Report Reveals Public Safety Accounts for Disproportionate Share of Excessive Pensions
City Councilmember Carl DeMaio today released his seventh annual report disclosing pension payouts to individual city employees. This year’s report used additional methodologies and data sets to bring even greater clarity to outrageous city pension payouts.
“Just when you thought the number of excessive pension payouts could not get any higher, it has,” lamented DeMaio.
The most notable revelation: a whopping 71% increase in the number of six-figure ($100,000 or more) city pension payouts in the past year alone.
“It is offensive to have a 71% increase in the number of city retirees receiving $100,000 or more in pension payouts, especially at a time when city services are being cut and San Diego’s working families are struggling,” DeMaio notes.
For the first time ever, the report breaks out public safety pension payouts from general worker payouts – and catalogues pensions being paid out after the effective date of the notorious “MP2” pension spiking plan approved in 2002.
The report shows that excessive pension payouts are disproportionately concentrated in the public safety ranks – with public safety accounting for 73% of six figure city retirees since 2003 whereas public safety accounts for only 33% of the total number of retirees since 2003. In addition to receiving higher pension multipliers and earlier retirement ages, public safety receives more generous “specialty pays” than any other employee classification – which have been added to base salaries to spike total pension payouts.
“This report is the perfect evidence of why public safety must be included in any meaningful and complete pension reform,” DeMaio concluded.
DeMaio has released this report for seven years – as a way of providing taxpayers with the transparency they should receive from their city government as well as to dispel misinformation provided by the city’s labor unions who continue to claim that city pensions are reasonable.
Previous reports by DeMaio brought to light the following outrageous facts:
- The $227,249 City Librarian: DeMaio’s CY2009 Report showed the city’s former head librarian receiving $227,249 as an annual retirement allowance. In the 2010 report, that same former head librarian is now receiving $231,190. Worse than that, the $231,190 does not include payouts this former city librarian would receive from another city-funded retirement program known as the Supplemental Pension Savings Program — where the city has matched up to 6% of many city employees’ salaries for decades.
- Earning More to Retire than Working for Taxpayers: The CY2009 report compared pension payouts vs. the highest salaries of city employees during the last year they worked. This analysis revealed a multitude of city retirees receiving pension payouts well in excess of their last and highest salary. For example, in 2010 the city’s former head librarian receives $231,190 as an annual retirement allowance – versus the $139,680 budgeted amount for the current head librarian working for the city.
- Millions in Total Payouts: In the CY2009 report, DeMaio commissioned a pension expert to calculate the life-long dollar value of payouts for the top 10 city pensioners – showing the 10 combined are expected to receive a whopping $ 61 million dollars over the remaining course of their lives.
- Million Dollar Lump-Sum Payouts: Starting in CY2008, DeMaio’s reports showed several city retirees had accumulated million-dollar cash balances under the DROP program, which they can receive as a cash payout or as an annuity payment – all in addition to their annual six-figure pension allowances.
- Getting Four Retirement Checks at Once: The CY2009 report showed how some city retirees are able to receive four separate retirement benefits – including the defined benefit allowance, DROP annuity payments, SPSP 401(k)-style payouts, and Preservation of Benefits (POB) payouts.
- Cash To Dash: The CY2009 report revealed that a significant number of city retirees live outside of the State of California and outside the City of San Diego. In fact, only 38% of retirees live in the City of San Diego.
- “Early Risers Club:” The CY2009 report found city politicians receiving retirement allowances at absurdly young ages. One ex-politician started receiving a pension check at age 35, another at age 39, while three others began collecting pension checks while in their forties.
- “Double-Dip Club”: The CY2009 report also found several former city politicians receiving, or in line to receive, taxpayer-funded salaries on top of their city pension.
After setting pension reform as his top priority in office, Councilmember Carl DeMaio on his first day in office refused to enroll in the city’s pension system. This has saved taxpayers approximately $30,000 per year.
“These outrageous pension payouts must end – and this report serves as an annual reminder that we must enact comprehensive pension reform,” concludes DeMaio. The full 2010 report, as well as copies of the previous reports, can be accessed at www.CleanUpCityHall.com.
Shocking Facts on Pension Payouts
71.1%
The percentage increase in one year in the number of city retirees receiving six-figure ($100,000 or more) pension payouts.
$303,980
The top annual retirement allowance paid in CY2010 – plus a second undisclosed allowance from a taxpayer-funded 401(k) account for this employee.
33% and 73%
Public Safety comprises 33% of retirees since 2003, yet they represent 73% of the $100,000 Club.
