Palo Alto Weekly

News - December 31, 2010

Pension costs top list of budget worries in Palo Alto

Recent investment losses at state pension fund, CalPERS, could double Palo Alto's pension costs, despite recent local cutbacks

by Gennady Sheyner

After enduring a year of layoffs, slumping revenues and benefit reductions for city employees, Palo Alto officials are bracing for more financial pain in the coming years as pension costs continue to rise — due to bad state-level investments that could possibly double city costs.

The troubling assessment emerged at last week's meeting of the City Council's Finance Committee, where the committee closed the 2010 budget and approved the annual Comprehensive Annual Financial Report — a detailed listing of the city's funds. This year's General Fund budget totaled $143.44 million.

The committee learned that the city's belt-tightening will likely extend into future years to account for looming pension obligations and uncertainties over revenue sources.

"We do have a problem, and we do have to make some changes," Administrative Services Director Lalo Perez told the committee Dec. 21.

"We're going to need to come up with additional money, and that's going to either come from a reduction in expenses for the city operations, an increase in revenues or an increase in contributions from employees."

The biggest question looms over pension costs, which are expected to rise steeply in the next two years — in some cases possibly more than doubling — because of the recent investment losses suffered by the California Public Employees' Retirement System (CalPERS). The pension fund's investment portfolio lost about 24 percent of its value in fiscal year 2010 — a loss committee Chair Greg Schmid called "astounding."

Perez said the city's contributions could drastically shoot up if CalPERS decides to revise the projected rate of return for its investments from 7.75 percent to 7.5 percent, as the pension fund's staff has recommended. The board is expected to consider the change in February.

Palo Alto currently contributes 24 percent of public-safety employees' salaries for pensions, while the employees contribute 9 percent. The city now pays between 19 and 22.75 percent for non-public-safety employees, with contributions varying by labor groups, according to the Comprehensive Annual Financial Report.

The CalPERS change could force the city to pay as much as 33 cents for every dollar of salary for "miscellaneous employees" (those not in public safety) starting in 2013. For public-safety workers, the city's contribution could soar to between 49 percent and 52 percent of salaries.

"We're talking about major increases in pension costs," Perez warned.

The committee had discussed the pension problem in the past. At its Oct. 5 meeting City Manager James Keene characterized the pension situation as an issue that needs to be taken seriously.

"I'm in the camp that thinks there is a day of reckoning that's going to come some time in the future, and it's going to be pretty significant," Keene said at the October meeting.

He acknowledged that the problem is statewide but said Palo Alto could benefit from proper planning and building the rising costs into the city's long-term financial forecasts.

The pension problems hit at a time when Palo Alto is recovering from a particularly grueling budget year. With tax revenues slipping, the city had to close a $6.3 million hole in the middle of the last fiscal year (which ended June 30). Officials then wrestled with a $7.3 million "structural deficit" (a deficit that extends to future years) later in the year. The council closed the structural cap by laying off workers, freezing salaries, reducing expenditures across City Hall and reducing employee benefits.

The city also recently instituted a two-tiered pension system in which newly hired workers get a less lucrative pension formula than existing workers — a change that is expected to partially mitigate against the rising pension costs.

Pension costs aren't the only fiscal challenge on the horizon in Palo Alto. Perez said last week that staff continues to keep an eye on overtime costs for public-safety workers — costs that routinely exceed budget projections. Staff also remains concerned about tax revenues from commercial properties, Perez said.

On a more positive note, Perez said there have been "positive trends" in sales-tax revenues, which dropped by more than $2 million in each of the last two fiscal years. Perez said staff has lately been receiving good feedback from local businesses, particularly high-end retailers. Sales-tax revenues are projected to rise from $17.3 million in fiscal year 2010 to $18.2 million in the current fiscal year, which ends June 30.

Staff Writer Gennady Sheyner can be e-mailed at gsheyner@paweekly.com.

Comments

Posted by Old Palo Alto, a resident of Old Palo Alto
on Jan 3, 2011 at 9:20 am

Calpers is nearly as bad as Madoff. It's a revolving door of business school buddies who start hedge funds with Calpers money. These funds are heads, the managers win, tails, the public loses. After all, all the money in Calpers is taxpayer money.

I love in the article the euphemism for taxes is revenues! What revenues? The city doesn't sell anything and if they did they wouldn't be competitive.


Posted by howdowepayforthis?, a resident of Another Palo Alto neighborhood
on Jan 3, 2011 at 9:36 am

Well, when employees can walk away with this kind of retirement Web Link it becomes easier to understand why the city might be in this kind of predicament.


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 3, 2011 at 9:59 am

This problem has grown to crisis proportions all over the country, but gets very little "press" here in Palo Alto. Way last May, I sent the following letter to the City Manager--

20-Year Cost of Major Benefits For Palo Alto Employees:
Web Link

The costs of providing pensions that pay two dollars for every one earned "on the job", and other post-retirement benefits, like health care, will rise to possibly 50% of the City's yearly budget, unless some is done. These changes would require very significant changes in State/Federal Labor Law, as terminating outstanding pension agreements is needed to keep from being swallowed up by the effects of "defined benefit" pensions.

The following is one of many papers that can be found these days on the WEB that discuss the problem at a national level--

Crisis in Local Government Pensions:
Web Link


Posted by the pension reform initiative, a resident of Crescent Park
on Jan 3, 2011 at 10:35 am

Menlo Park has shown the way: Web Link


Posted by howdowepayforthis?, a resident of Another Palo Alto neighborhood
on Jan 3, 2011 at 11:39 am

Palo Alto has already had their Measure L - it was imposed by the City Council earlier this year. A little too little, a little too late. Changes for new hires really won't make any significant difference for 10-30 years. In the meantime, thousands upon thousands of existing employees will be retiring under the old formulas - that's what's going to bankrupt the public sector, sooner than later.


Posted by Timothy Gray, a resident of Charleston Meadows
on Jan 3, 2011 at 12:04 pm

When the Pension funds were making greater returns, Palo Alto leaders spent the savings on pet projects instead of saving for a rainy day. Everything goes in cycles, so it should be no surprise that we have some down years -- that should be funded by the savings from prior excess years -- if the previous councils had not squandered the money.

Just to be clear about the prior post, pensions are funded as benefits accrue, not when paid out, so reducing the formula for new employees DOES reduce the funding requirements in today's budget.

Did you ever notice that the very same decision makers that blindly allowed the historical excess spending and approved bad labor contracts are the same "buget fighters" that are trying to retool their image as heroes? Where is the accountability? I am not seeing it.

I sincerely wish I could make a more positive observation, however the statements are empiracally verifiable. Strange that such a vacuum that can exist in such an intellectually rich town.

Timothy Gray


Posted by howdowepayforthis?, a resident of Another Palo Alto neighborhood
on Jan 3, 2011 at 12:15 pm

Mr. Gray - while you may be technically correct regarding the funding calculations for employee pensions, you neglect to mention the huge unfunded liability that public agencies face as a result of chronic underfunding and reduced investment returns at PERS. Unless I'm completely mistaken (and I'm no expert by any means) the amount the City will need to contribute to cover this gap will far exceed any savings that will result from the minor changes in the pension formula. That gap can only increase as more highly paid (and long-tenured) employees retire at 80 - 100+ percent of their former salaries.


