We hear a lot about the cost of public employee retirements. Can we blame our civil servants or is this just another case where today’s problems are the result of yesterday’s solutions?
After the passage of Proposition 13 to the later part of the 1990s many public entities (cities and counties) increased employee incentives by enhancing retirement benefits instead of salaries because CalPERS was able to refund part of, if not all, retirement contributions to the entities. These benefits were gradual increases in the amount the entity paid to the retirement fund, lowering age for retirement, calculating highest year instead of average of three highest, and increases in the percent the employee would receive at retirement age.
In the early 2000s when the unemployment fell to about 4 percent public entities found, even though they had a very good retirement benefit system, they could not recruit and retain people entering the job market because government entities could not compete with the salaries offered by the private sector. This new generation seemed more concerned with what they were making today than how much they would have for retirement.
To recruit and retain employees the public sector raised salaries and financial incentives to fill the positions needed to maintain the services the public seemed to demand, and at the same time kept the great retirement incentives. As a result a person who retired after 2002 could be paid from 50 to 75 percent more than a person who retired from the same position prior to 2000.
Rolling back either salaries and/or benefits is hard to negotiate when they were promised as a condition of employment and the unions that represent the employees have financed the campaigns of the elected officials that ultimately negotiate the contracts.
Finding a solution is like losing weight, we know we need to but cannot find the commitment to do it right. Is the public willing to pay more for services they have come to expect? Can the public employees accept the fact it is no longer 2002 and they are pricing themselves out of work?
I am sure whatever solutions are found in 10 years will lead to other problems unless the people making the decisions are more concerned about the future of our communities and citizens than they are about their short term incentives or their political futures.