If You Wanted To Inflame the Anger Over Overcompensated Public Employees . . .

Monday, August 8th, 2011

 . . . this would be a good way to do it.

Santa Clara County’s housing authority could have spent $16 million of federal funds to help more struggling families put a roof over their heads. Instead, it chose to more than double the value of its employees’ retirement benefits.

That may sound unusual, but federal housing officials say it was an allowable expense. Still, the switch from a 401(k)-style retirement plan to a pension allowing workers to retire early — with guaranteed lifetime payments — is raising eyebrows at a time when generous public employee pensions are under fire. . .

Bill Anderson, chairman of the Housing Authority of the County of Santa Clara’s board of commissioners, conceded that the money spent on employee pensions could have been used in other ways, including housing aid for low-income families.

Indeed, the waiting list for federal housing assistance is so long that applicants must now wait four to nine years.

Anderson also acknowledged that with the area’s high unemployment, the housing authority could fill jobs without a more generous retirement plan. But he said he considered the agency’s employees, whose average salary according to CalPERS is $60,730, underpaid compared with other government workers, most of whom have pensions.

“I was very much aware that this was money available for whatever else we do,” said Anderson, a retired assistant county counsel. “I thought it was the right thing to do for the employees.”

Housing authority workers who under the old plan had to wait until they were almost 60 to draw from retirement accounts — which could be shrunk by market losses — can now receive a guaranteed monthly pension check as early as age 50. And they’ll have a guarantee of 2 percent annual increases after they retire . . .

The change in retirement benefits was made possible after the U.S. Department of Housing and Urban Development in 2008 made the housing authority one of 32 Moving to Work demonstration sites. The program allows more spending flexibility to encourage “innovative” approaches that “use federal dollars more efficiently.”

Via Hit & Run.

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55 Responses to “If You Wanted To Inflame the Anger Over Overcompensated Public Employees . . .”

  1. #1 |  Mannie | 

    Union thugs supporting Union thugs.

  2. #2 |  Al V | 

    Switching from a 401k to a defined benefit pension. I would say it’s unbelievable, but that article reads like something from The Onion.

    They took 16 million away from affordable housing so they could guarantee that they had pensions instead of relying on what they had saved.

    If shame still existed as a concept in this society, that guy should have some.

  3. #3 |  Difster | 

    Until Santa Clarita county declares bankruptcy and renders those pensions null and void. That would be epic.

  4. #4 |  SJE | 

    This is like that scene in the movies where the bully kicks the dog/kid/girl one more time, the victim snaps, and reduces the bully to a bloody pulp. Everyone cheers.

    Note to Santa Clara unions: you are not the victim in this story.

  5. #5 |  Stephen | 

    I can’t get the link to work. I went to mercury news and I’ll try posting it here again.

    http://www.mercurynews.com/politics-government/ci_18635050?nclick_check=1

  6. #6 |  Leon Wolfeson | 

    Given anyone should have a pension, not something which can crash with the stock market? Just lol.

  7. #7 |  Al V | 

    Given anyone should have a pension, not something which can crash with the stock market? Just lol.

    401K’s don’t have to be invested in the stock market. Most of them have a variety of options. Bonds is a really good place to be right now, but that is beside the point.

  8. #8 |  Mattocracy | 

    This almost sounds like a gov’t agency exists to keep people employed and endowed with generous retirement packages, rather than actually do any good. Say it ain’t so.

  9. #9 |  2nd of 3 | 

    Anger not inflamed. Sorry.

  10. #10 |  Mannie | 

    Now that they’ve switched from 401Ks to pensions, the city can fail to fund them and the go bankrupt, and zero out their pensions. The goons will get what they deserve.

    fffffffffffft … Hhhhhhhhhhhhhah! Here, take a hit off this, it’s good shit!

  11. #11 |  CyniCAl | 

    Great example of American just-us.

    Good to see classism is alive and well in America.

    I will be sure to genuflect to my civil service neighbors at our next gathering.

  12. #12 |  Mario | 

    Public pensions need to be abolished across the board and replaced with 401(k)-style retirement funds; and it needs to start with Congress.

