Dan Borenstein, a columnist for the Contra Costa Times, said pensions for California’s public employees may be a form of “theft.” Speaking, on Thursday, June 21, to a large audience at the Orinda Public Library’s auditorium, Borenstein said that the pensions of public employees are leaving a large debt to future generations.
Using a detailed slide presentation, Borenstein said that many public-employee pensions are based on a formula giving a public employee three percent of his or her top salary multiplied by the number of years of service.
For example, if a public employee received a top salary of $200,000 and worked for 30 years, the employee would receive a pension of $180,000 per year.
However, Borenstein said that some public-pension plans could provide even more money because of special factors. Some pension plans, he said, pay for an employee’s expenses for health care.
Borenstein said a public employee’s top salary can be increased by adding extra compensation for unused sick leave and unused vacation. This practice is called pension spiking.
Borenstein said that the California Public Employees Retirement System (CALPERS), can produce, based on 2008-09 data, a pension of $67,000 per year after 30 years of service. Yet, in certain cases, Borenstein said, pensions could go as high as $82,000.
Borenstein said that some public employees get extra money from the Social Security system.
Borenstein noted that CALPERS invests funds collected for future pension payments. CALPERS, he said, guarantees an investment return of 7.5 percent. (Until a few months ago, the guaranteed rate of return was 7.75 percent.)
Over the last 10 years, according to Borenstein, investments, on average, have returned 5.5 percent.
Borenstein said that if CALPERS does not achieve its current 7.5 percent rate of return, California’s taxpayers have to make up the difference.
Borenstein said that some government pension systems do not have enough money to pay promised benefits.