Think, again.
The embattled Chief of Police of San Jose, California, Ron Davis, is retiring. Mr. Davis is barely 50 years old. If he lives to an average US male age of 78, he will receive $6,000,000 dollars in pension benefits plus lifetime health insurance for himself and his dependents.
A retirement package is potentially worth $7 to $8 million over his expected lifetime. Given his age, and his recent candidacy for the Chief’s job in Dallas, Texas, we can expect that he will be able to improve on this number.
The Chief is an example of typical public employee retirement packages. And these packages are bankrupting state and local governments across the country.
Last week, the House of Representatives rushed back to Washington to pass a $30B “emergency” bill to help states with teacher salaries for the 2010-11 school year and Medicaid payments for the first half of 2011. The bill is partly paid for by a cynical reduction in food stamp funding – in 2014.
The President hailed the bill for saving thousands of jobs for teachers. In California, the $1.2B in additional funding will create or extend the teaching careers of 16,500 teachers. That works out to $72,727.00 per teacher.
But – the devil is in the details – states are required to accept the money. However, states cannot qualify for the money unless they fund education at the small level as they did in 2009-2010. Puzzling, you say. If there is the same level of funding, how were there layoffs in the first place? Why did the parents and grandparents in our school district tithe themselves $250 to maintain our teacher/student ratios? The FIRST DEMAND on state budgeted school funding to pay the unfunded liability for teacher pensions – not educating your children!
Even acknowledging that teachers make only a third as much as police chiefs and cannot retire until they are 55 years old, the public liability per teacher can easily top $1 to 1.5M.
By comparison, a private employee paying in the maximum +/-$13,500 a year in employee and employer contributions (requiring an income exceeding $100K) and retiring at age 65, can expect to receive $335,244 in retirement benefits.
I still remember the first 401K briefing I attended at Unisys in the mid 1980s. We had a wonderful presentation from someone from corporate (should have been my first clue). If I made the maximum allowed contribution for the next 20 years – I would have a $1M or more when I retired. I signed up and stayed sign up for the next 20 years – until I left Gartner to found Cordi and Associates. There is no $1M dollars because there was the crash of ’87, the recession of ’93, the bubble of 2000 – you get the picture, because you, too, are living the story.
I don’t begrudge a good pension to anyone. But, we must begin to ask ourselves how much money should we borrow from China and United Arab Emirates to fund pensions for some while arguing that we cannot afford Social Security for many?
We need to finally face the fact that the current economy is not a short-term anomaly but, rather, a long term reality. We need a 10 Year Fiscal Sanity Plan that reflects this new reality for both Public and Private Sector employees and their retirement planning.
Raising taxes on tax payers making over $250K may be the only way we can insure that public employees help pay their own pensions!
To learn more about The Business of Government and Joyce’s approach to making government smarter, quicker, cheaper and smaller; visit www.reimagineamerica.org
To learn more about Cordi and Associates Business Advisory Services and Joyce’s approach to consistent profitability — BOTTOM-LINE EXCELLENCE visit www.cordiconsulting.com.