  13. #13 |  homeboy | 

    Fully funding a previously underfunded employee pension plan does not anger me one bit, regardless of who the employer might be. Underfunded pensions are not a good thing, period. It also does not raise my ire that workers with partial vesting in a pension fund may retire early and receive partial benefits from the plan.

  14. #14 |  TomG | 

    #13 apparently you missed the part about where that money was supposed to go ?
    And where do you think the money comes from? It sure isn’t from voluntary contributions or payments made for honest services rendered like a private company would receive.

  15. #15 |  SJE | 

    To those who aren’t angered: pensions are insured by the Federal Govt. If the city goes bankrupt, WE suffer. Here, the city transfered the accounts to pensions and thus have not paid much in liability insurance, thus giving us all the likelihood of a grand old rodgering.

  16. #16 |  homeboy | 

    @ #14, Tom G

    “apparently you missed the part about where that money was supposed to go ?”

    No, I did not miss that part, but apparently you did. “HUD spokeswoman Donna White confirmed that buying down employee pension debt was an acceptable use of program funds.” As the article makes clear, these funds were granted through a program designed to help agencies use “dollars more efficiently.” Fully funding a previously underfunded pension plan certainly does that, and comprises a use to which “that money was supposed to go.”

  17. #17 |  Don't comment much | 

    Par for the course.

    Santa Clara County’s reputation as “Santa Claus County” is much older than even this 1993 article on its (then) budget chief’s departure.

  18. #18 |  JS | 

    I remember reading onetime that in the late middle ages, just before the protestant reformation, something like 60% of the population of England were in clerical orders or some kind of clergy. Because that was were the power and influence and money was. People who work for the government at any level are kind of in the same position in our society.

  19. #19 |  TomG | 

    #16 homeboy – Oh I didn’t miss that part at all. Very convenient for the authority to have a HUD spokeswoman bless their decision to use $16 million for themselves/their employees, instead of the lower income people the authority was supposed to be looking out for. Just because it’s all legal doesn’t mean it’s ethical.
    If you’re going to take my money and claim it will be used to benefit the poor, USE IT TO BENEFIT THE POOR. Oh, I’m sorry, I guess that isn’t innovative enough.

  20. #20 |  derfel cadarn | 

    Then we WONDER why the US has a AA+ credit rating,Californias is going broke and why the rest of us shumcks are pissed off it is thinking like this. If mr Anderson was in MY district he be getting fitted for feathers right now(tar (HOT) first of course).

  21. #21 |  2nd of 3 | 

    “To those who aren’t angered: pensions are insured by the Federal Govt. If the city goes bankrupt, WE suffer.”

    Okay. :)

  22. #22 |  Leon Wolfeson | 

    @12 – Yup, can’t have people secure in retirement if they’re not high paid execs!

  23. #23 |  Mattocracy | 

    @ Leon,

    People aren’t owed a secure retirement.

  24. #24 |  SJE | 

    Leon:

    I admit the the “option repricing” that occured with many senior execs was a disgrace, made worse by the fact that it was sanctioned by the IRS.

    I disagree that this is about the common man having a secure retirement. It is about a minority using their power to give themselves more money, and passing the bill onto everyone else. Not that much different to the option repricing, except that only option repricing screwed the other shareholders. With the pension boondoggle, it doesnt hurt just the citizens of Santa Clara County, but directly transfers the risk of the pensions to all US citizens.

  25. #25 |  Al V | 

    No, I did not miss that part, but apparently you did. “HUD spokeswoman Donna White confirmed that buying down employee pension debt was an acceptable use of program funds.” As the article makes clear, these funds were granted through a program designed to help agencies use “dollars more efficiently.” Fully funding a previously underfunded pension plan certainly does that, and comprises a use to which “that money was supposed to go.”

    What they did was take a 401k which was funded by the employees, and replaced it with a new unfunded pension, then funded that pension. They took on an obligation that they didn’t need to do with money intended for affordable housing. They deliberately set the system up so they could spend the money on themselves. That is what is appalling.

  26. #26 |  DarkEFang | 

    Hey, if it makes anyone feel better, the bulk of the jobs lost in the last couple years have been in government.

  27. #27 |  gersan | 

    The solution to “overcompensated” public employees:

    Stop bitching and purchase a one-way plane ticket to the country of your choice. Somalia is a good choice, because there are no public employees there.

