be hired.”

Leaders in the Democratic-controlled Legislature told U-T Watchdog they were unlikely to take up any of the more extensive cost-cutting proposals originally pitched by Gov. Jerry Brown and later supported by GOP legislators. That includes providing new state and local workers hybrid retirement plans that combine a guaranteed pension with a less predictable 401(k)-style investment plan.

Former San Diego City Councilman Carl DeMaio, the architect of local voter-approved Proposition B pension measure, believes there are things that can be done to tamp down large payouts to existing employees across the state, including taking various performance and longevity-based bonuses out of the equation and using only the base pay to calculate pensions. The Alameda County administrator’s base pay is $301,000.

DeMaio noted that top administrators in line for the payouts are often the most savvy about the details of favorable compensation packages that they bring before elected officials.

“This is yet another wake-up call,” DeMaio said. “How many of these do we need to read about?”

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