Who’s the Public Servant?
And, indeed, government continues to take care of itself quite well:
• Before President Obama announced a two-year freeze on federal pay (which did not freeze actual pay) the number of federal workers making more than $150,000 a year had risen by 1,000 percent in the last decade and, reported USA Today, had doubled in the first eighteen months of the Obama presidency.14 Between December 2007 and June 2009, the number of federal employees making more than $100,000 rose by 46 percent; the number making $150,000 or more rose 119 percent; the number making $170,000 or more rose 93 percent.15
• An analysis by USA Today found that during a time of stagnating wages and benefits, the total compensation for federal workers—salary plus generous fringe benefits—had grown to twice the average in the private sector. In 2009 the average federal employee’s pay and benefits came to $123,049, compared with private workers, whose average pay and benefits were worth $61,051.16 From 2001 to 2009 average annual private pay grew by 24.9 percent while federal pay grew by 38.4 percent; as a result the gap between the compensation of federal and private-sector workers doubled from $30,415 in 2000 to $61,998 in 2009. Another study found that federal workers were paid more than private-sector workers in more than eight of ten occupational categories.17
• A Freedom of Information Act request by the Asbury Park Press found that in 2010, 1.3 million federal workers were handed $408 million in taxpayer-funded bonuses—up $80 million despite the deepest recession in memory.18
• The private-public gap has also grown at the state and local level. The average hourly compensation for private-industry employees was $27.42 in hourly salary and benefits in December 2009, lagging far behind the $39.60 per hour in total compensation for state and local government.19
The Millionaire Bureaucrat
But the largest gap between the two Americas can be found in the pension system. Let’s put this in perspective: The vast majority of private-sector workers no longer have so-called defined pension benefits. Fully half of the nation’s private-sector workers have no retirement savings plan and will have to rely on Social Security and whatever savings they manage to set aside after taxes and living expenses. Two-thirds of the remaining 50 percent will rely on 401(k)s to which they must make contributions and possibly also receive a modest employer’s match. The value of those accounts plunged from 2007 to 2009 and many workers now find themselves well short of the amount of money they will need to retire. A 2010 study by the Employee Benefit Research Institute found that 47 percent of baby boomers between the ages of 56 and 62 and nearing retirement age do not have enough in savings to avoid running out of money in retirement.20
In contrast, public employees like those in Wisconsin may contribute little or nothing while reaping pensions that can replace most of their preretirement income. So while the rest of us try to find a way to save to be able to put aside 10 to 15 percent of our pay every year, state employees face no such pressure. Nor do they have to worry about the stock market like their private counterparts: They can benefit from a rising market, but most are generally insulated from losses by their pension guarantees. As Steve Greenhut notes: “If such ‘roll of the dice’ investments pay off, then there’s more money for public employees and less political pressure to reform the pension system, and if they don’t, the taxpayers are on the hook. It’s the ultimate privatization of gain and socialization of risk.”21
Former California governor Schwarzenegger has pointed out the yawning disparities between the two Americas: Between 2007 and 2010, California had lost a million private-sector jobs and retirement accounts of private-sector workers had dropped nearly 20 percent. At the same time, the guaranteed pension benefits of government workers, “for which private sector workers are on the hook,” had risen in value. Very few average Californians had $1 million in savings, he noted, “but that’s effectively the retirement account they guarantee to public employees who opt to retire at age 55 and are entitled to an annual inflation-protected check of $43,000 for the rest of their lives.”22
It’s actually much worse than that.
In many California cities, police officers and firefighters can retire at the age of 50, with a salary equal to 3 percent of their highest salary times their years of service. So a firefighter in a city like Carlsbad, California, who retires at age 55 after twenty-eight years on the job will receive an annual pension of $76,440 from the city.
What would a private-sector employee have to save to equal that sort of pension?
Forbes publisher Rich Karlgaard crunched the numbers, noting that investment experts suggest drawing no more than 4 percent of retirement savings a year, which is also a reasonable rate of return on conservative investments.
Based on this small but unfortunately realistic 4% return, an $80,000 annual pension payout implies a rather large pot of money behind it—$2 million, to be precise.
That’s a lot. One might guess that a $2 million stash would be in the 95th percentile for the 77 million baby boomers who will soon face retirement.
That $2 million also happens to be the implied booty of your average California policeman who retires at age 55.23
By the same formula, a $100,000 pension would require private savings of $2.5 million, a $200,000 annual pension requires savings of $5 million, and so on.
Scandals
This taxpayer largesse falls on the worthy and the unworthy alike.
