Most Exorbitant Public Employee Pensions

In the propaganda war over pensions in New Jersey manufacturing statistics is a sport:

New Jersey’s public employee pensions are not “exorbitant,” as Gov. Chris Christie has proclaimed, at least not compared with other plans across the country, asserts a new report by a progressive policy organization.

The report released earlier this month by New Jersey Policy Perspective does not compare average payments to retirees. It instead compares three other indicators — cost-of-living increases, the “multiplier” that calculates pensions per year of service, and employee contributions.

According to NJPP’s methodology, which drew on data from the National Association of State Retirement Administrators, New Jersey’s pension plans rank 95th out of the 100 largest pension plans in the nation. In other words, based on those criteria, 94 of those 100 pension plans are more generous than New Jersey’s.

Totally bogus and debunked here at the time but it does raise the question of which state does have the most generous benefits and comparing average payments to retirees IS an excellent measure.  Since we now have the data on 154 state plans and some facility with Excel it can be done and the average for state plans* comes to $26,022.  The state topping the list at $42,877:

California

Related spreadsheets:

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* With a guess as to Wisconsin which has separate valuation reports for retirees and non-retirees.  The nearest I can figure is that the non-retiree valuation lists $4,817,721,000 in payouts while the retiree report lists 191,795 Core Annuitants and 40,152 Variable Annuitants though based on large differences in Annual Amounts it looks like Variable Annuitants are a subset of Core Annuitants.

wisconsin annuitants

Assuming there are really 191,795 retirees the average payout comes to $25,119.

35 responses to this post.

  1. Posted by Anonymous on August 14, 2016 at 4:55 pm

    Christie is disgusting in Every way

    Reply

  2. Posted by Greg Lamon on August 14, 2016 at 5:23 pm

    Unless you are going to include state by state labor market information such as wage data, housing costs, cost of living and other measures of each state’s economy comparing retirement pay is pretty meaningless.

    Reply

    • Those factors would be a needless distraction since there is no provision in any public pension system that you have to live in the state from which you obtain your pension. For example, a good portion of NJ public employees retire to lower cost (including lower tax) states.

      Reply

      • Posted by S Moderation Douglas on August 14, 2016 at 8:03 pm

        There are a lot of distractions. For instance, my state pension is just shy of $50,000 a year. I get another $20,000 + in SS (not affected by WEP). Does that make my pension more generous than a safety worker with a $50,000 pension and no SS?

        (I believe I read that the public plans database has info on which workers are or are not in SS.)

        On the other hand… (See Harry Truman:  “Give me a one- handed economist!”

        According to Biggs, the added value of SS to the worker is only 2.4% of salary. The rest is considered a tax. (But the cost to the employer is still 6.2%)

        If there is a cop with a $70,000 pension, is his pension more exorbitant than my $50,000 plus SS?

        Also, when I retired, I was contributing 5% of salary to PERS. My replacement will be contributing 10% (at least) his whole career, and will receive the same benefit formula I did. Wouldn’t his pension by definition be less exorbitant than mine, since he will pay twice as much for no increase in benefit?

        Reply

      • Posted by Anonymous on August 14, 2016 at 10:13 pm

        That’s true and I’ve heard arguments for “taxing” out of state retirees, etc because they are no longer contributing to the State’s economy. I wonder if companies require their retirees (or even employees) to buy their products and services. Oops I forgot that’s different….

        Reply

      • Posted by Greg Lamon on August 15, 2016 at 1:27 am

        John, I don’t mean to beat a dead horse, but I think the economic conditions of the state whee one worked and earned the retirement benefit is important if comparisons between state retiree pay are made.. A $50,000/retirement benefit for someone working in a high wage and cost state like New Jersey would be one thing, but the same amount paid to someone who worked in a low wage and cost state would appear to be much more generous to that state’s constituency. Comparing retirement pay earned or granted between states is otherwise an apples vs. oranges comparison. Labor markets vary between states, and in large states they vary from region to region of the state, making it very easy to reach incorrect comparison conclusions regarding how generous a given pension system is. In my opinion.

