Can you imagine what local governments could do if they had more than a quarter of a billion dollars of disposable income each and every year? They could fix roads, widen the freeway, help us through both droughts and floods by building more dams and reservoirs, hire more cops, build better schools, create effective fire breaks, build a desal plant — and the list goes on and on.
The truth is, our taxes and fees are so high, local government has this much money to spend, but they are spending it on government employee pensions. And, even then, they are falling farther and farther in debt.
For instance, there are more than 4,000 county employees, and the average wage and benefit package of a county employee is now $157,000. There are nearly 5,000 retirees, and the average pension is more than $75,000 per year. The annual payment to the pension fund is $175 million while the system pays out nearly $200 million per year, and the pension fund is short $1 billion.
This pension system is structurally flawed, based on the false premise that taxpayers can guarantee government employees will get paid a significant percentage of their salary for the rest of their life. This system is called a defined benefit retirement. The benefit is guaranteed no matter what. That is, the public sector retirement system relies on stock market returns, but the investments scarcely ever hit the needed rate of return.
Conversely, people in the private sector who have a 401k or an IRA have a defined contribution plan. They put in a set amount of money, and they get what they get when they retire depending on the investment returns.
Hence, while the private sector is left to either a meager social security payout and/or what they themselves managed to save, invest and risk on their own initiative, government employees contribute a mere pittance toward their own pension while being given a guaranteed income for the rest of their lives.
In some cases, government employees make more when they retire than they did when they were working!
That is because their retirement pay is based on their highest earnings, not their average earnings over the course of their career, and some of them get social security benefits too, on top of their government pension.
The insult to injury? This past Tuesday, Santa Barbara County supervisors obliquely received an annual report on the pension system. That is, the report was not scheduled for a discussion. This is due to the fact that the supervisor’s agenda is divided into two parts: the administrative and the departmental.
The administrative agenda consists of items that are not considered controversial or worthy of a discussion by the board. You could call it “the nothing to see here” part of the agenda. Accordingly, this $1 billion liability is considered business as usual.
Several hundred county employees receive a retirement in excess of $100,000 per year. Some receive more than $200,000 per year. They will receive over a million dollars in retirement benefits, which is more than some of them made in the course of their employment.
If they were in the private sector, they would have had to invest more than 100% of their annual income to earn that return — an impossible dream for government employees and a subsequent nightmare for taxpayers!
That $1 billion in unfunded liabilities is just for the County of Santa Barbara alone. The estimated shortfall for all government entities combined in California? One trillion dollars!
So the next time a politician or bureaucrat tells you there is not enough money to fix things, and that is why they have to raise taxes and fees, don’t believe them.
The truth is they are spending the money on a retirement plan a millionaire would envy.
Andy Caldwell is the executive director of COLAB and host of “The Andy Caldwell Radio Show,” weekdays from 3-5 p.m., on News-Press Radio AM 1290.