Posted by Steve, a resident of Menlo Park
on Jan 3, 2011 at 12:30 pm

Gennady -
You wrote: "[CalPERS] pension fund's investment portfolio lost about 24 percent of its value in fiscal year 2010"
Could you provide a source for this statement? When I check the CalPERS website, they show that 2010 was a good year for them with their 3rd quarter report showing earnings of over $11 Billion (>5%) since the first of the year. I think it's worth explaining how a seasoned investment fund like CalPERS could lose 24% of value during a rising market. Web Link
If I understand CalPERS methods, pension costs to the employer (Palo Alto in this case) are calculated from results achieved 2 years ago. This is done to average out the fluctuations in the markets and keep pension costs from whipsawing up & down. It's why the city didn't see increased pension outlays in the two years following the market crash and why they won't see reduced pension costs from this year's improved performance until 2012.


Posted by Mike, a resident of Crescent Park
on Jan 3, 2011 at 12:35 pm

And this is pretty much a local and miniaturized version of what the state is facing regarding pensions.

Does anyone have any doubts that politicians and unions are now planning all the possible ways for the taxpayers to buy them out of this with new taxes?


Posted by Steve, a resident of Menlo Park
on Jan 3, 2011 at 12:54 pm

Gennady -
Looking into it a little deeper, I find a CalPERS presentation that showed a 24% loss in investment returns during the 08/09 fiscal year. I think you got your date wrong in the article. Check out slides #13 & #15 at Web Link

Mike and others -
You might want to also check out this PowerPoint I linked to above. It shows that things may not be as bleak as you make out. Slide #17 reminds us that CalPERS was fully funded at between 103% and 138% between 1995 and 2001. It was only with the market crashes of 2001 and 2008 that the funded liability dropped into negative territory, which is what necessitated the increase in employer contributions. If the markets continue the positive returns of the past year and a half, there's every reason to believe that CalPERS will eventually return to being able to fully fund expected demands on their funds as public employees retire.
Just as another article in this paper shows that Stanford's endowment fund is returning to health as markets improve, we should be cautiously optimistic that CalPERS funds will also recover their ability to fund their obligations.


Posted by ez, a resident of Duveneck/St. Francis
on Jan 3, 2011 at 1:06 pm

just lay off some police to save money.


Posted by Wayne Martin, a resident of Another Palo Alto neighborhood
on Jan 3, 2011 at 1:11 pm


> CalPERS was fully funded at between 103% and 138%
> between 1995 and 2001

While this may have been true at the time, salaries have easily doubled for many public sector employees over the past 15 years. This means that their pension payouts will have doubled during this time frame, which puts a lot of pressure on the idea of "fully funded pension funds".

The following paper outlines how the current "automatic pay increases" we've seen for public safety employees, as well as many in the public sector at large, coupled with COLAs that promise unconditional pension payouts in future years can create a Tsunami of liability for a city government, like Palo Alto:

Web Link

It's very hard to predict what future salaries are going to be, but in the last ten years, Palo Alto now has over 450 employees making more than $100K/year, and now we're seeing the first cohort driving into the $200K/year range. Highest paying City employees are now making over $300K/year. There are no caps to government salaries, so these employees will be looking to see their salaries, and pensions, double every 10-15 years, unless something drastic happens.


Posted by Kevin, a resident of Midtown
on Jan 3, 2011 at 1:24 pm

Just tax the rich.


Posted by pat, a resident of Midtown
on Jan 3, 2011 at 1:26 pm

"…pension consultant Girard Miller told California's Little Hoover Commission that state and local governments have $325 billion in unfunded pension liabilities, which he said amounts to $22,000 for every working adult in the Golden State...

"The shortfall at the California State Teachers' Retirement System has ballooned so big -- the system estimates it at $42.6 billion -- that officials there say future investment profits could not come close to covering it."
Web Link

Santa Clara County Civil Grand Jury wrote a report on the crisis: "Cities must rein in unsustainable employee costs."
Web Link


Posted by Steve, a resident of Menlo Park
on Jan 3, 2011 at 1:33 pm

Wayne -
If salaries rise, then contributions to the pension fund by both employees and employers will also rise to fund this increased liability. The amount an employee contributes is around 7% of their income, whether they're earning $40K or $100K. The employer contribution of course varies depending on the performance of the CalPERS Pension fund.
Realize that most of the outlays for pension benefits in the past has been met primarily by earnings of the pension fund. As I recall, for every dollar of employee/employer contributions that is paid in benefits, 3 or 4 dollars are coming from earnings of the CALPERS investment fund. With the current down market, this ratio will be reduced but it will still be much greater than direct contributions to the pension fund.


Posted by pat, a resident of Midtown
on Jan 3, 2011 at 1:36 pm

To Wayne's point about increasing salaries: Palo Alto employees get 10 to 25 vacation days, 12 holidays, 12 days of sick leave, and can accumulate 30 to 75 days off. Average salaries rose from $75,814 in 200-01 to $113,841 in 2009-10, while public safety salaries increased from $89,059 to $146,061.

In 2009, 253 employees earned over $100,000 base salary.


Posted by howdowepayforthis?, a resident of Another Palo Alto neighborhood
on Jan 3, 2011 at 1:44 pm

Steve - your correlation between salaries and retirement benefits supposes that employees are funding their own retirement benefits through their own contributions. I hope this is the case, but perhaps more likely is a scenario where current employees are funding the retirements of current retirees, which from what I understand is the case with Social Security. As pension COLA's increase, and employee contributions decrease (due to the leaner retirement formulas), the funding gap can only become larger.


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 3, 2011 at 1:51 pm

> 3 or 4 dollars are coming from earnings of the CALPERS
> investment fund.

While true in the past, it is unlikely to be true in the future. Please note, that "defined benefit pensions" are guaranteed-whether they come from the CalPERS money management fund, or from increased contributions from the "employers of record"--meaning the public agencies that employed them during their working lives.

These "increased contributions" are paid for through decreased services, or increased fees/fines/taxes. We are now seeing public sector unions funding ballot initiatives to force tax increases that will be used to increase their salaries, and ultimately, their benefits. A couple studies have come to the conclusion that if the current "system" continues, the DOW will have to be at/about 40,000 in order to provide all of the hundreds of billions of dollars that have been promised to the public sector alone.

At the core of this matter, lies the question--just how much should a public sector employee be paid, during his/her working life and during his/her retirement years? We have yet to see that question on the table. Certainly the current City Council has failed to do much more than "acknowledge" that "some sort of a problem exists".

Until this question is meaningfully engaged, this problem will only get worse.


