By Count Friedrich von Olsen
For what are still too many people, the information released recently and now making its way into the consciousness of at least a handful of people comes across as just some words and numbers on the page. That number? $63.7 billion. What that number pertains to? The state of California’s net pension liability as it is currently calculated. Gibberish and jargon, some might call it. But to someone who understands what this gibberish and jargon means, the implication is staggering. Alas, for most people, it is simply gibberish and jargon. When I first heard the above number, I thought, after I stopped shuddering, it might just serve as the wakeup call some of us initiates have been awaiting. Just as quickly, I realized, the clarion call those words and numbers represent will simply not be heard by the vast number of Californians who must be alerted if the Golden State is to be diverted from the peril about to consume it…
Here is the alarm that should be sounded: Californians! You and the state you live in, the county you live in, the city or town you live in has been looted. The burglars have cleaned you out. And the burglars for all the world look like descent, honest folks, like you and me, like your next door neighbor. Who are these burglars? They are government workers: city employees, county employees and state employees…
This is hard for people to accept. As I said, these government workers do not look like crooks. Most of them do not think of themselves as crooks. Their spouses, their children, their parents, their brothers and sisters, aunts, uncles and cousins don’t see them as crooks. People think of them as good people. They pose as good people. They even do, from time to time, good things that all of us, or most of us, appreciate. Some of these public employees, such as police officers and firemen, are even looked upon by some as heroes…
So, how, you might ask, are they actually criminals? I will answer that this way: They are not criminals in the most common sense that most people think of criminals. They are thieves, but they have a license to steal. They engage in legal larceny. This larceny involves blackmail and extortion, specifically organized and orchestrated blackmail and extortion, legal extortion and blackmail…
It goes like this: The public employees’ bosses, ultimately, are elected officials, i.e., politicians. Politicians engage in the political process. The political process provides for politicians soliciting and receiving campaign contributions. The most prevalent category of campaign donors in California? The public employee unions. These unions collect hefty dues from their members. Often some of the public employees, particularly newly-hired ones, will begin to complain about how high those dues are. Eventually, though, someone will explain to those complainers that paying those high dues are a real bargain. The unions take those dues and deposit them into accounts that frequently total in the millions or even tens of millions of dollars. The union bosses then dole that money out to politicians. The union bosses discriminate in how they dole that money out. They don’t just give the money to any politician. The politicians selected to receive the union contributions then use that money to run their campaigns – to send out mailers to voters telling the voters what great people they are and what a good job they have been doing or, conversely, what bad people their opponents are. They use that money to buy yard signs, or billboard space, or radio or television ads. The politicians use that money to carry out a Madison Avenue-type advertising campaign as if they were trying to sell you toothpaste, or hair tonic, or a Chevrolet or a bottle of Coca-Cola, except they are selling themselves to the voters and it almost always works. If you look at the statistics, the candidate spending the most promoting himself almost always wins. There are exceptions that prove the rule, but those are rare exceptions…
As I just stated, the union bosses discriminate in how they dole that money out. They make sure, in a variety of ways, that those who receive the money will show their appreciation of the unions’ generosity. When it comes time to negotiate contracts for those public workers, the unions get high salaries and generous benefits for the government workers. How generous? Beginning municipal employees at the lower levels typically make in excess of $35,000 per year in salary and can count on another $15,000 per year in benefits. Higher level beginners generally start at more than $45,000 and pull in equivalent benefit packages as already mentioned, meaning a total compensation of $60,000 per year. For many private sector employees, even skilled ones with years of experience, this compensation level is enviable. After being in place for a few years and promoting, municipal workers move into even higher pay grades. Assistant municipal department heads typically make well over $100,000 per year in salary and as much as $50,000 per year in benefits. Department heads begin to move into the stratosphere. Rarely does a city department head make less than $150,000 in annual salary. Most make more than that. Department head salaries generally run in the range of $165,000 to $185,000. Some push or exceed $200,000 in salary. On top of those salaries come benefits, running anywhere from $30,000 to $50,000 to $80,000 per year. Benefits of as much as $100,000 per year or more – on top of the department head’s salary are rare, but not unheard of. Total annual compensation for department heads is rarely below $200,000 and more often approaching $250,000 – a quarter of a million dollars per year. City managers are, you guessed it, the highest paid of municipal employees, or usually so. You can find city managers making less than $200,000 per year, if the city is small enough and if you look hard. Typically, a city manager pulls in an annual salary nearing or at the quarter million dollar mark. Add to that benefits of at least $50,000 per year, and probably more, and you have a class of workers there who generally enjoy a total annual compensation of $300,000 to $400,000. But these generous salaries aren’t where the most outrageous thievery is taking place…
The real legal criminality here is in the pensions these legal crooks receive after they retire. The standard pension that most retirees over the last three decades receive is determined by the highest total salary (including overtime if they received overtime) and then multiplying that by the number of years they were employed by a public agency or public agencies and then multiplying that by two percent. Thus, for example, an employee who worked up the ladder to earn $100,000 per year who worked 30 years for a city would multiply that $100,000 by 30 and then multiply that by .02. This equals $60,000. That employee would then draw a pension of $60,000 per year for the rest of his life. In some cases, such as with police officers, some firemen and higher ranking city officials such as department heads or city managers, the percentage multiplier is more than 2 percent. In some cases it is 2.5 percent or even 3 percent. Thus, a city manager who worked in the public sector for 30 years and was making a salary of $300,000 at the time of retirement might be due, if his multiplier was 3 percent, a pension of $270,000 every year for the rest of his life. Oh, and if he or she were to die before his wife or her husband does, then that pension would be cut in half – to $135,000 per year – and the widow or widower would receive that pension for the rest of her or his life…
