News

One in four El Monte residents lives in poverty. Yet taxpayers pay a steep price to fund bonus pensions and other perks for city workers.

For the first time in its 85-year history, the California Public Employees Retirement System, CalPERS, is drastically cutting benefits for public retirees. Starting January 1st, four retired City of Loyalton public employees will have their pensions cut 60 percent.  For 71-year-old Patsy Jardin, that means her pension will drop from about $49,000 a year to a little more than $19,000.

School districts, already bracing for record pension contributions for school employees, will face additional costs they hadn’t expected as a result of a decision Wednesday by the California Public Employees’ Retirement System. . . Dennis Meyers, an assistant executive director of the California School Boards Association, estimated that the lower investment forecast would add $400 million to $600 million to school districts’ costs. Combined with already scheduled cost increases to CalPERS and CalSTRS, higher pension costs will consume every dollar of projected revenue increases for 150 to 200 school districts in coming years, he told the CalPERS board committee during a hearing

Californians in April will start paying more to register their cars — not to help maintain roads, but to keep the pension checks rolling for the motorcycle cops who policed them.

The impacts will first be felt in the state budget, which already makes annual payments of $5.4 billion a year into the CalPERS fund. While local governments and schools won’t have to boost their pension contributions until 2018, the state budget will begin to feel the effects of the CalPERS decision in almost six months. . . Brown, who will unveil his new state budget in less than three weeks, believes the ratcheting down of CalPERS’ investment profits will force the state to pay an additional $2 billion above current pension mandates by the summer of 2024.

A mix of 5,000 California state social and health care workers will get an 11.5 percent raise over the next three years if they approve a contract their union announced this week. . . Some members would gain as much as 17 percent next year, depending on their job categories.

The earnings forecast would drop from 7.5 percent to 7 percent, giving the nation’s largest public pension fund one of the most conservative forecasts, possibly setting a nationwide trend in the view of some. . . When fully phased in the lower discount rate will cost the state an additional $2 billion, Eric Stern of Brown’s Finance department told the committee, half from the general fund that contributes $5.4 billion to CalPERS this year and the other half from special funds.

In a move that critics say could increase costs and delay projects, a low-profile government agency responsible for handing out $500 million to restore San Francisco Bay’s wetlands and improve flood control has ruled that most of the construction contracts must be awarded to union workers.

One new deal announced this week would give a 14 percent raise over three years to the maintenance workers and electricians in International Union of Operating Engineers. . . Many of its members also would receive special salary adjustments bumping up their pay by an additional 5 percent. Some heavy equipment mechanics and telecommunications technicians would gain as much as an extra 10 percent in special pay increases.

Top officers of the largest U.S. pension fund want to lower their investment targets, a move that would trigger more pain for cash-strapped cities across California and set an increasingly cautious tone for those who manage retirement assets around the country.

This trend undermines the ability of state and local governments to invest in their public services by recruiting and retaining high-quality civil servants. For example, according to a report from Bellwether Education Partners we reported on last Spring, teachers could be making an average of 15 percent more if it weren’t for the unfunded liabilities that pension funds had accumulated over the years.

Panasonic Corp. is introducing convenience-store checkout machines that can scan and bag items on their own, joining Amazon.com Inc. in the push for more retail automation.

For state and local workers, the larger share going to defined-benefit costs comes at the expense of other forms of compensation. In the same period 10 years ago, wages and salaries made up 67.3% of compensation. As of September this year, that had dropped four percentage points to 63.3%. . . In the private sector, where workers are more likely to have a defined-contribution plan, the shift has been less dramatic. Wages and salaries made up 69.8% of compensation as of September, down less than a percentage point from a decade ago. In other words, as a share of total compensation, private-sector workers get to bring home more or less as much as they did a decade ago.

Amazon is building stores without cashiers and checkout lines. . . In Seattle, where Amazon is building its first cashier-less store, raising the minimum wage just $1.53 to $11 has already decreased the share of workers with jobs by 1.2 percent. By the time Seattle hits $15 in 2021, many more job positions will have been priced out. Raising minimum wages accelerates the elimination of low-wage work through automation and raises the barrier to entry for new companies that don’t have advanced capabilities.

The innovation slump is a key reason the American standards of living have stagnated since 2000. Indeed, absent a turnaround, that stagnation is likely to continue, deepening the malaise that has left the middle class so dissatisfied. . . Regulations have raised the bar for commercializing new ideas while directing a growing share of innovative effort toward goals with benefits, such as cleaner air, that don’t translate into gross domestic product. Meanwhile, a trend toward industry concentration may have made it harder for upstart innovators to gain a toehold.