        Reply

        • There is some correlation but based on the IRS average income figures taken from here:
          http://www.incometaxlist.com/income-tax-state.htm

          the retirees in states with lower average payouts have much lower replacement ratios whereas California not only has the highest average payout but (along with Alaska) the average California retiree gets about as much as the average regular worker:

          https://burypensions.files.wordpress.com/2016/08/sp-payout-avgsal.xls

          Incidentally, New Jersey though 10th in average payout does have one of the lower replacement ratios so NJPP might want to use these numbers for their purposes rather than that silly study they manufactured.

          Reply

          • The state topping the list at $42,877: California
            It is actually much more if you compare FULL CAREER employees in CA, who have “retired” since 2010, the average is close to double that $43K for one of the 20 separate city/county public pension systems (1937 Act Pensions), and 50%+ Higher for CalPERS retirees. Only when you put in 5 year employees,and employees from from 50+ years ago do you get the $43K number…The longest-retired employee in the CalPERS system is Curtis Bowden, a former member of the California Highway Patrol. He retired in 1947, which means he’s been collecting pension checks for 68 years, after working just 5.3 years for the CHP/state. ..In stark contrast, his modern CHP compatriots get 3 percent of pay for each year worked – six times as much – once they hit 50, thanks to uber-generous retirement formulas approved by state lawmakers in the halcyon days of 1999. So the CHP officer who retired last n 2013 will pull down $125,079 a year in retirement checks, according to data from the giant California Public Employees Retirement System.
            http://www.ocregister.com/taxdollars/public-531890-pension-retirement.html

  3. Posted by Anonymous on August 14, 2016 at 6:08 pm

    It would be very informative if the % of funded ratio was listed next to the average payout for each state.

    Reply

  4. Posted by Anonymous on August 14, 2016 at 10:23 pm

    On a lighter note and thinking optimistically I’d like to propose a Trump concession speech.
    It comes something like this; I’ll never offer congratulations to that b*itch, the election was rigged from the start, Republicans & Democrats actually worked together to keep me from my rightful place, My House no I meant the White House. Anyway back to making America great and me a few more billion in the process!

    Reply

  5. I agree with you that the NJPP study on pension benefits shouldn’t be taken seriously.

    Let’s say there is a state where end-career public employees make an average of $75,000 a year and then get a pension that is 66.7% of their final salary.

    Let’s say there is a state where end-career public employees make an average of $100,000 a year and then get a pension that is 50% of their final salary.

    Whose pension is more generous?

    Under the NJPP analysis, the first state is more generous since the pension is a higher percentage of the final salary, but in reality, both states’ public employees are getting the same $50,000 per year pension, and the high-salary state’s employees would be better off since they made more money while working.

    New Jersey is like the first state. Compared to the national average AND compared to NJ’s higher cost of living, NJ’s teachers are the second best-paid or the third-best paid in the country.

    So NJ’s teachers may get pensions that are a lower percentage of their final salaries, but their final salaries are extremely high.

    http://viz.edbuild.org/maps/2016/cola/states/#salary

    http://www.teacherportal.com/teacher-salaries-by-state/

    I agree with you, but I would like to hear a longer explanation from you of why the raw average benefit figure is indeed the best measure of pension generosity.

    Reply

    • Posted by Anonymous on August 14, 2016 at 10:42 pm

      Based on your second link NJ teachers average salary ranks 5th yet you conclude they are 2nd or 3rd?

      Reply

    • Average payout is an honest starting point (unlike the NJPP study which cherry-picked their three criteria) and there are factors unique to each state that inflate or deflate their comparative numbers.

      For example, California might have a higher average because their population has been expanding which means fewer older retirees (presumably getting lower amounts) in proportion to the more recent retirees.

      Then there is the fact that benefits are based on salary, and those states with higher average salaries among their general population would be expected to have higher retiree benefits also. This would account for states like CT, Mass, and NJ being in the top 10.

