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Public Employee Pension Greed and the Gutting of Downtowns  
(February 7, 2007)

Readers responded to yesterday's entry on the unsustainable nature of public employee pensions,and guess what: it's even worse than I thought: the greed, the corruption, the political power plays to protect the fat retirements of the few, regardless of the cost to the many.

We've got great posts today, so please read them all. Let's start with San Diego, which faces bankruptcy due to its pension obligations: City must take tough action on pension debt: Bankruptcy May Be Answer

Between 2004 and 2010, the voracious costs of San Diego's municipal pension fund are expected to almost triple -- from $85 million a year to $242 million. That additional $157 million in taxpayer contributions to city retirees is more than enough to wipe out the entire annual budget of the Fire Department.

For the current fiscal year, a very healthy general fund increase of nearly 10 percent was still not enough to cover the sharply rising demands of employee pay raises and pension benefits. Consequently, the City Council closed swimming pools and libraries and imposed a raft of fee hikes just to meet the steep jump in labor expenses.

Worse still, the retirement system debacle, brought on by a lavish expansion of benefits sought by City Hall's politically powerful public employee unions, is only now beginning to pinch. In future years, the budget adjustments required to meet the city's mounting pension obligations will be far harsher.

Declaring Chapter 9 also would exert pressure on the public employee unions to yield some ground on their extraordinarily generous pensions. At present, many workers actually retire as early as age 55 with significantly bigger monthly checks than they earned while on the city's payroll -- a perk unheard of in the private sector.

Earlier this year, when City Manager Lamont Ewell asked the unions to give back part of the pay hikes contained in their contracts in order to help balance the budget, he was summarily rebuffed. Considering the overweening influence of the unions, bankruptcy might be the only way to blunt their rapacious raid on the city treasury.
Next up: a longtime contributor's tale of just how easy it is for public employees to plunder the public:

I have a friend who became a firefighter at 20 after taking a few classed at the College of San Mateo. He “works” for a department in the East Bay (I put work in quotes since in his suburban district with “paramedics” the “firefighters” rarely go on a call and he will often go a full month without going on a call).

Since my friend has only had to “work” (go in to the station) 10 days a month over the past 20 years he had a lot of free time to start an apartment investment company. Over the past 3 years he has only gone in to the station on average 6 days a month making lost of guys happy since they get paid overtime to work his shifts.

He has decided to retire at 41 and let the taxpayers pay him just over 50% of his last years salary (plus medical and dental an vision for his entire family) for the next 40 to 50 years. He is working hard to push his “last years” salary well over $200K playing what is called the “overtime game”. The guys will pull out favors and get co-workers to call in sick when they are next on the overtime list so they work as much overtime as possible their last year often doubling their last year salary (and retirement pay for the next 50 years).

Forgot a couple other games they get to play, the “retire” and get a new job game.

You can “retire” as a captain at one department and take a new job as the chief of another department and get retirement pay + your new salary.

They can also retire with a “stress” disability and get almost all their retirement pay tax free. Google around and you will get sick to your stomach.

Below is a link to a guy that did the double dip and stress game:

'Chief's Disease' rife at CHP: pursuit of injury claims boosts top officers' retirement benefits.
It will make you sick, unless you're one of the "public servants" ripping off the public like this guy:

In 2000, the 57-year-old CHP employee was awarded a $39,000 settlement (for his stress claim), medical care for life for his injuries, and a state industrial disability pension of $106,968 a year - half tax-free.

Barely two years later, Gomez was hired by the federal government to be security director at San Francisco International Airport, a position described as "on the front lines of the war on terrorism." It's a job he holds today.
Isn't there a nice cold prison cell awaiting anyone pulling this kind of out-and-out thievery "in the real world"?

Our U.K. Correspondent (who triggered my initial meditation on the finances of my own city, which thanks to runaway pension costs, are perched on the precipice of doom) contributed this report on the hollowing out of urban shopping districts in his part of the world. Be sure to read how the city is so desperate for revenue that they drive potential shoppers away with absurd parking fees:

Great post today - I like the way you extrapolated the scale invariance concept. We have much the same issues in the UK with the public service getting inflation linked, gold plated, cast iron, copper bottomed pensions.

Every year the center of the town in which I live hollows out a bit further. Every so often, another business closes down and the slot gets filled by yet another charity shop - its about 25% charity shops at the moment. I don't know if they have the concept in the US but charity shops are shops selling donated stuff (books, clothes, bric-a-brac etc) through the store front. They are not bad looking - clean, professional and the stuff they sell is usually reasonable, cheap, used goods.

They fill a real niche in keeping the town center from looking like a war zone with boarded up windows and help make it viable for other businesses to carry on. However, being charities they don't pay anything like the property tax that real businesses do, the staff are usually mostly volunteers and so pay no tax and I suspect there is a limit to how many of them can populate the high street before there is no incentive what-so-ever to visit the place unless you need used clothes. The self supporting ecosystem is thinning out rapidly.

Of course the shrinking tax base and increasing obligations means we get a massive property tax rise each year and always more service cuts. The local government even put in meters on what was formerly free parking in order to raise money. You can imagine the effect that that had on the town center - especially for short term quick shops. In fact, people would pay for an hour (the minimum) and then try to hand a ticket with 45 minutes on it to other people entering the public parking lot. This could not be stood for so the local government instituted a system where you had to enter the last three digits of your license plate into the ticket machine to ensure they were not transferrable. Increasingly people just go to the ever growing number of big box stores out of town that have free parking. Its easier and there is more selection.
Thank you, contributors, for information on a brewing public pension problem (and thus a tax problem) set to explode--apparently all over the developed world.

For more on this subject and a wide array of other topics, please visit my weblog.


copyright © 2007 Charles Hugh Smith. All rights reserved in all media.

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