Pushing Public Employees to Retire


School superintendents are by far the highest paid government employees in New Jersey, making even more than heads of some Utilities Authorities, though they do need to come to work occasionally.

Governor Christie makes $175,000 in salary so in 2010 he imposed that as a prospective cap on superintendent salaries.

In an article today, a purported blowback example is provided in the retirement of Judith Wilson who has 35 years of service with a salary of about $225,000 and is retiring on a pension of $144,000 at age 56 rather than swallow a pay cut.  What that writer is missing…..

If Ms. Wilson had stayed another 10 years and gotten heretofore routine salary increases to get her average salary to $300,000 her pension would have been $250,000 instead of $144,000, an increase in value of about $1 million and those higher salaries while working would more than make up for the forgone pension payments over the 10 year period.

Defined benefit plans are severely backloaded.  Someone at or near retirement age could easily accrue 50% of their salary in the value of pension increases while someone 30 years from retirement might be getting an accrual value, subject to vesting, of 5%.  As outrageous as it may seem to have a government employee getting a pension valued at $2 million, how would $3 million strike you?

Does anyone teach math (or logic) around here?

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17 responses to this post.

  1. Posted by Anonymous on April 26, 2013 at 10:10 am

    Keep voting the way do and you will getting the same thing. you will never ever learn. First you need to stop believing everything they tell you They all have records and those records never show any marked improvement on any front, but nonetheless you vote for them

    Reply

  2. You do smile more, at age 56, spending $144K, than $250K at age 66 !

    The horse is dead, stop…….Now, run for office Everyone.

    Reply

  3. Posted by Tough Love on April 26, 2013 at 2:09 pm

    John, Agree with you, but that’s the basis design of DB Plans.

    I don’t like DB Plans in the Public Sector because (with the employer survival controls that exist in PRIVATE Sector Plans NOT existing in the PUBLIC Sector) it’s WAY too easy for our self-interested politicians to grant or increase pension benefits to excessive levels, often retroactively.

    There ARE beneficial element to DB Plans (mortality sharing being the primary one), but to be effective, reasonable, and yet “FAIR” to taxpayers, the pensions should cap out at 60% of final 5-yerar average base pay after 40 years and include full actuarial reductions of about 6% per year for each year you begin to collect your pension before age 65 (maybe 62 for police and firemen).

    Oh to dream ……

    Reply

  4. Posted by Al Moncrief on April 26, 2013 at 2:46 pm

    Yes, there are some excessive salaries and abuses in both the public and private sectors. But, what is the average public pensioner receiving in the U.S.? About $29,000?

    Kudos to BuryPensions for drawing attention to this topic of pension finance. It is probably the least understood public policy issue. Not even elected officials overseeing public pension policy get it. Certainly not Colorado politicians.

    ANATOMY OF A COLORADO PERA PENSION CONTRACT BREACH.

    In this article I have compiled an extensive (but, incomplete) chronology of events and statements surrounding the Colorado General Assembly’s breach of Colorado PERA pension COLA contracts in 2010. Colorado PERA retirees have filed a lawsuit, Justus v. State, asking that Colorado courts protect the retiree’s accrued, earned, contracted Colorado PERA public pension benefits. (More complete information germane to this lawsuit may be obtained only through formal discovery.)

    Readers of the article should note the abrupt transition of the organization, Colorado PERA, in 2009, from an organization that has historically defended the contractual rights of PERA members, to an organization influenced by self-interested parties . . . parties that successfully induced the Colorado PERA Board of Trustees to attempt a breach of the pension plan’s contractual obligations in 2010.

    Many Colorado politicians are primarily engaged in seeking votes, and bestowing political favors . . . compliance with constitutional provisions for these politicians is an afterthought. The prevailing legislative sentiment at the Colorado General Assembly in 2010 was that, since the idea of breaking Colorado PERA pension contracts was popular with influential self-interested groups and many constituents . . . those contracts should be scrapped. Colorado Constitution be damned! In 2010, political considerations trumped respect for the State of Colorado’s contractual obligations.

    Colorado PERA retirees (the target of the SB10-001 contract breach) have many unanswered questions regarding the 2010 breach of their pension contracts by the State of Colorado:

    Was the Colorado PERA Board of Trustees “opinion shopping” for a legal rationale to break PERA pension contracts in 2009? How was Jean Dubofsky’s firm selected to create this legal opinion? On her resume, Jean Dubofsky writes that Colorado PERA “requested” that she provide an opinion to PERA arguing that the Colorado General Assembly could “repeal” the PERA COLA benefit “without violating the vested rights” of PERA members. When exactly, in early 2009, did the Colorado PERA board decide to seek a legal opinion that would justify taking contracted PERA COLA benefits?