76.5%
The percentage of public safety retirees since 2003 that are receiving more in retirement than $61,118 – which is the average San Diego household earns (city median household income)
Comments 26
Percentages do not necessarily tell us much. Both an increase from 1 to 2 and 1,000 to 2,000 are 100% increases, but they are not the same in terms of importance. So what is the actual number of retirees with a pension above $100,000 and what is the median amount of that pension?
The shocking totals are right here, from the official City report. Readers are invited to check these out. Even Alger will have a tough time justifying these astronomical payouts. These greedy ‘retired’ folks are the reason libraries close, fire stations
are browned out, and potholes are not filled. Disgraceful selfishness with no conscience and no responsibility..
http://www.cleanupcityhall.com/uploaded/2010%20Top%202000%20Payouts.pdf
hahaha…Alger…it takes some big ones to try and marginalize this. You are determined. Nice effort!
Next let’s talk about what percentage of voters are shocked to hear ANY city employee gets a 6 figure city pension let alone like hearing the number is increasing.
I seem to have struck a nerve. I didn’t realize everyone here was so touchy. I wasn’t trying to make a point; I generally try to have facts to cite before I do that. Thank you to Check the Facts for that link which did directly answer my questions. I have two more, if any one knows the answers; maybe then I will try to make a point: How many total retirees does the City have and what percentage of the contributions made on behalf of these six-figure pensioners was made by the employees themselves?
To Michael and Check the Facts, please don’t project; not everyone is a knee-jerk partisan. Some of us simply want to have an intelligent fact-based discourse.
I pride myself on putting the “jerk” in knee-jerk partisan.
Alger, I think we need to ask slightly different questions. Instead of being concerned with how many six-figure pensions there are, we need to ask if the math in the current pension model pencils out? In other words, is the pension able to function for the long term and provide for the retirees, as intended? As an outside observer who has not looked in depth at the numbers but who has paid attention to much of the rhetoric – from both sides – I’d venture to say the system is failing.
D7 Voter,
That is a sensible idea and obviously any plan that has an unfunded liability of 35% has a problem with the math. The question is why and what is the best solution. There are a number of reasons why, but predominantly two make up the bulk of the problem: Intentional underfunding and retroactive benefit increases. You have to remember that there was no funding issue in the late 1990’s and there wouldn’t be today were it not for MP1 and MP2. Any plan that relies on investment earnings compounded over years is going to suffer a shortfall if the investments aren’t made in the first place. Likewise, any plan that relies on actuarial assumptions of what future benefits are going to be will be in trouble if benefit increases are given retroactively with no money put into the fund to pay for them.
So the question is do we throw the baby out with the bath water or do we just clean the bath water. A switch to a 401(K) plan will cost the taxpayers more in the short run and the long run. This is not rhetoric; it is a fact and if you would like, I will explain in another post. What a 401(k) does do is remove the risk from the taxpayer and that is a good thing, but we can reduce and almost eliminate the risk without the extra cost. The initiative should add three items:
1. A guarantee that the ARC will be paid every year.
2. A ban on retroactive benefit increases.
3. Since pension benefits are based on salary, a ban, or at least a limit of 1-2% on any pay raises unless the pension fund is more than 90% funded and the actuary certifies that the raise will keep the fund more than 90% funded.
Check the Facts,
The chart you referenced would lead one to believe that all of those six-figure pensions are lifetime annual pensions. That would be a misleading perception since a bulk of them contain a one-time DROP payment. If you remember, DROP was recently modified reducing the guaranteed annuity income from 8 percent to what I believe is 3 percent. This has caused many retirees to opt for a lump-sum payment.
As I said before, I am only interested in a fact-based discourse. There should be no room for demagoguery on either side, especially when my tax dollars are at stake.
Alger, you raise an interesting point when you assert that the bulk of the $100K+ pensions include a “one-time Drop payment.” And I’m delighted you insist that you are “only interested in a fact-based discourse.”
It’s clear that you have a knowledgeable grasp of city pensions. You are no amateur.
So tell us, Alger — how do you know that the bulk (presumably comfortably over half) of these big pensions include these one-time DROP distributions? Since you insist on a fact-based discussion, surely you are here presenting a factually accurate assertion, right? Could you cite your source, or otherwise confirm your assertion?
I think it’s important to realize just what constitutes the “median household income” — which in San Diego comes to $61,118. We’ve been using this figure to compare with government employee pay, but we are understating the disparity in pay.
As I understand it, the “household income” includes the income of ALL the people living under “the same roof” (including all in an apartment rental). It seems to include both all the members’ earned income, plus interest, dividends, royalties, pensions, etc.
