Top UC executives demand higher pension payments, threaten lawsuit

  • Share
  • Bookmark to Delicious
  • Bookmark to StumbleUpon
  • 2 comments

Despite the massive unfunded liability in the University of California’s pension fund, three dozen of the state’s highest paid executives in the system are threatening to sue unless their pension benefits are dramatically increased, according to a story Wednesday in the San Francisco Chronicle.

The highly paid executives want UC to calculate their retirement payments based on their entire salaries, instead of a $245,000 limit imposed by federal law. They say that in 1999, regents agreed to lift the salary cap if the IRS granted a waiver, a courtesy sometimes granted to institutions like UC.

The IRS granted the waiver in 2007, although UC President Mark Yudoff now opposes the increases based on the fund’s deteriorating financial condition and continued cutbacks across the UC system by virtue of the state’s chronic budget problems. UC officials say that the increase was never guaranteed, but subject to various levels of final approval.

In a Dec. 9 letter obtained by The Chronicle, the executives said, “We believe it is the University’s legal, moral and ethical obligation” to increase the benefits, the executives wrote to the Board of Regents. “Failure to do so will likely result in a costly and unsuccessful legal confrontation,” they wrote, using capital letters to emphasize that they were writing “URGENTLY.”

The University’s pension plan is currently unfunded in the amount of $21.6 billion, and officials have been rushing to boost tuition payments, reduce benefits for future employees and requiring them to pay more of their salaries into the plan.

For the 2011 year, UC hiked its tuition 8 percent, most of which- about $175 million- will go straight into the pension fund. Last year, tuition was raised 32 percent.

The increased pension commitment would add about $5.5 million annually to the pension liability and about an estimated $51 million to make the change retroactive to 2007, as the executives are demanding.

UC’s pension troubles have been brewing for the last couple of years, as only recently it determined that its existing pension obligations far exceeded the monies in its pension fund. Largely contributing to the problem was that neither UC nor any of its employees had paid into the fund since 1990.

“I think it’s pretty outrageous that this group of highly compensated administrators of a public university are challenging the president and the chair of the Board of Regents,” said Daniel Simmons, chairman of UC’s Academic Senate and a law professor at UC Davis.

“What outrages me the most is that these 36 people are blind to the fact that this is a public entity in dire straits,” said Simmons, who also served on the retirement task force and opposed the higher pensions.

San Francisco Chronicle

  • expose this
  • Share
  • Bookmark to Delicious
  • Bookmark to StumbleUpon
  • 2 comments

Despite weak economy, local governments pushing through property tax increases

  • Share
  • Bookmark to Delicious
  • Bookmark to StumbleUpon
  • 1 comment

While families are finding it tough these days to keep up with everyday outlays amid persistent unemployment and stagnant wages, cities are raising property taxes to boost payments to pension plans to maintain retiree benefits agreed to long ago, without much thought about how they would pay for it all.

Instead of the hoped-for and unrealistic projected annual gains, stock market losses have turned pension funds upside down, and city managers are scrambling to figure out how to make sense out of an impossible situation.

To keep up with dramatically rising pension costs, cities are cutting back hard on basic services, dipping into reserves and attempting to renegotiate pension benefits with stubborn unions. Even that doesn’t seem to be enough, and according to a report in the Wall Street Journal, cities throughout the country are beginning to aggressively raise property tax bills.

“Unless governments really want to squeeze essential services…there are likely to be a lot more property tax increases” across the country, said Don Boyd, a senior fellow at the nonpartisan Nelson A. Rockefeller Institute of Government at the State University of New York.

Upper Moreland, Pennsylvania is a good example of the pension funding crisis, and how it’s affecting city finances. As recent as 2005, when times were good, the city paid about $100,000 into its pension funds. Now that times are tough and revenues are down, the city paid $681,000 into the funds as its 2010 contribution. Next year’s estimated costs are set to be $1.1 million.

The city also receives contributions from the state, but only if the Upper Moreland makes contributions that are recommended by actuaries. And the only option left to enable a full payment now is to increase property taxes by 13.6 % in 2011.

In worse shape is Rolling Meadow, pop. 25,000, a suburb of Chicago. Officials there are planning on raising property taxes 9.8% next year, on top of the16% increase in 2010. The reason here is the same as elsewhere- increased pension and health costs for city workers. Despite the big increase in taxes, the police and fire pension plans are only about 45% funded.

City leaders made the same mistake here as in cities, large and small, across the country. Oversized promises were made for pension and health benefits with little concern how they would affect the communities when employees started retiring at age 50 and 55. Now that it’s happening, it may be too late to preserve all the benefits unless the taxpayers are willing to pay much higher taxes.

Even while increasing property and other taxes, lawmakers are starting to square off for a looming battle over reducing some of the generous retirement benefits won by the state and municipal unions.

What seems certain is that retirement eligibility, in many cases as early as age 50, will be pushed much higher for new hires and existing employees who have a long way to go before retirement. Employees will also likely be required to increase their own contributions into pension funds.

In Illinois, lawmakers recently passed a bill that would lift the retirement age for firefighters and police from 50 to 55. Other states are watching closely and may soon follow with their own version of it. Whether that will help enough, remains to be seen.