Posted by Steve, a resident of Menlo Park
on Jan 3, 2011 at 2:37 pm

Wayne -
You wrote: "At the core of this matter, lies the question--just how much should a public sector employee be paid, during his/her working life and during his/her retirement years?"
In our free market economy, how much an employee should be paid is determined by what the market will bear. Typically, public employees earn somewhat less than their counterparts in private industry with the difference being offset by by better benefits and job security.
In 2007 the economy was booming and public employment was considered by many to be inferior to work in the private sector. Consequently, local governments in the valley were having to hustle to hire and retain good employees. They did this somewhat by boosting salaries but, even more, by promising better pensions. At the time CalPERS was earning enough on its investments that they required employers such as Palo Alto to contribute little or nothing toward the pension benefits of their employees. So, from the city's point of view, they offered a better "package" to the employee at little or no cost to the city. This has come back to bite them now that CalPERS earnings in 08/09 were poor and employers are once again having to contribute to the retirement fund.
Unfortunately, what you say is likely correct: everyone is going to have to pay to correct this problem. Some public employees will lose their jobs while those who keep their jobs will see their salaries reduced and pension contributions increased. Citizens will see a reduction in services as the city cuts back to meet the pension obligations that it signed up for but, previously, didn't have to pay for.
This is some of the belt tightening that has to accompany a near collapse of the market that we recently experienced. Everyone will be experiencing some pain. How fairly and thoughtfully the city does this will determine the kind of city we live in once the economic crisis is over.


Posted by charlie, a resident of Barron Park
on Jan 3, 2011 at 3:01 pm

When will the Economic crisis be over?

2011 - 5%
2012 - 5%
2013 - 5%
2014 - 5%
..
..

Anyone has a better data?


Posted by aXcrm, a resident of Adobe-Meadows
on Jan 3, 2011 at 3:48 pm

Steve, if what you say is true, remove the liability. If there is a profit, pensioners get extra, if there is a loss, they get less.
The city can then plan without betting on market vagaries.


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 3, 2011 at 3:52 pm

> In our free market economy, how much an employee should be paid is
> determined by what the market will bear

The reality is that there is no "marketplace" where the public sector is concerned. Ever since labor unions were able to inflitrate the public sector, what has happened is that a "parallel" labor pool has emerged. This labor pool does not operate under the normal rules of the market place, but is able to effectively "extort" abnorally high wages, and impose restrictive work rules, that have the effect of driving up the cost of labor in this sector.

What is needed is for the public sector to coe to a realization that while it has "obligations" to provide certan services, it does not have an obligation to hire a work force comprised of labor union members whose main goal is to extract every dollar out of the situation that they can. Outsourcing, re-organizing, merging functions, and possibly jurisdictions with other Cities, and automating, then, become the neccessary path for the public sector in the coming years to get out of this huge, black, hole it has dug for itself.

> Typically, public employees earn somewhat less than their
> counterparts in private industry with the difference being
> offset by by better benefits and job security.

While this was common knowledge (or belief) generations ago, this is simply no longer the case. Particularly with the pension system, linked to high years' salaries and COLAs. Not only do public sector people more-or-less enjoy a "jobs-for-line" situation, but they make more than their counterparts in the private sector. With these Cadilac pensions, they easily can make twice as much as their private sector counter part (and help to bankrupt the public sector at the same time).

> local governments in the valley were having to hustle to
> hire and retain good employees

If you say say. Perhaps you might refresh our memories by posting the turnover rates for some of the local cities (Menlo Park, Palo Alto, Los Altos, Los Altos Hills, etc)?


Posted by Fireman aj, a resident of another community
on Jan 3, 2011 at 4:10 pm

Now what column do you put the 2 homes for the city managers in?
2 multi million dollar homes for city managers are a pension perk.

Their salaries are already at a high level and this perk is thrown in on top of that. How many people would like to have a home given to them that they can sell or live in when they retire?

Keene, please you have some nerve to talk about the high cost of anything, how many city managers get home as part of their comp package?


Posted by Steve, a resident of Menlo Park
on Jan 3, 2011 at 4:14 pm

Wayne -
I can only speak to Menlo Park where I live. As I recall, the turnover rate for the police force from 2005 to 2007 was above 60%. According to an article in the Oakland Trib "Reasons cited for leaving have included higher pay and benefits elsewhere and better career opportunities".
So yes, public employment is market driven when the employees can vote with their feet, same as in the private sector.


Posted by bill, a resident of Barron Park
on Jan 3, 2011 at 4:16 pm

Ez. Every public employee contributes to the cost of government. Why pick on the police? Like firefighters they are on call 24/7, and you're glad they're available when needed.

Steve. "Typically, public employees earn somewhat less than their counterparts in private industry....". The only analysis I've read was flawed by apples to oranges comparisons of the jobs described. Can you recommend any recent articles or analyses to support your claim?


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 3, 2011 at 4:25 pm

> "Reasons cited for leaving have included higher pay and
> benefits elsewhere

Please keep in mind that 60% of a small number is an even smaller number.

What about the rest of Menlo Park's municipal work force? Have you ever heard of 60% of a whole City's staff up and leaving for "somewhere else?"

There have been rumors that some Palo Alto Police move on to other Cities .. sometimes for higher salaries .. but often because there isn't anything to do much in Palo Alto (crime wise). This is probably true in Menlo Park also.

There is no dispute that employees will move for higher salaries and benefits. The question being debated is: "are they worth it"?

We are seeing police salaries in Palo Alto begin to creep into the $200K zone (base + overtime). It's difficult to envision paying that kind of money to police in a town where there are virtually no murders (yearly), the odd bank robbery every so often (a Federal crime), and not much to do other than drive around town.

If there is a "market" for public sector workers, it's turn upside-down compared to that of the private sector.



Posted by Fireman aj, a resident of another community
on Jan 3, 2011 at 4:44 pm

Steve, What I saw as a City of Palo Alto employee was "The in the private sector I would be making more money as a manager so I should get paid more theory".
This was for the managers not the regular city employee,how many private sector managers would still have their jobs after 64 trees hit the ground, how many would still have their jobs after the Children Theatre BS, and that list goes on and on.
It would be nice to see data on CAL PERS that shows were the money is going. I would bet that about 10% of the members of Cal PERS get 35%+ of the money that is paid out. When you see these high payouts and monthly salaries that money goes to chief,Attorney's, assistant city managers, public utility directors. All city employees are not created equal.


Posted by Another Question, a resident of another community
on Jan 3, 2011 at 7:15 pm

Economic times are tough, but Jim Keane convinced Council to pay $100,000 for a new kitchen remodel. Must be nice to have taxpayers to pay for this remodel.


Posted by Charlie, a resident of Barron Park
on Jan 3, 2011 at 8:44 pm

But that's not even his own house.. Very very very funny.


Posted by fireman aj, a resident of another community
on Jan 3, 2011 at 9:33 pm

Charlie, who, s house would it be, s. How much money could the city save by buying one homr and letting the current city manager live on it.


Posted by fireman aj, a resident of another community
on Jan 3, 2011 at 9:33 pm

Charlie, who, s house would it be, s. How much money could the city save by buying one homr and letting the current city manager live on it.