As you may have figured, someone has to pay for all of this. Who? You, the citizens, that is, the residents of these cities. You pay the cities and the cities pass the money along to the pensioners. The state of California has a retirement system for government employees called the California Public Employees Retirement System, or CalPERS, for short. On a continuous basis, the cities and counties and state government pay money to CalPERS to administer public employee pensions. In San Bernardino County’s case, it has a separate pension system from CalPERS called the San Bernardino County Employees’ Retirement System, or SBCERA, for short. SBCERA works a lot like CalPERS. CalPERS invests the money, hoping to get a good return on those investments and use the dividends and increase in the value of the investments to make the pension payments. But if the CalPERS investment portfolio does not do as well as its financial advisers hoped or predicted, CalPERS comes back to the state, or the county or the cities and forcibly demands that the state or the counties or the cities make up the difference…
Off in the future sometime a financial crisis for all those cities, all those counties and the state is looming. CalPERS simply cannot keep up with the pension demands upon it and it will come to the state, the counties and the cities demanding ever more money from them so those pensioners can continue to draw their generous pensions. And because of the way the contracts were drawn and the way the laws were written [by politicians receiving union political donations], the state and the counties and the cities are legally obligated to meet those demands. Previously, this looming crisis was kept hidden. The annual state financial report was able to gloss over this future financial liability. Last year, California’s annual financial report referred to the CalPERS “net pension obligation” but included only that portion of it pertaining to judges and legislators, pegging it at $3.2 billion. In the intervening 12 months, however, the state instituted new accounting rules, meaning the state financial report had to show CalPERS “net financial liability” for everyone in the system. That figure? $63.7 billion. That’s billion, with a b, as in boy…
This takes us to where this column started out. For most people, “Net pension liability” and “$63.7 billion” are just words and figures on the page. Are they capable of understanding what this represents? Do they understand that our public employees, using their henchmen – the unions – ganged up on and extorted and blackmailed our politicians so they could steal – legally steal – a huge part of that $63.7 billion? I say huge part, because I don’t think they stole all of the $63.7 billion. I think our public employees deserve pensions. It’s just that they do not deserve, they do not merit, they should never have been granted the kind of pensions they are now legally entitled to receive. By my rough calculations – and this is just that, rough – the lowest paid government employees deserve a pension that would be somewhere in the neighborhood of one half to at most three-quarters of what they are receiving. As you progress up the food chain, my calculation is that those public employees should be receiving one third, or one fourth or one fifth or in the case of city managers about one sixth of what they are actually drawing…
Still don’t think our public employees qualify as thieves? These stratospheric pensions, which were negotiated by city managers who had a conflict of interest in negotiating them because they were enriching themselves while they were doing the negotiating, are and were a corruption of the democratic process. The voters and residents would never have approved giving people who are no longer working annual pensions that dwarf the highest annual salaries ever received by a majority of the hardworking people who labor in the private sector…
I will make a single stab at illustrating how serious the pension problem is and how much these legal crooks who are or were our government employees have legally stolen or will steal from us. Take the City of Rancho Cucamonga. It is one of only two cities in San Bernardino County that keeps its ledger for the fire department separate from its general fund. Ontario and Rancho Cucamonga separate their fire departments out from their respective cities’ other divisions and departments. Five years ago, the Rancho Cucamonga fire department passed a threshold: That year it paid its retired firefighters, in the form of pensions, more money than it paid the firefighters that were then working for the city. That is, the guys that were working received less than the guys who were no longer working. At this point, many of those firefighters that were working for the city five years ago have themselves retired and today the City of Rancho Cucamonga is paying its retired firefighters, in the form of pensions, more than what the city pays to run the entire department – pay its current firefighters, put fuel in the fire trucks, buy equipment and supplies, service the equipment, keep the lights and appliances on in the fire stations, pay its clerical staff, pay for dispatch services, everything. This pension crisis matured more quickly with the Rancho Cucamonga Fire Department than it has with other government agencies. In the Rancho Cucamonga Fire Department is reflected the future of California and its governmental agencies and entities. There is coming a time – as early as 2023 or perhaps as late as 2026 – when practically every city in Southern California will be spending half of its incoming revenue or more on paying people who no longer are working. Less than half of the money those cities will spend will go toward providing services to those cities’ residents. At that point, for even the dullest of people, “net pension liability” will no longer simply be words on a page. Understanding of how public employees, through legal extortion and bribery, transformed themselves into a privileged class – the new aristocracy at liberty to plunder from the citizens – will be manifest. From among us will a new Dr. Guillotine spring to fashion a cure for them? Will these new California aristocrats – these thieves who hold positions working for our various governmental entities who will one day come face to face with the rabble they have stolen from – fare any better than the aristocrats in France in the late 1780s and well into the 1790s?