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Pension Inequality
In California, Luxurious Pensions Fuel Inequality

California’s underwater pension systems don’t help most people, but some of its beneficiaries make out exceptionally well. The Los Angeles Times tells the story of one such lucky man:

James Mussenden doesn’t bring up his pension in casual conversation. No point getting his golf partners’ blood boiling.

The retired city manager of El Monte collects more than $216,000 a year, plus cost-of-living increases and fully paid health insurance.

“It’s giving me an opportunity to do a number of things I didn’t get to do when I was younger, like travel to Europe, take some things off my bucket list,” Mussenden, 66, said recently. He even flew to Scotland to play the famed Old Course at St. Andrews, a mecca for golf enthusiasts.

The rest of the article focuses heavily on the injustice of poor people who have no pensions being taxed up to the eyeballs to pay lavish pensions for retired city executives. As it should; the inequality of public pension systems is an enormous, and under-reported, concern. It’s also a way, one hopes, that Left-leaning institutions (like the Times) and individuals can come to appreciate the urgency of addressing the pension crisis.

In the end, poor people who rely on government support systems and, in some cases, government employment, will be hardest hit when the pensions crisis sucks budgets dry. Twenty-eight percent of El Monte’s general spending goes toward paying off pension liabilities, and that number is expected to rise in coming years. Soon enough, El Monte will have to drastically cut back spending in other areas if it can’t get things under control. Meanwhile, getting things under control entails cutting back benefits and, because most pensioners aren’t due to receive $200,000, the reductions will hurt more than their golf game.

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  • Jim__L

    Is there any data on what percentage of total pension expenditures are represented by pensions over $200k, over $100k, over $50k, etc?

    • FriendlyGoat

      If not, there should be. The starting point for addressing this is determining what is “excess” and what is not “excess”.

      • Jim__L

        That is a decision that needs to be left up to the citizens whose money is being taxed away.

        • FriendlyGoat

          And you have properly questioned where the requisite data could be found for them to sensibly do that. Portraying pensioners only with stories akin to those of welfare queens is not particularly helpful.

          What this most likely amounts to is that certain management was both overpaid and over-pensioned.

          • Jennifer H

            Agreed, the problem of high pensions lies with the cities and counties othe public agencies that set those Pensions and pay scale. Only showing some data is just sensationalizing and not informational to people who wish to address the issue intelligently. It’s unfortunate the voters do not ask questions and get answers before they vote.

          • M Snow

            Well, we try, but predicting the future is tough. Returns on investments were somewhat higher during the 90’s when these decisions were being made. Add to that that until recently medical science was giving us increased longevity, so payouts were underestimated by the folks who managed retirement funds. None of this excuses the crony politician/union deals that left us in this mess but it does explain why voters didn’t see it coming.

          • CaliforniaStark

            A major problem is the public employee unions take an active part in the political campaigns, and contribute large amounts of money, to political candidates in California. When you see signs saying “police support” candidate Smith, or “fire fighters support” candidate Smith, it often means candidate Smith has agree in advance to support increased public pensions. Add to that the politicians are also increasing their own pensions as part of the process. The result is a fiscal Titanic disaster; the only question is when the ship goes down.

          • Jennifer H

            I disagree, the city manager is an example of the highest paid person in a city. Those pay packages are determined by the city itself. Also, the number of positions that can be held by one person is determined by the city. The city is responsible for collecting money to enlarge their tax base. If the people they hire achieve their goals they get more incentives. The unions use this to garner wage increases for their members.
            All citizens vote, or should. Voters are not just “unions”. A voting block is helpful and the objective of all campaigns is to deceive or sway voters in order to vote their way. Voters need to educate themselves on issues brought before them.

        • CaliforniaStark

          The citizens in San Diego and San Jose have already make the decision; they ended their existing pension systems for city workers, and replaced them with 401(k) plans. In San Diego the vote was overwhelming – 65% of the vote. The city worker unions are unhappy with the citizen decision-making, and have filed lawsuits against the voter approved measures.

    • Andrew Allison

      I don’t think it matters. It’s manifestly crazy that the retired city manager of a mid-sized city is pulling down more than the (overpaid) governor of CA.

      • Jim__L

        I agree with you about the craziness, but if we’re trying to actually solve the problem, it helps to know if a plan involves just picking off particularly absurd cases or if it involves setting things on a real path to financial stability.

        • Andrew Allison

          The only thing that’s going to solve the problem is municipalities filing bankruptcy. The “public service” unions have made it very clear that they will not agree to any reduction in benefits.

          • Jim__L

            Yeah, that’s what happens when private companies pay their people too much — they go bust.

            Bankruptcy is possible in the public sector too, and shouldn’t be avoided by artificial bailouts.

          • Andrew Allison

            Unfortunately, unlike municipalities, States can’t file for bankruptcy. What this likely means is that the States will ask the Federal government for a bailout which, hopefully, the Federal government will provide only after major reform, including State constitution amendments eliminating the prohibitions on reducing benefits and public pension compliance with ERISA. The obvious solution is to provide retirees with the level of benefits which they would receive from Social Security, like the rest of us (the alternative is for them to get nothing when the plans go belly up). This would likely reduce the unfunded liability to manageable levels.

  • CaliforniaStark

    Below are websites indicating how many individuals receive over $100,000 a year pensions in San Diego, and the state Calpers system: In San Diego 900; and in the Calpers system 21,652. Kept in mind that excessive pension costs almost put San Diego in bankruptcy about a decade ago:

    http://www.sandiegouniontribune.com/news/watchdog/sdut-san-diego-retirement-payouts-grow-2016may11-story.html

    http://www.ocregister.com/articles/pension-725098-calpers-club.html

  • Beauceron

    Yeah, but its OK. The press and those on the Left won’t blame the exorbitant promises made by Democrats to get votes from government workers for the tightening. They’ll blame the big bad meany conservatives.
    This is a political opportunity for the Left, not a crisis.

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