Posted by Steve, a resident of Menlo Park
on Jan 3, 2011 at 10:30 pm

Bill -
Sorry for the delay in responding to your request for info on public/private pay comparisons - dinner & dishes intervened.
Here's a a study published last April called "Out of Balance? Comparing Public and Private Sector Compensation over 20 Years".
Web Link}
The study finds:
1)Jobs in the public sector typically require more education than private sector positions. Thus, state and local employees are twice as likely to hold a college degree or higher as compared to private sector employees. Only 23% of private sector employees have completed college as compared to 48% in the public sector.
2)Wages and salaries of state and local employees are lower than those for private sector employees with comparable earnings determinants such as education and work experience. State workers typically earn 11% less and local workers 12% less.
3)During the last 15 years, the pay gap has grown - earnings for state and local workers have generally declined relative to comparable private sector employees.
4)The pattern of declining relative earnings remains true in most of the large states examined in the study, although there does exist some state level variation.
5)Benefits make up a slightly larger share of compensation for the state and local sector. But even after accounting for the value of retirement, healthcare, and other benefits, state and local employees earn less than private sector counterparts. On average, total compensation is 6.8% lower for state employees and 7.4% lower for local employees than for comparable private sector employees.

"The picture is clear. In an apples-to-apples comparison, state and local government employees receive less compensation than their private sector counterparts," said Keith A. Bender, report co-author and associate professor, Department of Economics at the University of Wisconsin-Milwaukee. "These public sector employees earn less than they would earn if they took their skills to the private sector."


Posted by Old Palo Alto, a resident of Old Palo Alto
on Jan 4, 2011 at 9:03 am

"The picture is clear. In an apples-to-apples comparison, state and local government employees receive less compensation than their private sector counterparts," said Keith A. Bender, report co-author and associate professor, Department of Economics at the University of Wisconsin-Milwaukee. "These public sector employees earn less than they would earn if they took their skills to the private sector."

This begs the question: why haven't they left the public sector? Is is altruism? No, I think there are other benefits that are not accounted for in this study.


Posted by Shocked, a resident of Palo Verde
on Jan 4, 2011 at 9:43 am

I am shocked at how fat their pensions are!


Posted by Steve, a resident of Menlo Park
on Jan 4, 2011 at 10:02 am

Old Palo Alto -
I can't think of any benefits that wouldn't show in statistics collected by the US Bureau of Labor statistics, which is I believe, what this study was based on. Or are you just looking for a way to dismiss the study because you don't like the conclusions? Facts are inconvenient some times.
On the other hand, you consider such things as job satisfaction as a benefit. If you look at who government employees are and what they do, you may find that serving the public is a satisfying benefit that, to a degree, offsets the difference in compensation.
Public school teachers get satisfaction from educating our children.
Nurses & doctors at the VA get satisfaction from improving the health of our nation's vets.
Police & firemen get satisfaction from making our towns & neighborhoods safer places to live.
If you look at it realistically, most people go into a profession because the work interests them, not because they expect to get rich. As long as the work is satisfying, they can overlook minor differences in pay. But when the difference in compensation becomes too great, they will behave as most people and leave for greener pastures.
Which is why city councils and county governments up and down the state were boosting salaries & pensions for employees back in 2007. With a booming economy and public compensation packages that were becoming even less competitive with private industry, many public employees were indeed leaving for greener pastures. The councils and counties felt they had no choice if they were to retain their experienced people.
It only made their decision easier that CalPERS was, at the time, covering most of the their contributions to the pension fund because the pension fund was earning 15% to 20% a year.
Now the pastures aren't so green, tax receipts are down, and CalPERS is requiring cities to contribute once again to the pension fund. It's time to renegotiate with employee unions to bring employee costs back into line, which is what Palo Alto and Menlo Park have already begun to do.


Posted by Wha?, a resident of Another Palo Alto neighborhood
on Jan 4, 2011 at 10:29 am

I know, let us do away with Social Security, or at least cut the amount given. Times are tough and how dare those who worked for that money want it now. Shame on them!

Stop bashing the working people and take a look at the profits and bonuses on Wall Street. I would think it a much saner attack.


Posted by Wayne Martin, a resident of Another Palo Alto neighborhood
on Jan 4, 2011 at 10:30 am

> "The picture is clear. In an apples-to-apples comparison, state
> and local government employees receive less compensation than
> their private sector counterparts ..

This study, like so many, is flawed because it ignores pensions. Moreover, given the large amount of data to compare, not to mention that there are different points-of-view to consider, one must take this study with the proverbial "grain-of-salt".

The issue should be "total lifetime earnings". With a government job, these earnings are generally much higher than in the private sector. Of course, it depends on the job title, and the number of years of service, but with pensions linked to high-years' salaries (any where from 72% to over 100% for government workers--virtually everyone who exits the system will end up making multi-millions in pension payouts.

For instance, using a COLA of only 2%, public safety retirees receive the following payouts:

Total Pension Payouts
Pension
$100K--10-Years: $1.1M | 20-Years: $2.5M | 30-Years: $4.1M
$150K--10-Years: $1.7M | 20-Years: $3.4M | 30-Years: $6.2M
$200K--10-Years: $2.2M | 20-Years: $5.0M | 30-Years: $8.3M

What's interesting is everyone who is trying to claim that the private sector "makes more money" routinely ignores these very lucrative payouts for public sector employees who are routinely making over $100K--and will be making even more in the future.

At some point in time, the author of this survey needs to be confronted about why he conveniently ignored pensions, as a part of the compensation packages that he used in his comparisons.



Posted by Wayne Martin, a resident of Fairmeadow
on Jan 4, 2011 at 10:46 am

> I can't think of any benefits that wouldn't show in statistics
> collected by the US Bureau of Labor statistics

Pensions payouts are not included in these statistics. Given that many public sector pension funds still refuse to make public their payouts, it's understandable why this data has traditionally not been available for analysis. However, of late, the Courts have been providing favorable decisions to litigants suing to obtain this information--which should have always been in the public domain.

> Which is why city councils and county governments up and down the
> state were boosting salaries & pensions for employees back in 2007

When asked previously to cite statistics about turn-over rates in local Cities, you demurred, offering only stats about the MP police. Now your back--offering stats about the 450-odd City governments state-wide? Well, the same question to you then-can you provide some hard data to back up your claims?

The $2.3 Trillion State and Local Government Debt Monster –
California Pension Systems on Unsupportable Path with
$500 Billion Projected Shortfall. CalPERS, CalSTRS, and UCRS:

Web Link

Well .. no matter what the returns were "back in the day", we (the taxpayers) are looking at $500B in pension shortfall today. Assuming 15M taxpayers in CA, that comes to an additional tax of $4,500/taxpayer that must be collected, one way or another in order to pay these promised pensions.


Posted by Steve, a resident of Menlo Park
on Jan 4, 2011 at 10:57 am

Wayne -
Did you even look at the report? The authors are very clear that pensions are considered in their comparisons. They write:
"Although it seems that wages are below comparability in state and local public sectors, this report's ultimate objective is to make a comparison that includes other forms of compensation, including PENSIONS and insurance. But even after accounting for the value of RETIREMENT, healthcare, and other benefits, state and local employees earn less than private sector counterparts." So your statement that this report is flawed because it ignores pensions is dead wrong.
And where are you getting these $100K annual pensions?? Sure, some of the highest paid public employees probably retire with that but it is the exception. According to CalPERS web site:
"The 6,133 retirees in the group's "$100,000 club" are about 1 percent of the total 492,513 retirees".Web Link
A more realistic pension is about 1/4 of that: "Jim Zamora of SEIU Local 1000, said . . . the average pension of retired state workers represented by the local is $27,000 a year."
Please run the numbers on the average pension and quit cherry picking your data.