Hence we are comparing total household income with a single government earner’s income, which makes the government income seem less of a disparity with the private sector. But of course in the middle class, it is more the rule than the exception that working aged adults work if possible.
According to labor’s ally in the county, CPI, the “median individual income in the county dropped to $31,271 in 2009.” Looking at that figure, it becomes clear that the city (and county) worker salaries and pensions are FAR better than the people they “serve.” This must end.
Okay Richard, I will play. As some on this site have been known to say, it is simply common sense. In this case, the common sense is that given the option of a lump-sum payout, a certain percentage are going to take it. Add to that the fact that the guaranteed interest rate on the DROP accounts had been dropped from 8% to less than 4% and then less than 3%, it would figure that an even higher percentage would take the lump-sum.
More importantly, a number of the DROP payouts were larger than than the regular pension payout. I am sure that you would agree that it would be mathematically impossible for the lifetime annuity from DROP to have an annual payment that exceeds that of the annual pension payment.
Since I answered your question, maybe you could answer one for me: Why is it not considered double counting of the same money to add the DROP payment to the regular pension payment? The DROP payments come from an investment the employee made with the first five year’s of his/her pension payments.
Richard,
One more question (this one is a softball for you): What is the median salary and median pension of a City employee? We know all about the the outrageous examples, what about the median?
So, Alger, we find that your “fact-based” assertion is instead based on your definition of “common sense,” which, I presume, is anything that makes sense to you. Hmmm . . . .
Look at the basic city pensions column — “Paid from SDCERS Trust.” I think you’ll agree that it’s fair to say that these figures are close to but less than the employee’s highest (and usually last years) salary, right?
Remember that the DROP account accumulates six different pots of money annually — but by far the biggest one is the member’s SDCERS pension payments which, while the employee continues to work, is deposited into the DROP account.
https://www.sdcers.org/benefits/active/airport/Pages/DROP.aspx
Okay. Now, look at the DROP payment column. Note that it is almost always less than the employee’s annual SDCERS pension. For that to be a lump sum payment as you claim, the employee would have to have quit after less than a year in the DROP program. I’m sure that occasionally happens, but in the chart the DROP payment is less than the SDCERS pension for all but a handful of employees.
So, in order for your “fact-based” (well, “common sense”) DROP assertion to be true, you have to make the case that the “bulk” of DROP retirees quit just months after entering the program. I think we can agree that such is not the case.
So much for your “fact-based discussion.”
Alger, since I didn’t make an assertion about the median city salary or pension, I don’t feel compelled to do your research for you. But I can tell you two things about city salaries:
1. The median SD city salary is significantly less than the average city salary.
2. It is considerably HIGHER than the latest CPI-calculated average SD County salary ($31,271).
As for median pensions, we have to be clear we are talking about a 30 year service pension. It matters not if it is one person working 30 years, or three people holding that same job for 10 years each. The (your) labor unions like to include the 10 year pensions to lower the average, but either example (above) obligated that employer/taxpayer for the full 30 year pension per employee position.
Also, we should be talking only about pensions being paid today — and not use the smarmy dodge of counting all the old pensioners who got the much more modest pensions in past years. After all, we can’t change past pensions — only what happens going forward.
But fortunately for readers of this blog, I know you would never stoop to such dishonest tactics.
Richard,
Do you know of any annuity where you can make five equal annual payments above the age of 50 and then receive annual payments that are greater than your original annual contribution? There is simply no way that those retirees that are receiving a DROP payment larger than their regular retirement are receiving those payments on an annual basis.
I would also surmise that since it was only recently that the rate of return for DROP investments was reduced approximately 70% that quite a few retirees would have taken lump sum payments this year and last, even those who had been previously taking an annuity might have cashed out.
On the other hand, maybe you are correct. Perhaps not a single retiree took a lump sum payment. I suppose it is possible that each and every one of them wanedt to diligently protect their money, none had any immediate needs or wants and none thought they could do better than the guaranteed 2+% rate of return that DROP is now offering. I guess the only way to know for sure would be to ask the author of the press release. Then we would know because Mr. DeMaio is always honest in all his statements especially those pertaining to numbers.
One other point: you seem to have ignored my question about double-counting. DROP accounts are made up of pensions received and reinvested by the retirees. I can see making the point that the retiree is collecting a pension for an additional five years, but I don’t see how that money can be included when computing the amount of the retiree’s annual pension.
Finally, you can try to belittle my point of view with comments such as “…(your) labor unions…” but the fact is that I’m not a public employee nor have I ever belonged to any union.
