CalPERS vs Social Security
“CalPERS vs Social Security”, Carmel Pine Cone, Oct. 15, 2021
With the retirement of Carmel’s police chief, I am reminded of the irresponsible and unconscionable debt that our state retirement system has burdened upon our community.
Our police chief retired at age 53, after 23.5 years of service, to take a position in the private sector. His annual pension is estimated to be 70.5 percent of his highest annual base salary, plus accrued vacation, sick days, and other compensation. He will immediately start receiving a pension estimated at $145,000 annually. If he lives 35 years into retirement, to age 88, the taxpayers in Carmel will have then paid him retirement benefits of about $5.1 million, plus COLAs and free medical benefits for life. His maximum Social Security benefits over those 35 years would be $810,000 as he would not be able to receive benefits from age 53 to age 70. Similarly, if our city administrator retires when he is fully vested, his annual CalPERS pension will likely be about $300,000 per year. If he lives 25 years into retirement, Carmel taxpayers will have then paid him retirement benefits of about $7.5 million, plus COLAs and free medical benefits for life.
Public records identify a retired CalPERS executive being paid an annual pension of $425,000. Social Security retirees, however, receive a maximum annual benefit of only $45,000, but only if they delay retirement to age 70. There are no free lifetime medical benefits for us. Go down the public list of Carmel’s retired workers and see the enormous pensions many of them receive. Even our retired military generals are not provided such extravagant pension benefits.
Per the fiscal year 2020 audit report, Carmel has a $21.7 million unfunded pension liability, which the report said was identified as 28 percent of the required funding. Our taxpayers paid 7 percent annual interest on that $21.7 million debt, which is approximately $1.5 million. In addition, there was a $1.9 million expense for the fiscal year 2020 employer payroll contributions. There have not been any payments to reduce that unfunded debt in several years. In fact, there is still a $1.3 million debt from Carmel’s 2012 pension obligation bonds.
The great mystery is where the money will come from to pay off this $21.7 million debt, and to continue to fund these outrageous pension benefits going forward. There is absolutely no political will in our city council to reduce CalPERS benefits to a more reasonable and affordable cost.
There is very little cost transparency associated with our CalPERS debt. We do not have a citizens committee to provide financial oversight. We desperately need strong leadership to resolve this issue. It’s time we start rationally managing this problem. We the taxpayers did not make those irresponsible promises of extraordinary pensions and free medical care for life. We can, and we must, modify those past promises. My solution is to place a cap on CalPERS retirement benefits, for both existing retirees as well as future retirees, to not exceed double of what is provided under Social Security, to terminate post-retirement medical benefits, and to not allow pension payments to start until the retiree reaches ages as defined by Social Security. Failure to take appropriate actions may force the sale of some of Carmel’s valuable assets to provide this pension funding.
David Quinnert, Carmel