    Colorado PERA retirees should grasp the full implications of this statement Jean Dubofsky makes on her resume. This statement on Jean Dubofsky’s resume proves that the Colorado PERA Board intended to attempt a taking of PERA COLA benefits prior to the 2009 PERA “Listening Tour,” prior to the placement into Colorado statute of the “requirement” for the Colorado PERA Board to recommend pension reforms to the General Assembly, and prior to any sort of objective contemplation of pension reform options.

    In 2009, we do not see the Colorado PERA Board of Trustees seeking a legal opinion regarding changes in the rate of accrual of PERA pension benefits to be earned in the future. We don’t see the PERA board searching for a legal rationale to increase the retirement age of active PERA members, or increase the number of years over which active PERA member base pension benefits are calculated (increasing years in the HAS calculation).

    We DO see the PERA board ignoring “less drastic” impairment of PERA pension contracts, and targeting “fully-vested” PERA pension COLA benefits. We DO see the PERA board seeking a legal opinion regarding their FIRST CHOICE for PERA pension reform, breach of “fully-vested” pension COLA contracts. (Or, perhaps this option was the first choice of PERA employer lobbyists.)

    Given the numerous previous statements of Colorado PERA officials (that have been reported in the press and in Colorado PERA publications) supporting the contractual pension rights of PERA members, why would the Colorado PERA Board of Trustees actively seek a legal opinion contravening this legal advice?

    What was the initial reaction of Colorado PERA’s in-house attorneys to the PERA board’s objective to break PERA pension contracts? Were these in-house attorneys charged with the task of finding an attorney who might create the board’s desired legal opinion? Or, was Jean Dubofsky recommended to the PERA board by outside lobbyists (perhaps education lobbyists, or other representatives of PERA-affiliated employers?)

    If the Colorado PERA board sought a legal opinion regarding PERA COLA contractual rights in early 2009, it follows that the PERA board anticipated litigation in early 2009, and thus the organization, Colorado PERA, should have had a “litigation hold” in place at that point in time on all materials relevant to the COLA taking. Why bother seeking a legal opinion if you are on solid legal footing?

    Why would a board, that has a fiduciary duty to act only in the interests of the beneficiaries of the pension trust, actively seek a legal opinion that would rationalize contemplated harm to the rights of those beneficiaries?

    Who made the original proposal to attempt to break PERA COLA contracts? A member of the PERA Board of Trustees? Education lobbyists? Colorado PERA staff? When was this suggestion first proposed to the PERA Board?

    Did Executive Director Meredith Williams leave PERA due to a disagreement with the PERA Board over the COLA-taking? As we have seen, he was a finalist for a pension job in Texas in November 2010 . . . nine months after SB10-001 was signed.

    Were Meredith Williams and General Counsel Greg Smith forced to defend a PERA Board decision to attempt a contract breach against their will? Or, did they personally support the contract breach attempt?

    Apparently, Colorado PERA officials wanted the Colorado General Assembly to submit an interrogatory to the Colorado Supreme Court seeking clarification regarding PERA contractual public pension rights. Was this idea quashed by legislative leadership? Why was this responsible step ignored in 2009?

    How did the Colorado General Assembly reach the conclusion in 2010 that the state’s public pension contracts are inferior to the state’s contracts with corporations?

    By what means did the Colorado General Assembly conclude that it is free to pump $700 million of state revenue into local government pensions that ARE NOT the contractual obligation of the State of Colorado, while ignoring the funding of the state’s own contractual PERA public pension obligations?

    Did lobbyists for PERA-affiliated employers pressure the PERA board to attempt a taking of fully-vested pension benefits from retirees in order to prevent changes to the partially-vested pension benefits of their union dues-paying members?

    As late as December of 2009, Colorado PERA officials provided written testimony to the Colorado General Assembly stating that PERA members have a contractual right to their PERA pension COLA benefits. In light of this, why is Colorado PERA currently appealing a Colorado Court of Appeals decision with this same finding?

    Did the Colorado PERA Board (through PERA lobbyists) actually “ask itself” to make pension reform recommendations to the General Assembly? Did PERA lobbyists initiate the amendment (request drafting of this 2009 bill amendment through a legislator)? Did PERA lobbyists seek the amendment to the bill, SB09-282, at the end of the 2009 legislative session in order to make a preordained conclusion to attempt to take PERA COLA pension benefits appear to be the product of extensive deliberation on the part of the PERA Board? Was this amendment adopted in anticipation of the coming litigation over the PERA COLA, to potentially benefit the defendants? The PERA defendants have emphasized in their pleadings that PERA board recommendations were made in conformance with this “legislative mandate.”

    Many aspects of the Colorado General Assembly’s breach of Colorado PERA pension contracts in 2010 are revealed in the chronological compilation of events and statements provided in this article.

    “The Preordained Colorado PERA COLA Contract Breach.”