      For me, it’s Georgia at 11 that seems surprisingly high without an obvious explanation so, on benefit formula alone, that might be the highest benefits when all factors are considered..

      Reply

    • Let’s say there is a state where end-career public employees make an average of $100,000 a year and then get a pension that is 50% of their final salary.
      Except the public employee today does not get a 50% pension, it is 90% at age 50 in CA and close to that in most other places.

      Reply

      • Posted by S Moderation Douglas on August 16, 2016 at 4:36 pm

        Only for safety employees and only if one has thirty years service at age fifty. That limits 90% @ 50 to about one out of a hundred workers.

        Reply

  6. I agree that the NJPP analysis needs to be taken with a dollop of salt.

    1. The NJPP analysis didn’t take into consideration retirement age.

    If there’s a state that allows employees to retire at age 55 and another that has employees wait until 65, the first one ought to be considered more generous even if the pension payment is a lower percentage of salary.

    2. The NJPP analysis looked at the post-2011 pension structure, under which employee contributions were higher and COLAs non-existent. The author of the NJPP analysis himself, using his own criteria for generosity, admitted that NJ pension generosity would be average pre-2011.

    Retirees and their political allies always say that employees “never missed a payment,” but the payments they were expected to make were politicized and were lower than what actuaries would have recommended.

    3. It is incredibly callous of the NJPP to say that the Pension Crisis is entirely the state’s fault.

    NJ missed billions in payments in the 1990s, but the stock market boomed then and it was actually ok. By 2001 the pension funds were OVERfunded, hence politicians, in an effort to pander to unions, increased benefits.

    Had NJ made actuarial payments throughout the 1990s, the pension funds would have been over-over-funded and the increase in benefits might even have been larger.

    If you want to see how intense the pander competition was, read this 2001 article about DiFrancesco and McGreevey battling to see who could do the most for the NJEA.

    http://www.nytimes.com/2001/02/25/nyregion/in-race-for-governor-charting-the-course-of-education.html

    Also, the increase in pension generosity was never properly debated. According to an interview I heard with Gordon MacInness, the increase in pension payments was introduced on a Monday and voted on on a Thursday. According to MacInness, legislators didn’t understand what they were even voting on.

    Also, NJ’s debts are so unpayable because our economy has been so stagnant since 2001.

    Since 2001 the national economy has been in “secular stagnation,” but NJ’s economy has grown at half of the national average. From 2004-2014, our economy grew at only 0.8% a year, which is significantly below what it grew at in the 1950-2001 era.

    NJ’s governing class was short-sighted, dumb, and influenced by the unions themselves, but they increased pension generosity based on assumptions of economic growth that were reasonable given NJ’s economic history up until that time, but turned out to be wildly optimistic.

    Had NJ’s economy grown in the 2001-2016 era like it grew previously, our revenue would be higher by billions and our debts more manageable.

    Our economic stagnation has many causes, few of which are under the direct control of the governing class. The NJPP and its funders ought to cut the state some slack.

    Reply

    • Posted by Anonymous on August 15, 2016 at 12:14 pm

      Ok how about a compromise, the NJPP will cut the State the same slack it’s Governor is cutting it’s PW & Unions – LOL! Just seemed like a point of discussion that was missing g from your informatively long post….

      Reply

      • Posted by S Moderation Douglas on August 15, 2016 at 1:35 pm

        Good idea. NJPP to Governor:

        “SIT DOWN AND SHUT UP!”

        Reply

        • Something I find massively frustrating about discussions of NJ’s pension crisis is how nobody talks about NJ’s economic malaise and how this is a major factor in why we have such a crazy debt:GDP ratio.

          http://php.app.com/taxpain/2015/10/17/business-cry-fix-taxes-now/

          http://www.nytimes.com/2006/01/15/nyregion/nyregionspecial2/hightech-lowered-profile.html

          NJ isn’t as rich as it used to be. Our problems precede Christie and will outlast him.

          Attempts to make us prioritize pension funding over all other state priorities will probably induce a recession as thousands of public employees are laid off and taxes increase. The recession will make NJ’s debts even more unpayable.