Posted by The Palo Alto Premium, a resident of Crescent Park
on Jan 4, 2011 at 11:02 am

Steve, you must have looked hard to find that study. Any search on "public vs private sector pay" will give you reams of responses where the opposite is true.
For example, the top hit is: Web Link
"Federal employees earn higher average salaries than private-sector workers in more than eight out of 10 occupations, a USA TODAY analysis of federal data finds"
"City and county workers earned an average of $43,589, about 2% more than private workers in similar jobs."
"State government employees had an average salary of $47,231 in 2008, about 5% less than comparable jobs in the private sector. [....] State and local workers have higher total compensation than private workers when the value of benefits is included."
It's across the board apart from:
"The private sector paid more on average in a select group of high-skill occupations, including lawyers, veterinarians and airline pilots."


Posted by pat, a resident of Midtown
on Jan 4, 2011 at 11:06 am

Steve,
The link in your message doesn't work, but it sounds like you're referring to the Bender & Heywood study at:
www.slge.org/vertical/Sites/%7BA260E1DF-5AEE-459D-84C4-876EFE1E4032%7D/uploads/%7B03E820E8-F0F9-472F-98E2-F0AE1166D116%7D.PDF

They state, "For instance, jobs in the public sector require much more education on average than those in the private sector."

It's a sweeping generalization to say that public employees are "highly educated" and private sector employees are "less educated and low-paid."

Which employees are we talking about? Admins and clerks? Lawyers? Janitorial services? Gardeners? Computer scientists? Auditors? Finance directors?


One problem with the study is that the authors look at salaries over the last 20 years. More companies had unions 20years ago. Since so much manufacturing in the US has moved overseas, fewer companies are unionized and fewer companies offer generous benefits.
A critique of this paper by Dr. Gary L. Wolfram is at:
www.mackinac.org/12686

"Keith Bender and John Heywood recently released a study concluding that although the average state and local government employee is paid more than the average private-sector worker, once individual characteristics such as factors like education, age and unionization are taken into account, the public-sector worker is actually paid less than his or her private-sector counterpart. There are at least two types of problems with the study — one methodological and one statistical — that cast serious doubt upon this conclusion. "


Posted by pat, a resident of Midtown
on Jan 4, 2011 at 11:10 am

More on studies:

Wayne's point is critical. The entire package (salary + benefits) has to be considered in any analysis.

There's another study by Allegretto & Keefe: The Truth about Public Employees in California:They are Neither Overpaid nor Overcompensated by www.irle.berkeley.edu/cwed/wp/2010-03.pdf

This study was another apples-to-oranges comparison. The authors dismiss the notion of comparing positions: "The idea of comparing similar positions and duties is appealing, but requires judgment in matching positions that appear comparable but may not be identical."

Apparently, they think it's better to use databases and statistics instead of making the effort to compare positions, which is really not that difficult. HR professionals do it all the time.

Some "conclusions" from the study:

"An apples-to-apples comparison, or one that controls for education, experience, and other factors that may influence pay, reveals no significant difference in the level of employee compensation costs on an annual or per hour basis between private and public sector workers."

The only way to get an apples-to-apples comparison is to compare identical jobs, e.g., lawyers, IT-professionals, clerks, HR professionals, etc. The study did not do this.

"There are too many critical occupations in the public sector, for example, police, fire, and corrections, without appropriate private sector analogs."

To leave these professions out of the picture, yet conclude that, "… the problems in California certainly could not have been caused by pensions and cannot be cured by pensions," is unconscionable. (Though I absolutely agree with firemanaj that some of the managers are seriously overpaid. They have their own "union.")

Another issue that must be considered with unionized employees is the fact that their pay is not merit-based and it is extremely difficult to fire them. All members get the same increases, regardless of efficiency, productivity, or talent.

But it's the police, fire and corrections unions that have the most power and the highest salaries and benefits. It's for this reason that some cities are farming out police and fire services.

"Educational attainment is the single most important predictor of earnings—thus it plays a vital role in this analysis."

Again, an apples-to-apples comparison is needed. A person with an MS in computer science or engineering is probably going to earn a lot more than a person with an MA in history.

"Retirement benefits also account for a substantially greater share of public employee compensation, 8.2% compared to 3.6% in the private sector."

I assume the study is looking at 401K plans in the private sector, since I know of no corporations that provide pension plans similar to union pensions. Also, public sector employees can retire at age 55 or 60 and collect salaries equal to or greater (with periodic increases) than their working salaries. In addition, they have full health insurance for themselves and their families for the rest of their lives.

From the 2011 City of Palo Alto Budget: "The Retiree Health Benefit Fund manages the payments associated with and reserves dedicated to medical benefits granted to retired employees of the City. In Fiscal Year 2011, retiree health benefit expense is estimated to be $9.8 million.

"Future Retiree Medical Liability - Estimated Avg Cost per employee $ 2,663."

Also see www.paloaltoonline.com/news/show_story.php?id=16236
Palo Alto retirees cash in on 'cash out' payments
City paid $5.3 million last year to workers with unused sick, vacation days

"Union status was omitted from this study of earnings and compensation comparisons, since it has been a focal point of the compensation controversy. This means that, in essence, we are statistically comparing unionized public sector workers with all private sector workers – both union and nonunion – rather than with their union counterparts."

But union status is a key factor in salary/benefits differences. Instead of saying the study compares public (mostly union) with private (non-union) employees, it should say it's comparing union to non-union.

The big unions breaking the bank in California are the very ones omitted from the study: fire, police, corrections.
See: www.mercurynews.com/public-employee-salaries
Database breaks down public worker salaries

"Possibly, a more important question for policy makers, rather than why highly educated public employees are unionized, is why relatively less educated and low-paid private sector employees are inadequately represented by unions."

It's a sweeping generalization to say that public employees are "highly educated" and private sector employees are "less educated and low-paid."

Which employees are we talking about? Admins and clerks? Lawyers? Janitorial services? Gardeners? Computer scientists? Auditors? Finance directors?


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 4, 2011 at 11:19 am

> Did you even look at the report? The authors are very clear that
> pensions are considered in their comparisons.

I've downloaded it, but it's a jumble .. so it's on my todo list. I continue to disbelieve that they have accurately examined the pension plans of both the public and private sector in such a way that their results are meaningful.

Most private sector companies are not offering pensions .. just Social Security. It's clear from looking at CalPERS data, that CalPERS retirees make more in their payouts than people on Social Security do.

Without examining all of the pensions funds in all of the States, there is no hard data to present. However, I'd be willing to bet that State pensions are generally better than Social Security.

Here's an Op/Ed piece from

America's Pensionless Future:
Web Link

"Prichard is the future," says San Diego's former city attorney Michael Aguirre, who is advising the city to declare bankruptcy to reduce its pension burden. "We're all on the same conveyor belt. Prichard is just a little further down the road."

Read that again! This is San Diego, California—not Podunk, Nebraska.