A Buffalo police detective, serving forty-five years in prison, is collecting a $40,544 annual pension; so too is disgraced New York State Comptroller Alan G. Hevesi, who collected a $166,000 pension even after pleading guilty to a felony corruption charge. Not even a conviction for sexually abusing five members of a Boy Scout troop he once led can keep another New York teacher from pulling down his $52,073 annual pension while he sits behind bars.24 There are other ways to game the system as well: A retired NYC firefighter who received a tax-exempt disability pension for asthma spent his retirement running marathons—and was able to run a six-minute mile—even though his disability included “reduced lung capacity.”25
The city of Yonkers, New York, has boosted the pensions of police officers by having them work overtime as flagmen on Consolidated Edison construction sites—then reporting the work as city overtime even though the company was picking up the cost. At least one hundred retired Yonkers cops and firefighters were paid more in pensions than they made in salary before retiring. In one notorious case, a city employee who retired at age 44 with a base salary of $74,000 was reportedly pulling down an annual pension of $101,333.26
Perhaps not surprisingly, in a recent study, nineteen of the twenty highest paid city workers in New York State were on Yonkers’s payroll.27 Even though unemployment in the Empire State remained high in 2010, there were ninety-nine thousand state and local workers bringing home six-figure salaries.28
The stories (and scandals) are legion:
• In Bell, California, the police chief worked a single year at a salary of $457,000 before retiring with the government pension that will pay him $448,000 a year. This paled next to the city manager’s potential $890,000 annual pension.29
• In the modest blue-collar suburb of Bellwood, Illinois, a community with a per capita income of $24,000, taxpayers paid city administrator Roy McCampbell $472,000 in 2009, at that time by far the most of any municipal employee in the state. He managed the huge payday despite having a base salary of just $129,000; he was able to pad it by cashing in unused sick and vacation days. Even more creatively, he was paid for performing the duties of ten positions, including comptroller, administrator, public safety CEO, finance director, budget director, human resources director, mayoral assistant, corporation counsel, property commission director, and development corporation officer. When McCampbell retired he became the state’s top pensioner, with an annual payout of $250,000.
“I didn’t hold a gun to anybody’s head to get this,” he told the Chicago Tribune. “I’m not tryin
g to do anything bad.”30
• In another Chicago suburb, taxpayers learned they were funding a parks director who was being paid $435,000 a year. Once again, the director’s base salary was relatively modest at $164,000, but it was enhanced by $270,000 in bonuses granted by the local parks commission. That conveniently boosted the director’s pension to $166,000—which means that he will now make more in retirement than his former base salary. Two other employees also benefited from the commission’s spending splurge. Even after the sweet deals were exposed by the Chicago Tribune, officials defended their generosity with taxpayer money. “Parks officials in the northern suburb say it was a good use of taxpayer dollars,” reported the Tribune, “even though the off-the-charts spending spree included giving the three executives nearly $700,000 in bonuses while paying one of them $185,120 for no work and signing over an SUV to him as he left town.”
Ultimately, several parks commissioners were forced to resign, but the retired director will continue to be paid as long as he lives.31
• In Governor Christie’s state of New Jersey, auditors found the state’s Turnpike Authority blew $43 million on “unneeded perks and bonuses.” One employee with a base salary of $73,469 actually pulled down $321,985 after a series of payouts and bonuses. Among the various perks for the turnpike employees: $430,000 for free E-ZPass transponders so that employees could get to work. All of the goodies were handed out even as tolls were being raised.32
• In Milwaukee, Wisconsin, county officials voted themselves huge pension benefits that included so-called backdrop payments.* Even though the pension scandal sparked a voter revolt that forced the county executive and several supervisors out of office, the pension payouts continue. In 2010, one 66-year-old assistant district attorney retired with a backdrop payment of almost $1.1 million, in addition to an annual pension of $66,024.33
Not even the Greeks can sustain that sort of spending for long.
Two Scoops
Public pensions are so generous that many public employees come back for seconds.
Double-dipping from the public trough is fairly widespread, including a Florida college president who pocketed an $893,286 retirement lump-sum payment on top of his $14,631 monthly pension—while still drawing $441,538 in salary.34 It was all perfectly legal: Florida law allows officials to “retire” for thirty days and then return to work at their old jobs at full salary, while collecting their pensions. The St. Petersburg Times found that nearly ten thousand Florida officials collect pensions and paychecks from the public. North Florida County state’s attorney Willie Meggs announced that he had “simply changed his mind about plans to retire,” a decision that meant he could (1) collect a lump sum of $519,995, (2) his full annual salary of $151,139, and (3) a monthly pension of $7,749. “It’s my cotton-picking money,” he explained.35
Well, it is now.
