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Maybe we should thank Bell's Rizzo for shedding light on pension excesses

The seeds of the state pension fiasco were sown in 1999, when Gov. Gray Davis and lawmakers raised retirement benefits for state workers, and many cities and counties followed suit.

August 01, 2010|Steve Lopez

Marcia Fritz remembers it distinctly: She had a chilled glass of Handley chardonnay in her hand and was chatting with friends on the shores of Lake Tahoe in August of 2002. She was totally relaxed until one of her pals brought up an official in her mid-size city who was retiring. His pension was to be based on a 3-50 formula.

Fritz, a certified public accountant, nearly choked.

The 3-50 formula meant that the official could retire at age 50 with a pension based on 3% of his final salary, multiplied by his years of public service. If he made, say, $200,000 a year and had 25 years on the books, he'd get $150,000 a year until the day he died, plus benefits and cost-of-living increases.

It was like winning the lottery.

"I was stunned," says the Citrus Heights resident, who would go on to lead a statewide pension reform movement.

Fritz, who calls herself a fiscally conservative Democrat, could not believe that such a generous pension was available to a public employee only 50 years old and potentially in line to collect a retirement check for more years than he had worked. How could taxpayers afford that?

"I just instinctively knew when I heard 3-50 that we were in trouble."

And so we are, with the fiasco in the city of Bell hammering home that point after a Times expose on a city administrator making nearly $800,000. Robert "Ratso" Rizzo's pension could hit $700,000 a year, while residents of low-income Bell pay the second highest property tax rate in L.A. County to foot the excesses of city leaders.

But we've got public pension trouble across the deficit-ridden state, even where retirement payouts aren't nearly as obscene. The crashed economy, along with corruption scandals and boneheaded investments by the state's public pension system, CalPERS, means taxpayers have had to fork over an extra $600 million for pensions this year. According to Fritz, thousands of retired public employees in California collect $100,000 a year or more, often with medical benefits too.

I don't have a problem with safety nets in retirement. But do they have to be spun from gold?

I'm tired of hearing about plumbers, cops, firefighters, electricians and street sweepers hanging it up in their 50s at nearly full pay and sometimes collecting Social Security to boot. Taxpayers are covering a part of the cost while seeing their own jobs disappear, their salaries shrink and their 401(k)s take a beating.

Pensions? They went "poof" in the private sector years ago. And the argument that public servants deserve better retirement benefits because they work at lower pay than the rest of us doesn't hold up in this economy.

So how did we get into this mess, with Fritz and others predicting calamity if we don't get more of the kinds of reforms Gov. Schwarzenegger has worked out with half a dozen state employee labor unions? When Fritz got home from that trip to Tahoe and did some research, she discovered that the seeds of the current disaster were sown in 1999.

That year, with the economy fat and public officials happy, the state banked on an endless run of milk and honey. Gov. Gray Davis and the Legislature — with nearly unanimous bipartisan support — raised pensions for state workers to nation-leading levels under SB 400. Many cities, counties and other public entities joined the party, and smiling union leaders could tell their members they had gotten a spectacular return on years of faithful campaign donations.

Fritz, of the California Foundation for Fiscal Responsibility, tried unsuccessfully to get a pension reform plan on the ballot last year. A former consultant to CalPERS and a task force member for the national Government Accounting Standards Board, she said her continued mission is to educate the public on the potential pension tsunami and lobby for reform.

Both candidates for governor, Meg Whitman and Jerry Brown, have made pension reform proposals for state employees. Fritz likes some of their ideas, but she thinks we need even bigger changes, and they need to extend to all public employees.

If she were in charge, new employees wouldn't be able to boost their pensions with what she calls a Sears catalog of extras, such as adding the value of vacation time to their final pay. Pensions would be based on an average of the final three years of an employee's salary instead of the final year, so late-career spikes like Rizzo's don't break the bank.

Fritz said cops and firefighters now retire, on average, at 54, while other government employees retire at 59. If each group worked five years longer, she said, the public cost would be cut in half. She'd also require all employees to contribute to their own pensions and drastically lower the formulas for figuring retirement pay.

In Bell, where the staggering salaries of top executives are under investigation and they were forced to resign, the pension formula is one of the more generous in the state. In the case of Rizzo, it's 2.7% of his $787,637 salary multiplied by three decades in three public jobs, with the gravy train starting at his current age of 55. That puts him between $600,000 and $700,000 a year in pension pay.

Maybe we should thank the dirty rat. His greed and arrogance were so monumental, he's shocked the entire state, and that just might send the whole gravy train right off the tracks.

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