Startlingly, San Diego is just one of thousands of cities stretching from California to New York whose bloated, crushing public pension obligations are pushing them toward bankruptcy—or toward contact with a high social explosive known as "pension repudiation.
---

It's very difficult for anyone to take this study seriously, given the news that's hitting the papers on a daily basis.

> "The 6,133 retirees in the group's "$100,000 club" are about
> 1 percent of the total 492,513 retirees

The problem is that this is just the tip of the iceberg. With public sector employees now making routinely more than private sector employees (how many hardware designers, or software engineers make as much as a police officer, or a fireman here in the SV?), and these people exiting the system with 50-100%+ pensions--we are going to see this 1% figure jump easily into the 20% figure in the next decade. This 1% figure is true--for today, but we need to be looking out 10-20 years to understand how deep the hole is that we are in today.


Posted by Steve, a resident of Menlo Park
on Jan 4, 2011 at 11:24 am

The USA Today analysis is laughable. They simply compared salaries of all private workers with those of all public workers without taking into account levels of education, years of experience, salary cost with location, etc. Studies that go to the trouble of actually comparing apples to apples, as did the study that I referenced, find that public employees, on average, earn less than those in comparable positions in the private sector.
I refer you to an article from the Washington Post from last fall:
"A new government study shows that federal workers make an average of 24 percent less than their counterparts in the private sector, with some areas of the country showing much larger gaps Web Link. The gap is an average of 2.1 percent wider than it was last year, according to the Post's Federal Eye column. Some areas show significantly larger discrepancies. Federal salaries in the Washington-Baltimore area, for example, were 38 percent less than those in the private sector, according to the Post."
This federal study did not consider the differences in benefits, just salaries, so it isn't as comprehensive as the "Out of Balance?" study I referenced above.
Republicans always need to have a whipping boy to appeal to people's emotions, rather than to their intelligence. It looks like public employees and their unions are the new target. Facts don't matter much though when the purpose is to demonize - not analyze.


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 4, 2011 at 11:33 am

> Please run the numbers on the average pension and quit
> cherry picking your data

The $27,000 (or maybe a little less) is true, for today. But all of the numbers I am presenting are forward-projected against today's salaries. Anyone who is receiving a $27,000 pension payout retired over the past 30 years at a salary of $45K, or less. What I am saying is that the people who will be retiring in the next twenty years will be making 5-10 times what the current retirees have been seeing in pension payouts.

This link points to a file where the City of Palo Alto employee salaries can be found:

Web Link

by forward projecting the salaries, using 4$-6% yearly pay increases (which have been typical for quite a while here in PA), then the likely salaries at retirement can be "guestimated". It's not hard to see that the City of Palo Alto will have hundreds of retirees seeing greater than $100K payouts in the coming years.

There is no "cherry picking" of data here. Just a hard look at what's very likely to happen in Palo Alto, and doubtless in most Cities in California--unless something drastic happens.


Posted by Steve, a resident of Menlo Park
on Jan 4, 2011 at 11:34 am

Wayne -
You write: "Most private sector companies are not offering pensions .. just Social Security. "
Not true. Most companies have switched from pensions to 401K retirement plans for their employees and most companies continue to contribute toward those retirement accounts.
Anyone who thinks they can retire comfortably on just Social Security is nuts. SS was always meant as a safety net to keep people from abject poverty and as a supplement to some other form of retirement.
Realize too that many public pensioners aren't eligible for Social Security. Their pension is all they will have in retirement unless they have been able to save more than their pension contribution.


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 4, 2011 at 11:35 am

> without taking into account levels of education, years of
> experience, salary cost with location

And how does one get this information from either private companies, or public agencies?

And if one can't get this data from reliable sources, where does it come from?


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 4, 2011 at 11:37 am

> Not true. Most companies have switched from pensions to
> 401K retirement plan

A fair rejoinder. However, how many small businesses would you guess are providing 401Ks?


Posted by Steve, a resident of Menlo Park
on Jan 4, 2011 at 11:41 am

Wayne -
"4%-6% yearly pay increases" may be typical in Palo Alto but salaries for Menlo Park workers have been flat for the past 2 years and will be for 2011 too. Given the financial situation of the city, I expect the soonest that MP workers can hope for a raise will be in 2013 IF the economy continues to recover.

I think your projections are exaggerated by over-estimating the COLA's that employees will be receiving. How do you calculate that pension payouts for employees 20 years from now will be "5-10 times what the current retirees have been seeing in pension payouts"???
I know you don't believe the conclusions of the "Out of Balance?" report but have you got any better studies to support your beliefs? I would like to keep this discussion fact-based as much as possible.


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 4, 2011 at 11:46 am

> Realize too that many public pensioners aren't eligible for Social
> Security. Their pension is all they will have in retirement unless
> they have been able to save more than their pension contribution.

CalPERS pension averages (at/about $26K-$34K) are already more generous than Social Security ($12-$20K a year). So .. why should a government sector retiree expect to "double dip"? Remember too, that Social Security is not "free"--people contribute about 7.5% of their salaries (and work maybe 20 years longer than government sector employees), and their employer contributes 7.5%. Self-employed people contribute the full 15+%.

> Their pension is all they will have in retirement unless they have
> been able to save more than their pension contribution.

And why is this situation any different for a Government Sector employee than a private sector employee?

We really need to get to the point where we see government sector employees in the same like, salary and retirement benefits wise, as every other American private sector employee.


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 4, 2011 at 11:49 am

> I think your projections are exaggerated by over-estimating the
> COLA's that employees will be receiving

COLAs in California for government sector employees are convoluted, but deterministic at the current time. CalSTRS uses one formula, and CalPERS using another. While the COLAs could be larger in the future (than I am currently using), then can not be smaller.


Posted by Steve, a resident of Menlo Park
on Jan 4, 2011 at 12:23 pm

Wayne -

You ask: "And how does one get this information from either private companies, or public agencies? And if one can't get this data from reliable sources, where does it come from?"
I answer with a quote from BLS:
"The Bureau of Labor Statistics is the principal fact-finding agency for the Federal Government in the broad field of labor economics and statistics."
I imagine information on pension comes from the Pension Benefit Guaranty Corporation (PBGC). This corporation monitors all of the 27,500 private-sector defined benefit pension plans in this country serving over 44 million workers and retirees. Pension payout information is a matter of public record - else how could the employees know what to expect when they retire - so there's nothing secret about how much the pension liability will be for both public & private pensions.


Posted by Steve, a resident of Menlo Park
on Jan 4, 2011 at 12:40 pm

Wayne -
You ask: "why should a government sector retiree expect to "double dip"?"
That's my point. They don't double dip. Whereas employees who get a 401K retirement plan can also count on Social Security when they retire. Therefore a pension needs to be a bit higher to account for this disparity.
Over 80 million workers have 401K plans so this is not a minor number who will tap both their 401K and Social Security.

You also write:
"We really need to get to the point where we see government sector employees in the same like, salary and retirement benefits wise, as every other American private sector employee."
I imagine public employees would love to achieve parity in salary & benefits with their private sector equivalents but, as the "Out of Balance?" report shows, this is not the case.
As for parity between public pensions and private (401K + Soc Security) - you have yet to show me any studies that indicate they are currently out of whack. The "Out of Balance?" report suggests that public pensions also lag the retirement benefits available in the private sector, though they don't address that question directly. Where do you get your information that pensions are overly generous? And I mean current pensions, not the exaggerated projections that you pulled out of the air.


