Feb 22, 2011 9:32 PM by Nancy Chen

The Problem with Pensions: Public worker gets almost $200K/year for retirement

Retirement on the Central Coast--it's not too shabby, especially if you work for certain public agencies.

How's retirement at the age of 57 and getting $152,825 a year for the rest of your life sound?

That's the reality Ken Hampian, the former city manager of San Luis Obispo, is living, according to the California Foundation for Fiscal Responsibility.

And there's also Frank Ortiz, a former Santa Maria fire chief who gets $157,644 a year.

Or what about James Langhorne, a former Montecito Fire Department fire marshal, who gets $193,928 a year?

And they're not alone.

"You could retire as early as 50 with a 90 percent pension," said Andrew Carter, a San Luis Obispo City councilman, referring to 90 percent of a salary.

And these packages can't be wiped out by a dip in the market like 401(k)s can in the private sector.

It's guaranteed by law--no matter what.

With city and county budgets in crisis, public pensions have become a source of frustration for many.

Former Santa Barbara County Supervisors held a press conference earlier this month to protest current pension practices.

"We are broke, California is broke, the county is broke," said Brooks Firestone, a former supervisor.

California is facing a budget shortfall of more than $26 billion, and lawmakers are growing increasingly concerned.

"We're in a position now where everything is on the table, and the pension shortfall is actually a problem that's been growing for years," said Mike Latner, a Cal Poly political science professor.

These big pensions can cause some big problems.

Near San Francisco, Vallejo--whose motto was the "City of Opportunity"--had to file for bankruptcy in 2008.

Leaders there blamed it in part on huge salaries and benefits for firefighters and police officers.

At the heart of the pension crisis is the investment fund known as CalPERS, the California Public Employees' Retirement System.

About 93 percent of cities in the state use the fund, currently valued at $219 billion, to manage pension and health benefits.

In just 2003, its annual rate of return was 23 percent.

As a result, San Luis Obispo increased benefits and salaries between 2003 and 2005 for all of its employees, just like many other cities in the state.

"It's like free money, like a free lunch," said Andrew Carter, a San Luis Obispo city councilmember. "And CalPERS literally told the Legislature that it wasn't going to cost a dime to do this which, of course, is a fallacy. There is no such thing as a free lunch."

But after the economy tanked, the fund returned nearly $90 billion less than it was supposed to--in just one year; that's a loss of more than 35 percent.

And the effects are long-term.

"For a one-year stock market decline, all public entities that are part of CalPERS are going to be paying for that over the next thirty years with increased rates," Carter said.

But the legal obligation to pay the pensions is still there.

"There is no magic purse, all the money does come from our taxpayers," he said.

As a result, taxpayers have to pony up more money to make up for the difference.

Much of the pension comes from the same city budgets that pay for services like paving roads, tree trimming and maintaining parks.

"You cut in your parks and recreation programs, you stop paving your streets so there are a lot more potholes," Carter said.

We looked at eleven cities here from Paso Robles to Santa Barbara to see which city spends the biggest percentage of its budget

The biggest spender was San Luis Obispo, which spends more than 8.3 million dollars on pensions each year, about 16 percent of its $51.6 million general fund operating budget; the other cities average around 13 percent.

The numbers for each: San Luis Obispo: 16%; Paso Robles: 15%; Santa Barbara: 14.8%; Arroyo Grande 14.8%; Morro Bay: 13.7%; Santa Maria 13.9%; Lompoc 12.6%; Pismo Beach 12.1%; Atascadero: 11.6%; Grover Beach: 9.8%; and Guadalupe: 7.6%

Statewide, there are more than nine thousand retirees making more than $100,000 a year off public pensions, according to the California Foundation for Fiscal Responsibility.

Santa Barbara alone has 29; San Luis Obispo comes in second in our area with 16 people in the $100K club.

City leaders have argued these generous pensions keep them competitive.

"The dilemma for government is, how do you keep public employee positions attractive so that you can attract the best talent and still make the pension more competitive and market-oriented?" asked Mike Latner, a Cal Poly professor of political science.

Hampian says he agrees with the need for reform but that his retirement is the end result of a 35-year public service career.

He says he also invested personal savings in the system, as many public employees do.

But what happens when pension costs run a city in the red?

The money has to come from somewhere, and it's being taken from parks, streets and maintenance.

Tomorrow, we take a look at one city fighting to keep pensions in check.

The three-part investigative series, "The Problem with Pensions," will continue to air Wednesday and Thursday nights at 6 p.m. and 11 p.m.



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