LEGISLATIVE REPORT:
Words to the Young: Traditional Pensions Exist
By Michael Karsch, Legislative Representative
As we enjoy our pensions from the City of Los Angeles via LACERS, we might think of our own children and grandchildren who may not feel the urgency of just having the security of a pension check every month. All of my grandchildren are in their 20s and looking very earnestly at jobs, with pensions getting very little attention. I tell them to pay some attention to pensions, which may cover a substantial number of years in their lives, like at least ten, more likely 20 or more years. And what about your medical coverage? I realized with those in their early 20s that I should start with recommending government jobs. Look at me – it’s been a long, fun career, and now I am covered for the remaining portion of my stay on this earth.
Realizing I should be more realistic in talking to them, I just said to look at government jobs – you might find something out there that appeals to you, whether you have a college background or not. Check out the Websites of the cities you live in, or would like to live in, see what is there, then check the background information that should help. And then I said to think of the safety of the pension. Well, this did not generate any conversation. I hope I left an idea in their heads.
A recent report in a Forbes news article titled “10 Jobs That Still Come With a Traditional Pension” offered this list:
1) teacher;
2) state and local government;
3) utilities;
4) protective service;
5) insurance;
6) pharmaceuticals;
7) nurse;
8) transportation;
9) military; and
10) unions.
Nearly all of these fields offer the traditional pension, although a few are offering the 401(k) savings account for retirement. More than 70 percent of utility companies offers good pensions.
Some public pensions draw attention for their generosity. Reason.com looked at the CalPERS figures from last year and noticed that 30,969 pension checks worth $100,000 or more were issued in 2018 (the City of LA does not belong to CalPERS). CalPERS built up its investment portfolio and pension payouts from the 1990s with 10 percent annual growth for much of that first decade, meaning the portfolio generated enough funds to cover the obligations by 100 percent. The surplus is now gone, and reportedly the shortfall is $138 billion.
The following are some individual city stories among the CalPERS family:
- Oxnard is implementing cuts in its city budget, mostly to meet rapidly rising pension payments. This is what the city of Oxnard must pay into CalPERS by 2024: $45 million; the cost in 2017 was nearly half, $23 million. This does not include what the Oxnard active employees are paying for their share of the pension.
- Santa Monica’s unfunded pension liability is $448 million now, but will “balloon” in the next few years. The Finance Director of Santa Monica says that the city should pay $16.6 million, instead of the currently expected $2.6 million in the upcoming 2019-21 biennial budget to pay down that debt. The Finance Director also said, according to the Santa Monica Lookout, that if CalPERS does not meet its investment return targets, the City’s liability could balloon, undermining its long-term fiscal health. City Manager Rick Cole attributed the debt situation to “catastrophic miscalculation” made by the governor and state legislators in the 1990s based on “rosy assumptions of future earnings.” He added, “They authorized retroactive increases in pension benefits for some state workers. The vast majority of local governments soon fell into line.”