Posted by the Palo Alto premium, a resident of Crescent Park
on Jan 4, 2011 at 2:11 pm

Steve, you're missing the point. With the public salaries being so much higher than their private equivalent, even bringing them into line with private salaries and lowering the cost isn't going to be enough.
We simply can't afford these on-going benefits.
As with 401k, the risk needs to be moved to the beneficiary. Palo Alto can't continue to underwrite the costs of these pensions.


Posted by Steve, a resident of Menlo Park
on Jan 4, 2011 at 3:01 pm

Wayne -
But the "Out of Balance?" report, and others, shows that public salaries are lower than their private equivalents, not higher. That's why I said that public employees would be delighted to achieve parity with the private sector.


Posted by the Palo Alto premium, a resident of Crescent Park
on Jan 4, 2011 at 4:36 pm

Steve, sorry, no, yours showed what you wanted to show. All the others show the public salaries are higher and have been for some time.

And, yet again, you miss the point. Even lowering the costs to that of private equivalents doesn't solve the problem.


Posted by JacoP, a resident of Midtown
on Jan 4, 2011 at 4:44 pm

Fireman aj

the city owns the house.


Posted by pat, a resident of Midtown
on Jan 4, 2011 at 5:19 pm

"Studies that go to the trouble of actually comparing apples to apples, as did the study that I referenced, …"

Steve, as I have pointed out, the study does NOT compare apples to apples, lawyers-to-lawyers, clerks-to-clerks, etc.

The study says, "State and local governments consist disproportionately of occupations that demand more skills and earn higher wages. As a consequence, the typical state or local government employee has substantially more education, training, and experience."

This is absurd on the face of it. Who is the "typical" state or local government employee? Is there such an individual? Would we find him/her in the planning department or the library or the sewage treatment plant or ?

"…most companies continue to contribute toward those retirement accounts."

Some supporting data please. How many are "most" companies?

"I would like to keep this discussion fact-based as much as possible."

Do you consider the study presented all the facts? It cherry-picked the jobs it included and excluded.

"… the "Out of Balance?" report, and others, shows that public salaries are lower than their private equivalents, not higher."

Steve, please go back and read my concerns about the flaws in the study's conclusions.


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 4, 2011 at 6:54 pm

Someone emailed me a link to one of the studies in question:

Web Link

From reading the article, it's clear that every point I have been trying to make about this (and similar) studies being flawed is true.

Let's start (again) with the premise I have been asserting--

Unless total lifetime compensation is under consideration, the results of any "study" is not of too much value, other than to look at a snapshot of employees under study.

So, what is total lifetime compensation?

Total-Lifetime-Compensation = total-salary-for-working-years +
total-benefits-for-working-years
+ total-post-retirement-guaranteed-pension-payouts
+ total-post-retirement-guaranteed-healthcare

No doubt, there are a few other items to consider--but unless the pension is considered in any comparison with the private sector, then the results are either meaningless, or fraudulent.

The payouts for most salaried government employees have been modest, in the past. But with salaries now in the 100K to 200K range, with pension multipliers in the 75%-100+% range, .. this comes to anywhere from $1.5M to $8+M additional dollars that need to be "on the table".

While private sector retirees will doubtless get income from their retire accounts, this is not income guaranteed by the taxpayers. Whereas the "defined benefit" pensions are!

Study Incredibly Flawed

---
The study did not compare workers with similar jobs in the private and public sector because its authors felt there were too many differences to draw accurate conclusions. For example, the study notes that there are no private sector police officers or firefighters; and that teachers at a public school face far different challenges than those at a private school.
---

5000 workers means 2500 public sector, and 2500 private sector, or does this mean 5000 of each? 2500 is not a very large number, out of about 15M workers.

And the comment about not comparing workers in similar jobs because of "differences" is very difficult to fathom. And finally, not comparing the salaries and benefits between teachers in public schools, and private schools because of "different challenges" makes one believe that these authors will make great grandparents .. since they like to weave such interesting yarns for the kids.

Just for the record (ONE MORE TIME), unless the pensions are considered as "deferred income", or some other way that directly links the to the total compensation package for an employee, then the claims about government workers being underpaid are just well .. anything from wrong, to false --

Posting this pension payout data again--

Using a COLA of only 2%, public safety retirees receive the following payouts:

Total Pension Payouts

Pension
$100K--10-Years: $1.1M | 20-Years: $2.5M | 30-Years: $4.1M
$150K--10-Years: $1.7M | 20-Years: $3.4M | 30-Years: $6.2M
$200K--10-Years: $2.2M | 20-Years: $5.0M | 30-Years: $8.3M

For decades labor unions have done everything in their power to hide the impact of pensions on the cost-of-doing business. This caught up with General Motors in a big way, when it collapsed under the weight of pensions and health benefits to its workers. The same thing is happening now in the private sector.


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 4, 2011 at 7:02 pm

> That's my point. They don't double dip.

I fear that your answers reveals a complete lack of understanding of the pension issue.


> I imagine public employees would love to achieve parity in salary
> & benefits with their private sector equivalents

The Daily Post has published the salaries of all of the major government agencies on the Peninsula. It was shocking to see the large number of >$100K salaries. With the pensions linked, yielding multi-millions for many of the current employees, and most of the future government sector employees--I can not image one of these people wanting to trade their plush (jobs-for-life) situation for people in the private sector.


Posted by Steve, a resident of Menlo Park
on Jan 4, 2011 at 11:21 pm

Wayne -
There you go again, printing projections for pensions of over $100,000 a year when you know that applies to less than 1% of retired public employees. You still haven't calculated the numbers for the average public employee who's getting just $27K.


Posted by Wayne Martin, a resident of Fairmeadow
on Jan 5, 2011 at 11:16 am

> There you go again, printing projections for pensions of over
> $100,000 a year when you know that applies to less than
> 1% of retired public employees

This thread was about Palo Alto "Pension Woes", not the bulk of the CalPERS retiree base. Here is the $100K club for Palo Alto:

Web Link


BENEST, FRANK $14,578.88 $174,946.56 PALO ALTO
BRIGGS, PATRICIA $11,073.92 $132,887.04 PALO ALTO
BROUCHOUD, ROBERT $9,390.10 $112,681.20 PALO ALTO
COSTA, JOHN $10,247.55 $122,970.60 PALO ALTO
CWIAK, ROGER $10,537.74 $126,452.88 PALO ALTO
DAULER, RICHARD $8,488.05 $101,856.60 PALO ALTO
DURKIN, CHRISTOPHER $9,229.96 $110,759.52 PALO ALTO
EAGAN, PAUL $8,661.48 $103,937.76 PALO ALTO
FISCHER, TORIN $10,240.34 $122,884.08 PALO ALTO
FLEMING, JUNE $12,393.79 $148,725.48 PALO ALTO
GONZALES, KENNETH $8,368.86 $100,426.32 PALO ALTO
HARTNETT, DONALD $9,238.22 $110,858.64 PALO ALTO
HEISER, DAN $9,945.62 $119,347.44 PALO ALTO
HEITZMAN, WILLIAM $9,112.30 $109,347.60 PALO ALTO
HERNANDEZ, JONATHAN $8,728.00 $104,736.00 PALO ALTO
IGNOFFO, PHILLIP $10,162.81 $121,953.72 PALO ALTO
JACKSON, MICHAEL $9,876.79 $118,521.48 PALO ALTO
JAMES, RICHARD $13,472.72 $161,672.64 PALO ALTO
JOHNSON, LYNNE $15,201.35 $182,416.20 PALO ALTO
LEVY, MARY $9,880.72 $118,568.64 PALO ALTO
LIKENS, GAYLE $9,865.58 $118,386.96 PALO ALTO
LINDSEY, DANIEL $11,368.71 $136,424.52 PALO ALTO
LOQUIAO, DONATO $8,345.27 $100,143.24 PALO ALTO
MCKENNA, KATHLEEN $9,517.73 $114,212.76 PALO ALTO
MERSON, THOMAS $10,369.85 $124,438.20 PALO ALTO
MIKS, WILLIAM $13,047.51 $156,570.12 PALO ALTO
MRIZEK, EDWARD $11,832.24 $141,986.88 PALO ALTO
PIANA, DONALD $9,562.17 $114,746.04 PALO ALTO
REISERER, RUSSELL $9,843.03 $118,116.36 PALO ALTO
ROUNDS, JAY $11,002.64 $132,031.68 PALO ALTO
THILTGEN, PAUL $12,697.45 $152,369.40 PALO ALTO
WEINREICH, GARY $8,462.37 $101,548.44 PALO ALTO
WETZEL, RICHARD $10,652.78 $127,833.36 PALO ALTO
WILLIAMS, DANIEL $8,836.90 $106,042.80 PALO ALTO
WILLIAMS, SYBIL $8,500.56 $102,006.72 PALO ALTO
YEATS, CARL $10,691.47 $128,297.64 PALO ALTO
YORE, MICHAEL $10,065.49 $120,785.88 PALO ALTO
ZOOK, BRADLEY $8,963.94 $107,567.28 PALO ALTO

It's not clear how many people are currently retired from the Palo Alto City Government, so this list needs the less than 100K group to be totally accurate.

However, the point that I (and all of the Pension Reformers) am making is that the current level of salary, with the short period of service required for retirement, and the very high pension multiplier (% of salary) will crush City governments throughout the Country. This article about Palo Alto's post-retirement budget costs being an example of what we will see in the future.

Using the 2009 Salary data (link posted earlier), there were over 20 employees who retired in 2009 with salaries greater than $100K. These former employees will start with $100K pensions (or will see them in a few years as the COLAs move them into the $100K zone).

These pensions are guaranteed by the City of Palo Alto, and must be paid for via taxes/fees/fines, etc. by the residents and businesses of Palo Alto.

Ultimately, we have to ask: "what did these people do when they worked for us to justify $100K-$200K/year pensions for life?"


Posted by the Palo Alto Premium, a resident of Crescent Park
on Jan 5, 2011 at 11:56 am

"Ultimately, we have to ask: "what did these people do when they worked for us to justify $100K-$200K/year pensions for life?"

It's the guarantee that is the problem. They are welcome to share in any return they get from their pension fund and if this is $100-$200k then good luck to them.
As long as they are taking the risk, they should get the benefit.
It is the on-going final-salary Palo Alto guaranteed amount that has to stop! Shortfalls need to come out of peoples pensions not tax-payers pockets.


Posted by Joseph E. Davis, a resident of Woodside
on Jan 5, 2011 at 12:28 pm

The solution is to tax public pension benefits above the median Californian income at a 90% rate, and feed the money back into the pension fund.


Posted by The Thinker, a resident of Stanford
on Jan 5, 2011 at 1:13 pm

Sour grapes, people. You'd jump on these pensions in a second if you could qualify for the job.


Posted by Charlie, a resident of Barron Park
on Jan 5, 2011 at 1:46 pm

It's sad that only take a couple genius worked in the city and came up with this pension scheme in the past. The only alternative now are hike more fees and cutting down more services..


Posted by Steve, a resident of Menlo Park
on Jan 5, 2011 at 4:03 pm

Here's a positive solution to solving the pension problem, thanks to the UC system, which was facing the problem in spades. Basically, they sat down with the employees involved and negotiated a new pension plan that, while causing some pain, was fair to all involved and that will gradually reduce the university's liability to manageable proportions:

Web Link

The 3rd paragraph summarizes the new system:
"Pension benefits for current employees and retirees will not be affected by the changes as earned pension benefits are protected by law and cannot be revoked or reduced. Current faculty and staff, as well as UC, will contribute more to the pension program, and roughly half of current faculty and staff will come under new eligibility rules for retiree health care.
The changes approved require both UC and its employees to contribute more to the pension fund, with employees contributing 5 percent of pay to their pensions by July 2012 and UC contributing 10 percent."


Posted by who cares, a resident of Triple El
on Jan 5, 2011 at 7:25 pm

thanks to all for their pointless opinion on pension reform. To the guy with multiple posts who admits that he can't understand the recent report on government pensions because its all a "jumble" and it is on his "to do" list to read the full report, too funny. please read the full report before posting jibberish as fact. the only really important fact brought forth by this media report is that palo alto has a city manager and city senior staff that are unqualified to offer any opinion on city finances or to hold any public office.


Posted by Wha?, a resident of Another Palo Alto neighborhood
on Jan 6, 2011 at 1:24 pm

Are you really using figures for "public safety retirees" here? Police and fire get higher salaries and have shorter careers than most working folk. They earn every cent.

Most Palo Alto city employees work 20 plus years here and even then get half their salary or less when they retire.

Thank the stars the city has dedicated employees that take this kind of lambasting on a regular basis.

Again, direct your anger at the Wall Street folks who get in bonuses what many of us get to live on for the rest of our lives.


Posted by taxpayer, a resident of Southgate
on Jan 6, 2011 at 2:44 pm

Defined benefit plans are an anachronism. Once the norm, they are virtually non-existent in the private sector and being phased out in the public sector (ie Federal govt). What would happen if massive deflation occurred and the $ had twice it's current buying power? The cost of living would be halved, tax revenues would be halved, most people's wages would be halved, but PA retirees would still be making the same. If my 401k lost 24%, my employer certainly wouldn't increase their contribution to 52% to make it up for me. The only reason these plans still exist is because of union extortion: "Give me what I want or we'll all go on strike and shut the whole city down."


If you were a member and logged in you could track comments from this story.

Post a comment

Posting an item on Town Square is simple and requires no registration. Just complete this form and hit "submit" and your topic will appear online. Please be respectful and truthful in your postings so Town Square will continue to be a thoughtful gathering place for sharing community information and opinion. All postings are subject to our TERMS OF USE, and may be deleted if deemed inappropriate by our staff.

We prefer that you use your real name, but you may use any "member" name you wish.

Name: *

Select your neighborhood or school community: * Not sure?

Comment: *

Verification code: *
Enter the verification code exactly as shown, using capital and lowercase letters, in the multi-colored box.

*Required Fields