  28. #28 |  PeeDub | 

    No rodes eether!!!

    * spits out troll bait *

    (Dammit)

  29. #29 |  homeboy | 

    @ # 25, Al V

    I think you come close to a critical admission here, and I thank you for it. Many here would like to respond to something other than the subject of this story. What is reported here is merely an agency administration fully funding a pension obligations using funds that allow for that purpose. Some would like to pretend that they are indignant over the misuse of funds that had been earmarked exclusively for distribution to low-income constituents, but we all know that is not the case. HUD allocated funds to increase the efficiency of agency expenditures, and this agency found a very wise way to achieve that end.

    As you suggest, many here would like for the issue to be the existence of the pension itself. This pension was created some 27 months ago, and it seems that many here regret their lost opportunity to scream out against it at the time. Regardless of how one feels about pensions generally (my economics training brings me to approve of them, personally), the implementation of this fund was not brought before us in this article. In this case we find that an agency utilized funds that were allocated to improve the efficiency of its budget, and used a relatively small sum (~$16mm) to shore up the funding of pension obligations that were ~60% underfunded. This is nothing more than sound and prudent fiscal management. I feel absolutely no anger over the fact that a government agency finally behaved with some sense of fiscal responsibility.

  30. #30 |  C. S. P. Schofield | 

    As a rule the citizens (or subjects) of any Government want said government to do all manner of service for them, for little or no money. Contrariwise, Government functionaries always seem to want to raise taxes, while cutting back on service. The friction between these two positions is called “politics”, and doubtless provides God and His Angels with and endless supply of mirth.

  31. #31 |  SJE | 

    #27: Wow, a new version of Godwin’s law.

  32. #32 |  Buddy Hinton | 

    Ummm, Totski‘s . . . Mr. Balko hasn’t blogged on this yet, but London is burning because police shot a guy and won’t say why (they initially lied and sed the ded guy fired 1st). Just sayin’.

  33. #33 |  Stick | 

    I don’t like the idea of govt. having anything to do with funding my retirement. I’ve seen the hell those smirking bastard bureaucrats put my parents through. I don’t know about America, but here in Australia the govt. treats its pensioners like dog turds on the street, just giving them a smell of money and benefits after a lifetime of paying taxes.

  34. #34 |  SJE | 

    “London calling, see we ain’t got no swing
    ‘Cept for the ring of that truncheon thing”

    London Calling- The Clash 1979

  35. #35 |  yonemoto | 

    homeboy, exactly how is it that you consider “switching to a plan where people can retire early” the same thing as “fully funding an underfunded plan”.

    Who is making this “60% underfunded” judgement? Relative to what?

    The rest of us in the private sector have to deal with very minimal pension plans (or, in my case, NONE AT ALL*) because if we demand too much of a pension, then our employers will go bankrupt.

    *Yup, PhD Biochemist, $30k/year at age 29, no health insurance (I’m on a federal grant as a “temporary employee”), no pension.

  36. #36 |  Stormy Dragon | 

    @13:

    Public pensions need to be abolished across the board and replaced with 401(k)-style retirement funds; and it needs to start with Congress.

    Congress shouldn’t get any sort of retirement, IMHO. It shouldn’t be a career.

  37. #37 |  M. Flakne | 

    http://www.canadianbusiness.com/article/38460–apnewsbreak-mo-doctors-get-paid-while-sleeping

  38. #38 |  james | 

    Radley Balko, defender of low income housing everywhere. Huzzah.

  39. #39 |  homeboy | 

    @ #35, Yonemoto

    “homeboy, exactly how is it that you consider “switching to a plan where people can retire early” the same thing as “fully funding an underfunded plan”.

    I don’t. The plan switch was made before the pension plan was created more than two years ago. Under the adopted plan, people with partial vesting may receive partial benefits upon early retirement. I was referring to the recent action whereby a funding shortfall in the pension plan was remedied, which is a discreet event distinct from the plan switch and creation of the pension fund. As such, I was addressing the “funding [of] an underfunded pension plan.”

    “Who is making this “60% underfunded” judgement? Relative to what?”