  • expose this
  • Share
  • Bookmark to Delicious
  • Bookmark to StumbleUpon
  • 1 comment

New Jersey unfunded pension liability soars

  • Share
  • Bookmark to Delicious
  • Bookmark to StumbleUpon
  • Comment on this story

New Jersey is finding itself in even a more precarious position than previously thought regarding its unfunded pension liability.

A report released on Thursday by the state Department of Treasury showed that the unfunded liability grew by over $8 billion in the most recent fiscal year ended June 2010. The total deficit now amounts to $53.9 billion. Besides the unfunded pension liability, the state has an additional $67 billion unfunded balance in healthcare benefits for current and future retired employees.

At June 30, the pension system was about 62 percent funded, down from 66 percent one year earlier.  The statewide system covers about 728,000 working and retired state, county and municipal employees.

Gov. Chris Christie skipped a $3.1 billion payment to the fund this year, saying that he will continue to pass on making contributions until the entire system is overhauled.  The last contribution made to the system was in fiscal 2008, when then-governor Jon Corzine paid $1 billion.

A statement released by Treasury Spokesman Andy Pratt said “If all the required contributions to the pension funds had been made over the last decade, New Jersey would still not have enough money to pay all the benefits state and local governments have promised to public employees.”

Christie has proposed an overhaul of the system that union leaders and workers will find tough to accept. If adopted, his plan will cut the deficit to just $14 billion by 2026. On its present course, the system’s deficit would be about $125 billion by then.

The plan suggested by Christie includes freezing cost-of-living adjustments, rolling back a 9 percent benefit increase that was promised for 2011 and increasing the retirement age to 65. Employees would be required to pay 8.5 percent of their salaries into the system, up from 5.5 percent, and shoulder a much larger portion of their healthcare costs.

An October report from Chicago-based Loop Capital Markets said that 20 states, including New Jersey, California and Illinois, underfunded or skipped pension payments between 2007 and 2009. The report said that 91 of 145 pension systems it reviewed had less than the 80 percent of future benefits funded, that actuaries recommend.

Critics say the main issue in the unfunded systems is that lawmakers repeatedly agreed to union demands for ever-increasing retirement benefits, relying on unreasonable estimates of investment returns, and not identifying new sources of funds to pay for the pension payments and health benefits.

  • expose this
  • Share
  • Bookmark to Delicious
  • Bookmark to StumbleUpon

Six retired San Diego educators out-earn U.S Secretary of Education

  • Share
  • Bookmark to Delicious
  • Bookmark to StumbleUpon
  • Comment on this story

San Diego’s pension problems are nothing new, and lawmakers continue to search for answers on how it got into its mess and how to get out of it. The state’s pension system for retired educators has its own version of the problem, with an estimated $40.5 billion budget deficit over the next 34 years.

The San Diego Union-Tribune took a survey of pension payments made by the California State Teachers’ Retirement System to some of the local top administrators, looking for insight into how the fund pays its retirees, and found examples of outsized pensions paid to recent retirees.

Despite the fund’s financial woes, the amount paid to some of the retirees seem excessively generous.

The survey looked at educators’ pensions from the county’s 42 school districts, five community colleges and other educational institutions. Surprisingly, six of the county’s retired executives are collecting more that U.S Education Secretary Anne Duncan’s 2009 base salary of $197,000.

The county’s six highest paid educators are:

  1. Rudy Castruita, retired in 2006 as superintendent to the San Diego County Office of Education, receives $281,034 or 107 percent of his salary.
  2. Kenneth Noonan, retired in 2007 as superintendent of the Oceanside Unified School District, receives $249,011 or 92 percent of his salary.
  3. Larry Maw, retired in 2005 as superintendent of the San Marcos Unified School District, receives $229,326 or 98 percent of his salary.
  4. Ralph Cowles, retired as superintendent of Vista Unified School District in 2006, receives $223,632 or 97 percent of his salary.
  5. Sherrill Amador, retired in 2004 as president of Palomar Community College, receives $218,511 or 113 percent of her salary.
  6. Warren Hogarth, retired in 2003 as superintendent of the La Mesa-Spring Valley School District, receives $216,348 or 105 percent of his salary.

Included among the most highly-paid San Diego county retirees are 254 teachers and administrators who are paid over $100,000 per year, in addition to health care benefits.

The survey also found that the average retired teacher collects $40,633 per year, amounting to 58 percent of their final salary. That is more than the average San Diego city worker who receives $37,442 but far less than the $67,428 paid to firefighters or $62,098 for police officers.

Educators generally pay 8 percent of their salaries towards retirement, and taxpayers contribute another 8.25 percent from local districts and another 2 percent from the state.

Using the most highly paid retirees as an example, over the course of a thirty-year career, assuming an average salary of $100,000, the most that would have collectively been paid in is roughly at 18 per cent per year is $540,000. Yet based on a 25-year retirement payout for retirees and widows, the total pension benefits could likely exceed $5 million. Predictably, the math doesn’t add up.

It’s a good formula for keeping retirees happy, but with cutbacks and layoffs for currently employed teachers, an overhaul of the existing system is long overdue.

  • expose this
  • Share
  • Bookmark to Delicious
  • Bookmark to StumbleUpon