Pension News: Average Monterey Co. retiree gets only $19k


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Analysis by The Californian shows the average county retiree gets about $19,000 a year

By Leslie Griffy, the Salinas Californian

521 Pension Blog
Read more in the SEIU 521 Pension Blog

Public employee pensions are in the crosshairs as headlines tell stories of large payouts and governments scramble to cover increasing benefit costs while facing record deficits.

In Monterey County alone, Salinas Valley Memorial Healthcare District’s ex-chief executive officer Sam Downing’s $4.9 million in pension bonuses and severance has sparked a state audit.

But when The Salinas Californian examined a sampling of pension payments to former employees of Monterey County agencies, it found that a small cadre of retirees take home more than $100,000 a year. Most get much less.The average pension payout for a retired public employee who worked in Monterey County is a little more than $19,000 a year, comparable to the region’s median income.

Public vs. private
“This is really, for me, a way of making sure that someone can afford to live in the community where they’ve worked their whole lives,” said Matt Nathanson, the Monterey Bay vice president for the Service Employees International Union, which represents more than 4,500 workers in Monterey County. He has worked for both Monterey and Santa Cruz counties.

“The advantage of a pension system is that it allows those of us who don’t make a lot of money to be able to retire,” he said.

Still, Nathanson said he understands why some private sector workers — who have seen their pension systems disappear over time — may feel slighted by the guarantee public workers have.

“If you are someone who has zero, $2,000 sounds good,” Nathanson said. “As union members, we need to make sure that everyone has a safe retirement.”

Still, Nathanson noted, the average pension is nothing compared to the big numbers that make headlines.

Few big collectors
Only 69 retirees who worked for one of the Monterey County agencies with retirement funds invested by the state’s pension manager, California Public Employees Retirement System, receive payments greater than $100,000 a year.

Most of those are government employees with decades of service, those who held high-ranking management positions or public safety officers who generally get more generous benefits.

Former Sheriff’s Cmdr. Fred Garcia receives about $118,000 a year, ranking No. 30 on the CalPERS pension list from the Monterey County government agencies sampled by The Californian.

“I think that I worked 29 years for that. These are negotiated things,” Garcia said. “I know that people look at the unions and the retirement system as being the cause of budget problems.

“But pensions didn’t cause the economic crisis in this country or the county.”

Pension plans for Downing’s Salinas Memorial Healthcare System aren’t included in the data requested by The Californian because the health care system doesn’t use CalPERS to manage its retirement investments. Pension bonuses like the $3.9 million Downing received aren’t allowed under the CalPERS system. (Another $1 million paid to Downing was part of a severance agreement, not a pension).

Union backers insist that problems with public employee pensions don’t come from the rank-and-file workers.

“Most of these public employee pension scandals are about management who spend years feathering their own nests,” Teamster lobbyist Barry Broad told the state panel considering an audit of SVMH.

Still, those smaller pensions — in some cases 90 percent of a worker’s salary for life — are eating away at local government budgets.

Renegotiating pensions
The combined pressures of the Great Recession on pension investments, lengthening lifespans and waves of retiring Baby Boomers have increased the payments required of governments to fund pension programs.

In the three-year fiscal outlook for Monterey County’s government released in February, officials said they expected retirement contributions to double over the next decade because of recession-driven investment losses. “At this pace,” the report said, “it is difficult to imagine any increase in the county’s ability to finance other needs in the years ahead.”

While the county and the city of Salinas are in negotiations with their employee groups to pare back benefits to help fund other services, unions in Monterey have already agreed to pension-related cutbacks.

It’s not a pressure that people thought unions and governments would face.

When the current pension standards were introduced in 1999, after the higher rate of 3 percent of a salary for each year of service was adopted by the California Highway Patrol, some believed that the increased benefit was essentially no-cost to government.

With the tech boom and later the housing bubble, the pension system’s investments grew at such a pace that CalPERS told many local governments there was no need to pay into the system. Investment profits were covering contributions.

Governments across the state quickly picked up the attractive benefits as a recruiting tool.

But the recession brought losses to CalPERS, as it did across the broader market. Even as investment returns have dropped back to prior levels, CalPERS now demands more contributions to cover the losses it did suffer.

A state commission asserted that to keep up with pension costs and to make up for investment losses, government agencies will have to spend 40 percent to 80 percent of their payroll on pension contributions.

“It is practically enough money to fund a second government, and it will — a retired government workforce,” the Little Hoover Commission said in a February report.

In the city of Monterey pension costs were 26.3 percent of payroll costs for law enforcement before union groups agreed that workers would pick up more of the pension costs and consented to a system that gives less generous benefits to new hires.

Both of the concessions were recommendations made in the commission’s report.

“The public sees that pensions are a problem and our employee groups recognized that,” Monterey Human Resources Director Mike McCarthy said.

It’s a package of concessions that more and more government agencies may press their workers to accept.

The unions themselves are working to ease the burden of pensions on communities, said Nathanson of the SEIU.

“We don’t want pensions to crash city and county budgets,” he said, noting that public employees depend on government agencies and the pensions for their livelihoods.

His union supports a cap on high-end pensions statewide and legislation to prevent workers from padding their end-of-career salaries with overtime, holiday and sick pay to beef up retirement payments.

By the numbers
The Salinas Californian requested public employee pension data for 16 different Monterey County agencies from the state retirement fund. All told, the paper received pension information for 2,940 retirees from the sampling of Monterey County agencies. Here’s a look at what the numbers revealed:
ª 69 retirees’ pensions are more than $100,000 a year
ª 1,502 pensioners receive less than $20,000 annually
ª The median annual payout is $19,406.
Each employee group and government agency negotiates different contracts with different benefits. One common pension formula:
ª Most public safety workers, such as police officers and firefighters, receive 3 percent of their highest salary for every year worked if they retire at the age of 50.
ª Other public employees commonly receive pensions amounting to 2 percent of their highest salary for every year worked if they retire at the age of 55.
ª Funding for the pensions comes from contributions made by both the employing government agency and the worker. Returns from investments made by the state’s retirement ®system are supposed to make up the difference.
Public employee pension plans have a guaranteed payout, meaning the annual income of the retiree is set by a contract and a formula. Under nonpension retirement plans, the amount a retiree receives depends on what has been invested and the returns on those investments.

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  • whatsu9pwiththat

    Your information has really made me sit up and notice. I will tweet about your blog.

    Thank you.