    That is not a judgment, it is a matter of mathematics. The plan was initially funded by converting the contributions made by employees under the old retirement system (totaling $11.4mm) into fund capital. That left the plan underfunded until administrators transferred another $14.4mm from the HUD administrative allocation to fully fund the plan. Assuming the $16mm figure reported in the article includes ~$1.6mm in deficiency costs, that would mean the plan was previously underfunded by 58.4%. If the reporter simply overstated the total amount of the transfer, and it actually totaled only $14.4mm toward a funding obligation of $25.8mm, that would mean the plan was underfunded by almost 56%. Either way, I am comfortable with a shorthand of “~60%.”

    A plan’s funding obligations are calculated relative to the plan’s projected capacity to pay out the defined benefits it is obligated to provide; that is what determines the level of a plan’s current funding obligations.

    “The rest of us in the private sector have to deal with very minimal pension plans (or, in my case, NONE AT ALL*) because if we demand too much of a pension, then our employers will go bankrupt.”

    While I lament your plight, I disagree with your causation analysis. I don’t believe that the reason pensions have been ransacked, depleted, and become scarce is that employers will go bankrupt otherwise.

    “*Yup, PhD Biochemist, $30k/year at age 29, no health insurance (I’m on a federal grant as a “temporary employee”), no pension.”

    That’s an unfortunate circumstance; I certainly hope that the condition of your finances and employment substantially improve.

  40. #40 |  TomG | 

    james (#37) – I highly doubt that Radley is defending the housing itself. Neither was I. I suspect that he was pointing out that when given “permission” by federal rule changes, a state authority has no qualms about spending millions on its own employees rather than the poor who need the lower income housing that the agency is supposedly administering.
    I find it interesting that so many people have defended this use of funds. I guess state employees’ retirements are more important than poor people’s housing.
    (I myself work at a state funded university).

  41. #41 |  homeboy | 

    @ #36, Stormy Dragon

    “Congress shouldn’t get any sort of retirement, IMHO. It shouldn’t be a career.”

    I tend to agree with you.

  42. #42 |  homeboy | 

    @ #40, TomG

    Hi Tom,

    What “rule changes” are you discussing?

  43. #43 |  TomG | 

    From the original article on Mercury News:

    “The change in retirement benefits was made possible after the U.S. Department of Housing and Urban Development in 2008 made the housing authority one of 32 Moving to Work demonstration sites. The program allows more spending flexibility to encourage “innovative” approaches that “use federal dollars more efficiently.”

    HUD spokeswoman Donna White confirmed that buying down employee pension debt was an acceptable use of program funds.”

    That is what I meant by “rule changes”. I admit I don’t know how inflexible the original spending guidelines were. But the feds apparently tried to allow experimentation – which I’d be in favor of usually – and the housing authority decided to experiment with keeping the money in-house.

  44. #44 |  Leon Wolfeson | 

    @23 – Ah right, it’s not good enough until old people starve because of incompetent fund managers, right.

  45. #45 |  JS | 

    Leon, when was the last time anyone starved in America?

  46. #46 |  Kolohe | 

    “Stop bitching and purchase a one-way plane ticket to the country of your choice. Somalia is a good choice, because there are no public employees there.”

    Well there used to be, but he’s back at his old job at Dept of Transportation in Buffalo, NY. http://www.buffalonews.com/city/article514533.ece

  47. #47 |  Al V | 

    @homeboy
    FTA:
    To buy into CalPERS, the housing authority in 2009 transferred $11.4 million from its roughly 200 employees’ retirement savings in the old plan. It then paid $14.4 million from its Moving to Work operating funds to ensure the pension plan was fully funded.

    The point is that they didn’t NEED to switch from a 401K to CalPers. By doing so, they incurred a 16 million dollar charge of funds that could have been used to house the poor instead of line their pockets. They made themselves more expensive for no benefit to the public.

    According to the article, they funded up-front which means that the plan switch and the funding were done at the same time.

    “a government agency finally behaved with some sense of fiscal responsibility.” Fiscal responsibility would have been to not incur the costs in the first place.

  48. #48 |  homeboy | 

    @ #43, TomG

    OK. While the chronology is correct (the transfer did take place after 2008), the suggestion of proximateness is wrong. Under the MTW revision in 2008, the demonstration sites were allowed to negotiate annual plan agreements with HUD. Under these agreements, they can request funding for programs and initiatives that must be approved and funded in particular by HUD. Housing authorities outside of these 32 demonstration sites are bound by their original MTW agreements, which were generally executed in the 1990s.