          At a certain point, attempts to force New Jerseyans of the 2020s and beyond to fully pay for idiotically assumed debts of the 1990s becomes the equivalent of putting children in a debtors’ prison because of their parents’ mistakes.

          Also, lots of people talk about how 1990s tax cuts created pension underfunding and yes, that’s true, but there was also a huge surge of state aid in the 1990s to obey the Abbott rulings. From 1989-90 to 2001-02, NJ’s state aid increased from $2.5 billion to $5.5 billion and pension contributions fell from $750 million to $0.

          Is that a coincidence? I think not.

          http://njeducationaid.blogspot.com/2015/08/the-role-of-abbott-funding-in-njs.html

          Abbott is incredibly ineffective. If you compare the Abbott districts with equally poor non-Abbotts (eg, Freehold Boro, Dover, Fairview, Bayonne etc) who spend 50-60% as much, the Abbott districts underperform their severely disadvantaged demographic peers.

          Reply

        • Posted by Anonymous on August 15, 2016 at 2:26 pm

          Now I’m hitting below the belt, assuming I could find the waist line, we’d need a supplemental appropriation to buy a special chair for the Gov to sit down in. No wait, we’ll just take the $ from the ARC appropriation….sorry pension funds screwed again!

          Reply

  7. Posted by Anonymous on August 15, 2016 at 7:35 pm

    Around and around we go and where we stop…. Politicking, blogging, public debating – we know what has to be done but yet we continue to hypostatize. We need an immediate combination of measurable P&B reforms and tax increases both tied to a constitutional amendement! No more blame games or what ifs, just real action.

    Reply

    • Posted by dentss dunnigan on August 16, 2016 at 9:35 am

      This is a great summation of the entire process .”.The problem of course is that pensions will never be able to match the duration of a perpetual obligation stream. And even if they could, the best case scenario is that they would be able to lock in their existing underfunded status while doing absolutely nothing to close the gap.

      As we’ve said before, the looming pension catastrophe is an inconvenient fact for elected officials as well as union bosses and their membership. Rational solutions like cutting benefits are not palatable to employees or the elected officials that require their votes. As such, we suspect the problem will continue to be ignored until it boils over…”

      Reply

  8. Posted by Theodore Konshak on August 16, 2016 at 12:35 pm

    For the number of Wisconsin retirees, add the core and the variable. Payments to retirees on the variable basis follow the market. Benefit payments for retirees selecting the variable basis can actually decline in down markets.

    Reply

  9. Posted by George on August 16, 2016 at 9:31 pm

    This blog post says CALPERS lifetime health benefits vest after 5 years. Which I think is generous.

    “Under current law, it is possible that an employee who worked for a reciprocal CalPERS agency for more than five years, and then became employed by SMFD, could qualify for lifetime health benefits from the district after only one day of service,”

    https://calpensions.com/2013/07/01/law-prevents-cuts-in-retiree-health-care-costs/

    Reply

    • Posted by S Moderation Douglas on August 17, 2016 at 2:29 am

      This doesn’t apply to all CalPERS members. State employees with ten years service get fifty percent of retiree healthcare paid, incrementally increasing to one hundred percent paid after twenty years service.
      The “lifetime vesting” after five years is only for fifty percent. Ten years, in those cases, are required for full retiree healthcare. It’s individually bargained by local governments.

      From the article:. “Carson’s alternative provides 50 percent of the employer retiree health care contribution after five years of service, 100 percent after 10 years. Sacramento Metropolitan’s alternative provides 25 percent after five years, 100 percent after 20 years.”

      Reply

  10. Posted by Anonymous on August 17, 2016 at 9:58 am

    interesting article on trump, Christie and tax money lost. no wonder pension payments can’t be made, Christie is too busy giving trump money.

    http://www.msn.com/en-us/news/politics/trump-casinos%e2%80%99-tax-debt-was-dollar30-million-then-chris-christie-took-office/ar-BBvHIH3?li=BBnb7Kz

    Reply

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