In Phoenix, when the city’s police chief Jack Harris retired from his job in 2007, he received a one-time lump sum of $562,000 and began receiving a $90,000 annual city pension. But just two weeks after retiring, the city rehired him with the title Public Safety Manager—a position nearly identical to his old job—at a salary of $193,000 a year.36
College presidents also got in on the double-dipping: The president of Indian River State College pocketed more than $585,000 in a lump sum and supplemented his $286,470 salary with a monthly state pension of $9,823. At Northwest Florida State College, the president earned an annual salary of $228,000, which was then supplemented with a monthly pension of $8,803 and a lump-sum payment of $553,228 in 2007.37
Florida, unfortunately, was not alone. The retired superintendent of the New Trier Township High School district in Illinois collected a $261,681-per-year pension, but he was able to supplement that generous benefit with a salary of $170,000 as superintendent of a school district in California, putting his combined total compensation at $431,681. Even though Illinois law bars double-dipping, the rule does not apply to officials who cross state lines, and an investigation by the Chicago Tribune found that leaving the state “is one of the most lucrative ways for retired superintendents to collect multiple checks.”38
In Washington State, educational bureaucrats also enjoy the sweet taste of the double-dip at the public trough—without having to move or even change jobs. Consider Greg Royer, a vice president at Washington State University, whose $304,000 annual salary makes him one of the state’s highest paid employees. As The Seattle Times reported, Royer is one of many employees who supplement their taxpayer-funded salaries with taxpayer-funded pensions. For seven years, Royer collected an annual pension of $105,000 on top of his salary. It is important to note here that Royer did not break the law, but simply took advantage of the system rigged for employees like him. His double-dip was not especially unusual. The newspaper found “at least 40 university or community-college employees” took advantage of a loophole that allowed them to retire and then be rehired within weeks, “often returning to the same job without the position ever being advertised. That has allowed them to double dip by collecting both a salary and a pension.”39
Here’s how it worked for Royer: He was first hired on October 1, 1973; on his thirtieth anniversary, October 1, 2003, he “retired.” One month to the day later, on November 1, he was “rehired” and thus commenced receiving both salary and full pension. As the paper noted: “Royer, 61, has collected about $700,000 in retirement benefits while continuing to draw his salary. In recent years, he’s been responsible for overseeing some of the deepest budget cuts in the university’s history. Last year, for instance, WSU announced it was cutting about 360 jobs, axing its theater and dance program and hiking tuition by 14 percent.”40
Then there was Rick Rutkowski, the president of Green River Community College, who executed a similar maneuver to fatten his wallet. Rutkowski, who made $179,000 a year, “retired” on December 1, 2001, was rehired exactly one month later on January 1, and collected a $64,000 annual pension in addition to his salary. As an editorial writer for The Seattle Times later marveled: “Rutkowski amazingly does not believe what he did was ethically wrong.”
“I had served 30 years and consequently was entitled to the pension,” he told the Times. “I don’t think there are any ethical issues involved, regardless of the fact that it doesn’t feel good for many people.”
No Greek bureaucrat could have put it any better.
As The Seattle Times noted, Royer and Rutkowski were hardly alone. The paper found nearly two thousand double-dipping state employees at a cost to taxpayers of $85 million a year. This pales in comparison to Ohio, whose teachers’ retirement system paid out more than $741 million to 15,857 faculty and staff members who were still working for school systems and accumulating a second retirement plan. In Ohio, the average teacher retired at the age of 59.41
In North Carolina, the highest paid pensioner in the state was the former director of a mental health program who retired with an annual benefit of $211,373, despite the fact that the state auditor had said his agency “wasn’t performing the functions it was supposed to be carrying out and that he was grossly overpaid.” Eventually, his operation was shut down and he was rendered redundant. But as a local newspaper reported: “[I]t turns out that he had been doing a very good job of feathering his own nest. He had retired in 2005, and then returned to the same job as a ‘contractor’ but at the much higher salary of $319,000 a year. Thus, when he ‘retired’ again, his pension had zoomed from $145,000 (which still seems a gracious plenty) to its present mind-boggling level, making him one of only two state retirees pulling down more than $200,000.”42
Urban Myths
Many of the perks and benefits for public employees are sustained and supported by the equivalent of urban legends. Foremost among the defenses has been the longstanding and now absurdly out-of-date claim that the generous benefits for public employees compensates for their lower salaries. Now that those salaries eclipse their private counterparts, the justification is inoperative, even among
public-employee zealots. More recently, generous fringes and retirements benefits for uniformed employees have been defended on the grounds that police officers and firefighters die young, and so merit the special treatment. This is a compelling political argument, especially after 9/11, and clearly police officers and firefighters are called on to take risks above and beyond most employees in the private sector. But do those risks justify such a dramatic differential? Police and fire services, after all, do not have a monopoly on danger. In fact, according to the Bureau of Labor Statistics, the most dangerous jobs in America are:
1. Commercial fishing jobs
2. Timber logging
3. Aircraft pilots and flight engineers
4. Structural iron and steel workers
5. Farmers and ranchers43
Teachers, college administrators, and government bureaucrats do not make the list, and few fishermen or loggers enjoy the sort of retirement and pension perks enjoyed by public-sector pencil pushers.
California’s “3 percent at 50” (3 percent of their final year’s pay times the number of years worked, available at age 50) pensions for public-safety employees is championed by unions on the grounds that so many cops and firefighters die young. Some union propagandists go so far as to claim that the typical cop or firefighter lasts only five to eight years past retirement. But these claims are not supported by retirement system data. In fact, California’s retirement system has found that police and firefighters are, in fact, the longest living categories of public-sector employees. As Steve Greenhut noted, public-safety employees “live on average into the low- to mid-80s.” And the high rate of duty disability claims? Greenhut reported that The Sacramento Bee once found that “82 percent of manager level officers in the California Highway Patrol retired on disability—a number that spiked after CHP shut down its fraud division.”44
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