    The Housing Authority of Santa Clara County authority filed an annual plan that requested permission to use HUD funds to “improve administrative efficiency” and “streamline…and reduce administrative costs, and allow HACSC to increase staff [support].” HUD approved both the allocation and its use to fund the authority’s pension plan. True, while the authority theoretically could have channeled every cent of its funding into benefit programs, I think this was a better move. It may have saved more than its funding expense in potential litigation, recovery, and deficiency costs alone.

    It seems a bit of a misnomer to refer to an expenditure granted in 2011 under the specific approval of HUD, per a master plan that dates to 2008, as the exploitation of a rule change. If HUD did not want to allow the authority to shore up its pension funding liabilities, it could have said, “No.” Regardless of how one feels about pensions, I would think that we could all agree that deliberately underfunding a pension plan is an inherently bad idea.

    BTW, I don’t know how it might relate to this discussion, but I have also worked at a state-funded university; I lectured at one for 2 1/2 years. I was paid horribly, roundly disrespected by the administration, and burdened with an horrifically poor benefits plan.

  49. #49 |  homeboy | 

    @ #47, Al V

    “To buy into CalPERS”

    I don’t know what you mean by, “buy into.”

    “The point is that they didn’t NEED to switch from a 401K to CalPers.”

    I don’t see that as the point at all. That is water that passed under the bridge some time ago. The point here is that an agency was faced with a pension plan that was underfunded by nearly 60%. Thankfully, they did something about it.

    “According to the article, they funded up-front which means that the plan switch and the funding were done at the same time. ”

    The plan switch was performed, and the funds converted thereafter. The plan was underfunded at that point, a condition which the agency recently rectified. I am not quite sure what point you are trying to make here.

    “Fiscal responsibility would have been to not incur the costs in the first place.”

    Or, perhaps, not to cooperate with the War Relocation Authority in 1942 – 1944. Given that these events occurred, however, I will return to the matter at hand. Reclaiming this pension fund from a severely underfunded condition was an act of sound, prudent fiscal management; to leave it deliberately underfunded would have been the opposite.

  50. #50 |  homeboy | 

    @ #45, JS

    “[W]hen was the last time anyone starved in America?”

    That would be today. According to a study published by the U.S. Department of Agriculture in November, 2010, 6.8 million American households suffer from “recurrent absences of nutrition,” i.e., starvation. Sadly, that number seems to have gone up every year recently. If you mean to ask, “When was the last time anyone starved [*to death*] in America,” I wouldn’t have a last known date of occurrence.

  51. #51 |  Newsouthzach | 

    “Yup, PhD Biochemist, $30k/year at age 29, no health insurance (I’m on a federal grant as a “temporary employee”), no pension”

    Move to Australia where the academic unions are stronger. $95k/year at age 29, PhD physicist, health insurance includes a $100 deductible before everything is covered 100%, employer pays into a defined benefit plan that would pay 85% of final salary upon retirement or you can take 17% of your salary to a defined contribution plan, tax free.

  52. #52 |  Newsouthzach | 

    Sorry, wasn’t clear there. Employer pays the 17 percent. That’s what unions do for us working folk.

  53. #53 |  Newsouthzach | 

    Also: not an Australian. That’s private insurance paid by the employer. Unions.

  54. #54 |  Mattocracy | 

    @ Leon Wolfeson,

    Or people could take a interest in understanding the market and know what the fuck their managers are doing. Personal responsibility is a bitch sometimes, but if you’re seriouse about your retirement, know what the hell your investment people are doing.

    Or you could do what my grandparents did and save. Either way, people shouldn’t expect others to pay for their retirement.

  55. #55 |  fwb | 

    You can be as angry as you want at the state officials. BUT it is the Congress that was wrong for granting the money in the first place. Congress has absolutely no constitutional authority to spend for local issues, AT ALL, EVER.

    Article I, Section 8, Paragraph 1 limits expenditures to the debts, common defence and general welfare of the United States – a body politic, not less than for all 50 states, not less than for every individual, never for foreign aid of any kind. How many states does it take to make a general welfare of the United States? How many individuals does it take to make a general welfare of the United States?

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