Police and Firefighter Pensions Threaten Government Solvency

Editor’s Note: This is the third in The county Sheriff’s Department and Orange County Fire Authority are hired by many cities to provide police and fire services. Their contracts are consistently some of the costliest items in local budgets, which are being voted on this month by city officials.

As debate swirls over wages and overtime for police and firefighters, a much bigger nightmare looms: pensions.

In the not-too-distant future, public employee pension costs threaten the solvency of government agencies in California and throughout the nation.

And there's no easy solution. Orange County and other agencies are contractually and legally bound to honor the pension agreements signed long ago with public safety employees. The California Supreme Court this spring shot down an attempt led by O.C. Supervisor John Moorlach to get rid of some generous retirement benefits. The failure has left the county on the hook for what could amount to $5 million in legal bills. 

SHERIFF'S DEPARTMENT PENSIONS

Four years ago, the county–led by Moorlach and his former chief of staff, Mario Mainero—tried to pull back the Orange County Sheriff’s Department’s “3 percent at 50” pension plan for sheriff’s deputies.

This is a common formula offered in 37 counties throughout the state by the California Public Employee Retirement System, according to the Peace Officers Research Association of California.

That's a total of 251 agencies.

Under the plan, at age 50, a sheriff’s deputy can retire and receive 3 percent of his yearly wages for each year he served, according to the Peace Officers Research Association. The 3 percent figure is usually calculated using the highest-paid year's base pay, or using an average of the three highest-paid years' base pay, depending on the contract.

So, according to the Peace Officers Research Association of California’s site, a deputy who retires at 50 after 20 years of service would receive 60 percent of his salary from the Public Employee Retirement System every year until he died.

Under some plans, a spouse or other dependent survivor can continue to receive half the payout after the retiree's death, according to CalPERS literature.

Multiply that by the tens of thousands of California employees with 3-percent-at-50 contracts, and it's easy to see the cost ballooning out of control.

After Orange County lost its court battle to overturn the formula, Moorlach took to his blog, predicting pension costs would undermine other vital services.

“I’m just back from a tour of the Dayle McIntosh Center for the disabled,” Moorlach wrote. “It is programs like these that will suffer in order for the taxpayers to pay for a 50 percent increase in pension benefits for government employees who paid nothing for them and for which no funds were set aside during their careers...

“Wayne Quint [then-president of the Orange County Deputy Sheriff's Association] owes the taxpayers of Orange County a big thank you for this incredible awarding of a life-time guaranteed income,” he continued.

Many taxpayer groups are also unhappy with the pensions that public safety workers receive.

“We think they do deserve a good rate of pay, but when they retire at 50 at full pay, that’s not right,” said Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association.

“That they can get paid $100,000 every year forever is insane,” said O.C. Supervisor Shawn Nelson.

The top tier of deputies in the OCSD receive 3 percent of their highest-paid year in the calculation of their retirement, whereas a lower-tiered employee gets 3 percent of the average of his or her three highest-paid years, which works out to a lower figure.

FIREFIGHTER PENSIONS

The Orange County Fire Authority renegotiated some of its contracts late last year and this year to increase the employee pay-in for its retirement system, but pensions still pose a looming burden.

OCFA Spokesman Kris Concepcion said he and his colleagues also have a 3-percent-at-50 pension plan. Contrary to popular assumption, overtime is not included in the salary calculation, he said.

In other words, a hypothetical firefighter’s 3 percent would be calculated using his or her $80,000 base salary, not the $120,000 total salary that includes overtime.

Concepcion countered characterizations that most employees retire with 90 percent of their salaries at 50. Though it’s mathematically possible for rank-and-file firefighters to retire at 50 with most of their salary in pension payouts, it seldom happens that way.

Employees don’t tend to start at 20 and work at the same place for 30 years anymore, he said.

Concepcion said the several unions who organize OCFA employees have agreed to concessions over the last seven months—addressed in Part 4 of this series—that will save the authority tens of millions in pension costs. In part, firefighters will be stepping up retirement contributions to 9 percent.

County Supervisor Nelson said all employees should pay in half the cost of their pensions and there should be a cap on how big a pension could be, although he doesn’t know the “right number.”

Nelson said at OCFA, the cost of a typical pension is 60 percent of an employee's base salary.

So, if someone makes $100,000, that's a $60,000-per-year pension, independent of how much overtime that employee took during his or her career.

-- San Clemente Patch Editor Adam Townsend contributed to this article

What are your thoughts on the pensions? Do you receive a pension?