    We see the co-prime sponsor of SB10-001 and Colorado PERA’s attorneys stating that the COLA is a Colorado PERA contractual obligation. We see members of the Legislature stating that SB10-001 breaks PERA contracts.

    We see officials of Governor Bill Ritter’s administration describing the Colorado PERA COLA benefit as a “present obligation” arising from the “employment exchange transaction,” which will result in an average loss of $165,000 for PERA retirees over the next twenty years (a substantial loss.)

    We see numerous statements by Colorado PERA officials that PERA pension benefits are “guaranteed.”

    We see a former Colorado Assistant Attorney General, and numerous Colorado PERA retirees, warn the Colorado PERA board and the General Assembly against an attempted PERA COLA contract breach.

    We see state legislators using market volatility to justify the breach of Colorado PERA pension contracts, retroactively take accrued pension benefits, slash the pension debt of PERA employers, and seize what they believe is a “window of opportunity” to break pension contracts.

    We see Colorado PERA attempting to deceive Colorado courts by conflating constitutionally permissible improvements to the contracted PERA COLA benefit, with retrospective legislative takings of accrued PERA COLA benefits in 2010.

    We see Colorado PERA attempting to confuse Colorado courts regarding the distinction between “ad hoc” public pension COLA benefits and “automatic” pension COLA benefits.

    We see Colorado PERA attempting to exaggerate the financial condition of the Colorado PERA trust funds by employing “market-based” public pension funding ratios in legal briefs, while Colorado PERA has used “actuarial funded ratios” historically (as is common practice in public pension administration.)

    We see documentation of legal research conducted by Colorado PERA attorneys supporting the contractual pension rights of PERA members. (I doubt that PERA’s General Counsel originated the idea to attempt the COLA contract breach given his numerous previous statements and his legal briefs [cited in the press] that militate against such an attempt.)

    We see Colorado PERA officials emphasize the fact that PERA members are not eligible to receive Social Security benefits, and are accordingly particularly vulnerable to state breach of pension contracts.

    We see the Colorado General Assembly enact “prospective” pension reform for thousands of Colorado county government retirees, honoring their accrued pension benefits, after having retroactively seized the accrued pension benefits of Colorado PERA retirees in 2010.

    We see the adoption of legislation in the past by the Colorado General Assembly in which PERA employee pension contributions are “technically being paid by employers, from their salary-raise pools” in order to AVOID the breach of PERA member pension contracts.

    “The Colorado PERA SB10-001 Lobbying Juggernaut.”

    We see a member of the Colorado Legislature stating that SB10-001 was “a deal cut before this body met,” (that is, prior to legislative deliberation of PERA pension reform alternatives.) We see PERA lobbyists orchestrating debate on SB10-001.

    We see the co-prime sponsor of SB10-001 stating that the Colorado PERA Board of Trustees “needs to make it toxic” (through lobbyists) for anyone to challenge Colorado PERA in the legislative arena.

    Visit saveperacola.com for the rest of this article. “Friend” Save Pera Cola on Facebook!

    Reply

  5. Posted by Anonymous on April 27, 2013 at 11:07 am

    Remember that the costs are not just salary. If the superintendent stayed, they would contribute 7% towards the cost of their pension ($15,750). In addition, they would pay a share of health benefits based on salary, 1/3 of $21,000 plan is another $7000. Tax cap of 2% insures that raises will not exceed that amount after full implementation of the health contributions. So if she was making $225, she’d be looking at $5k a year in raises, x 10 would be $50,000 additional not $75,000. And that would be the maximum. It also doesn’t consider the 7% additional pension contributions on $50000, would be $3500 additional revenue to the pension system plus the savings of what the state wouldn’t be paying out (144k/year plus health insurance). At retirement the superintendent will pay zero for health benefits. Now consider that the superintendent can go to NY State or PA, or become an interim superintendent.

    At the same time the state/local government will pay 2/3 of the new superintendent’s health benefits. Remember that the cost to government will be for 2 people–the cost of the retiring superintendent and new superintendent. There is no savings with the cap.

    Interesting that years ago the state eliminated tenure for superintendents to get “market conditions.” Then they capped taxes increases and total payouts. You have to be nuts to want to be a superintendent now.

    Reply

    • Posted by Tough Love on April 27, 2013 at 1:51 pm

      All you are proving is :

      (a) we pay them too much
      (b) their formula pensions are too erogenous and they can receive them (unreduced) at too young an age, and
      (c) with almost nobody in the Private Sector getting employe-rprovided retiree healthcare subsidies any longer … AND … with the Public Sector workers earning no less than their Private Sector counterparts in “cash pay”…. WHY is there ANY taxpayer-funded retiree healthcare ?

      Reply

      • Posted by Tough Love on April 27, 2013 at 1:59 pm

        Ooophs … obviously the word “erogenous” in my item (b) above, should have been the word “generous”.

