Compounding the Confounding

“Huh?”

The average California public employee who’s in the CalPERS program now receives a pension of \$36,486 a year. There are two interesting things to note about that number:

• Half of the dollars fall below that level, along with more than half the employees. The dollars going out above the \$36,486 level go to a lot fewer people – since the numbers are skewed by those who are getting \$100,000 a year or more in retirement pay and benefits from the state.
• Just a few years ago, the average was about \$10,000 less than it is today. That’s because the poor sops who were too dumb to be born later, after the whole public employee pension thing turned into a scam on the people, are dying off and the lucky, more lucrative ones are joining the retired ranks.

But that’s just the beginning of this confounding mess. Let’s do some math. Last year, 33,330 CalPERS covered public employees retired. So:

33,330 X \$36,486 = \$1,216,078, 380

In other words, a combination of less-than-hoped-for investment returns and taxpayer dollars will combine to dole out \$1.2 billion to these folks in their first year of retirement. But that’s just the beginning. These folks, on the whole, are retiring in their 50s and early 60s, so let’s assume they will live on average another 25 years. Here’s the math for that:

\$1,216,078,380 X 25 = \$30,401,959,500

I’m sure the actuaries can shoot that number out of the water, but so what? So what if it’s \$26.8 billion instead of \$30.4 billion – it’s a lot of money, and it’s just for one year’s retirees.

Back in 1999, there were 16,701 retiring employees. See how much bigger government has gotten? From 16,701 retirees per year to 33,330, or more than doubling, in just 14 years! The class of ’99 got an average benefit that was about half of today’s: \$20,532 vs. \$36,486. It took \$330 million to pay their first year benefits – versus \$1.2 billion today, which even the actuaries will agree is almost four times more.

Compounding the confounding, indeed.

So finally, I added up all the big numbers – the annual payout for an average 25-year lifespan for each graduating class of new retirees, from 1999 to 2012, and came up with \$270.8 billion dollars, or over a quarter trillion dollars.

Question my math if you like, but if anything, it’s low. Even the unions speak of a quarter-trillion dollar unfunded liability – and that’s just the unfunded portion, above what CalPERS can pay from its pool. Others peg the unfunded liability at a half-trillion. But who’s counting? It’s easier to whistle in the wind, like Jerry Brown does, and keep approving new public employee contracts with retirement benefit increases.