Alger, in your original post on this matter, you said the following:
“The chart you referenced would lead one to believe that all of those six-figure pensions are lifetime annual pensions. That would be a misleading perception since a bulk of them contain a one-time DROP payment.”
I repeat — “a one-time DROP payment.” What part of “one-time” do you not understand?
Yes, the DROP payment distributions can be taken numerous ways — from a transfer to an IRA to a annuity of any length. 20 years is a common annuity option for recipients to take.
You also said “a bulk of” DROP retirees were taking your lump sum distribution option. I don’t know exactly what that term means, but surely it means a LOT. Yet you’ll find only a handful of recipients drawing a DROP payment bigger than their pension payment — and even then it’s by a small amount.
Perhaps if you had truthfully said “a few” or even more accurately “a handful,” we wouldn’t be having this discussion about your accuracy. And indeed, your accuracy would not be called into question except for the fact that you grandly announce that you are interested only in a “fact-based discussion” — inferring that others are not as honest/accurate as you are.
So, back to your “fact-based” lump sum payout assertion. Was it “fact-based”? If your assertion were submitted to Voice of San Diego, you’d get a FALSE rating and have that long Pinocchio nose drawing attached.
Alger, CLEARLY you are closely allied with YOUR labor unions — as are most “progressives” and activist Democrats. I did not say you were a member or official of a public employee labor union.
But then, that DOES raise the question of just WHO you are. Why post anonymously? It’s not that you are afraid of the mayor — you’re not a city employee, right? How can we believe your assertions about your personal status when you post anonymously?
Hows’ that fit into your “fact-based discussion”?
Richard,
You still ignored my question about double-counting.
Alger, as of 12/10, the city DROP annuity rate for 2011 is 4.8%, guaranteed for the life of the annuity. The DROP savings earn 2.3% in 2011 — down form 2.9% the year before.
https://www.sdcers.org/news/Pages/DROPInterestChangeDec2010.aspx
Hence it is likely that last year’s annuity rate was around 5.3% to 5.5% (I don’t know the exact figure). Such guaranteed lifetime rates likely would entice most such government employees (who so dearly cherish guarantees) to take the annuity option.
Richard,
Trying to carry on the theme of a fact-based discussion. the following was in Wednesday’s UT (http://www.signonsandiego.com/news/2011/apr/13/court-city-can-make-changes-drop/):
“The interest rate had been 8 percent for the program’s first 10 years. But the city pension board lowered the rate to 3.54 percent on July 1, 2009, and it currently sits at 2.3 percent.”
Still waiting to read why you think the reinvestment of money already earned should count as new money in a subsequent year. I call that double-counting.
From our Twitter feed…
@sandiegorostra says: “Fascinatingly wonkish discussion (an oxymoron?) on @carldemaio pension report…”
Alger, I fail to understand your point in your post on DROP SAVINGS rates. It’s the same data as my info posted prior to your post — though mine includes the higher 4.8% ANNUITY interest rate as well as the current 2.3% SAVINGS interest rate, which is more germane to retirees deciding whether or not to annuitize their DROP account.
Alger, I appreciate you trying to change the subject on DROP, as you’ve “dropped” your lump-sum claim like a hot potato. You have yet to present any plausible defense of your assertion that the “bulk” of the DROP payouts are “one-time lump sum distributions.”
Richard,
You have repeatedly avoided my question about double counting and since this is a political blog, I will try to step away from the wonkish and close with this. You seem obsessed about my use of the word “bulk,” but whether you call it bulk, significant percentage or even just a few, the fact remains that not all of the DROP payments are on-going annual payments.
Similar to when he showed a chart showing increasing required pension contributions through 2025 while failing to mention that those required contributions will drop by more than 50% in 2026, Mr. DeMaio again puts out a chart that is at best misleading. Add in my unresponded to point that DROP payments are really double-counting, and “misleading” becomes a very generous term.
Jimmy Lennon…… “Fans, We have a SPLIT Decision.”
Fight Crowd…………. BOOOOOO !
Lennon……… Judge Jim Sills scores it 147 Rider, 144 Alger.
Fight Crowd………. BOOOOOOO!
Lennon……… Judge City Beat has it 147 Alger, 145 Rider.
Fight Crowd……………. BOOOOOOO!
Lennon……… and Referee Gayle Falkenthal scores it 146,
………………….. 145 for the winner…. and STILL champion,
…………………… Dick Rider !
Fight Crowd…………… CHEERS and BOOOOOOOs!
Good Night from the Plaza Monumental bull ring here in romantic Old Mexico.
Jim,
A fair decision. If you want to beat the champ you have to knock him out. I hope he will give me a rematch.