        Also, the answer to “You have to be nuts to want to be a superintendent now” is to freeze the pay (or provide very low raises) to the next few levels below them. ALL of their pensions are too generous. And if we can’t easily reduce the pensions, we can certainly slow down stop their growth by freezing the pay levels.

        Reply

    • Posted by muni-man on April 27, 2013 at 2:50 pm

      What, no ‘rubber rooms’ for superintendents? – an egregious employment oversight if there ever was one. Illinois’ got the right idea though. They appear hell-bent on speeding up their dive off the financial cliff by strengthening their pension funding guarantees with new language that would make it virtually impossible for them to ever repeal in the future. True-blue-utopian visionaries out there, lol. Damn glad NJ avoided that contractual snakepit and can keep underfunding in earnest.
      http://illinoispolicy.org/news/article.asp?ArticleSource=5764

      Reply

      • Posted by Tough Love on April 27, 2013 at 3:16 pm

        I have been reading the proposals to create an iron-clad Illinois State GUARANTEE to fund AND be responsible for the Public Sector pensions … supposedly in exchange for some givebacks.

        Absurd…. the “givebacks” will come anyway since there is no money to pay for even half what has been promised. There is no reason for the “State” to “give up” ANYTHING in exchange … and CERTAINLY not doing something that would make it even harder to address future problems that might arise.

        Anyone that would vote for this is in the Union’s pocket ….. PERIOD.

        Reply

        • Posted by muni-man on April 27, 2013 at 3:49 pm

          I just found it amazing to read that and see the absolute stranglehold unions have on them, even though they’re a financial basketcase now. The guarantees are meaningless though – economics is gonna flatten them with or w/o stronger guarantees. It’s just a legislative exercise in futility that’s all.

          Reply

  6. Posted by George on April 27, 2013 at 7:30 pm

    ” how would $3 million strike you?” But in your example she would be paid 10 fewer years as she is 10 years closer to death. She would in theory be replaced, so the pension scheme would increase by one member. There are now two unlimited health plan participating families instead of one. Was she collecting her pension while working.

    On the political side, the question is is it easier to handle one family making a lot of money with a large pension obligation or a retiree (and family) and an new employee (and family).

    Also interesting is nobody seems to feel she has years of valuable experience, or that a new person might improve things.

    Reply

    • Posted by Tough Love on April 27, 2013 at 8:22 pm

      Which get back to what I said earlier … (a) we pay them too much, and (b)
      their formula pensions are too generous and they can receive them (unreduced) at too young an age

      Reply

  7. Posted by bpaterson on April 29, 2013 at 11:28 am

    JB, not all superintenedants of districts are under that 175k salary cap+ adjustment. There are other “shadow” districts such as votechs, or ed services, or jointure where there is no cap on the salary. Example: In your union county votech supt bistochi who just retried last years was making $225,000 after 34 years………..and lets not get into college presidents salaries, there was a SL study done a few years ago on that group.

    Reply

    • Posted by Tough Love on April 29, 2013 at 12:30 pm

      The new salary caps only kicked in AFTER pre-existing (multi-year) contracts with the individual Superintendents expired.

      Reply

  8. Posted by bpaterson on May 3, 2013 at 10:44 am

    why I find interesting is whenever a govt entity finished their budget, they are normally quoted in the news saying something along the lines: “this budget is a good budget that has no layoffs and no cuts in services”. As a resident and taxpayer, I understand the quest of no cuts in services, but from my private sector experience I understand employment is fragile, so why should I care at all of whether there are layoffs or not?

    Reply

    • Posted by Tough Love on May 3, 2013 at 11:26 am

      There is a major disconnect when it comes to Public Sector employee management.

      In the Private Sector, “getting-the-most-for-your-money” (considering BOTH the short and long term in such decisions), efficiency, high productivity, and profitability are the the goals … with sufficient, but not excess staff. Sure there are some slackers, but (unless the boss is family) they don’t last very long.

      In the Public Sector, these goals seem to be conceptual but rarely practiced, and controls of any sort non-existent or not followed (ad w/o any consequences for not following them). Keeping those that gave you (or can take it away) your job and those who have input on your funding happy seems to be job #1, #2, and #3. Job #4 seems to be figuring our how to increase (whether needed or not) your budget and staff, and how to increase your pay, pensions and benefits. Necessary work does get done, notwithstanding Union work rules that over-staff and slow-down the process making Taxpayers pay more than what is needed. And slackers ….. the Unions tell everybody to slow down, so the incompetent don’t look so bad.

      Reply

      • Posted by muni-man on May 3, 2013 at 12:02 pm

        It’s simply employment cocooning 101, 201, 301 and 401. It’s a time-honored practice among publics.

        Reply

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