It’s official: America has entered a retirement crisis. Or, as Forbes understatedly put it, “the greatest retirement crisis in the history of the world.”
And, while the causes are manifold — the demographic bulge of baby boomers leaving the fulltime workforce; greater worker longevity; the disastrous, 30-year shift from traditional defined benefit pensions to costly 401(k)-style plans — most experts agree that the national retirement implosion has gone critical, with an estimated 75 percent of Americans who are nearing retirement age having less than $27,000 in their retirement accounts.
Even John C. Bogle, the founder of the $2 trillion mutual fund and 401(k) behemoth Vanguard Group, recently admitted that the system of retirement plans that rely on 401(k)s is broken.
“[401(k)s were] designed as a thrift plan, and it doesn’t work as a retirement plan,” Bogle declared.
So it is with some irony that a Texas hedge fund billionaire/former Enron trader and a politically ambitious Northern California mayor have teamed up to cripple one of the few parts of the retirement story that still works — California’s public-sector pension system. Last month San Jose Mayor Chuck Reed filed papers with the state attorney general’s office to begin the qualification process for what Reed called the Pension Reform Act of 2014.
The measure, which was financed with a $200,000 down payment from John Arnold, the Houston billionaire and right-wing libertarian, seeks to rewrite California’s constitution to effectively empower the state and local governments to gut retirement benefits for current employees for the years of work they perform after the changes go into effect, should the measure pass.
Reed and his billionaire backers (including Silicon Valley venture capitalist Michael Moritz) will have to move quickly, however, if they want to make their claims stick about the “unfunded liability” of California’s public pension structure. According to the California Public Employees’ Retirement System (CalPERS), the system was 101 percent funded before the 2008 crash and is today well on its way to a full rebound, even during this sluggish recovery.
The new ballot initiative’s dry run came last year when Reed persuaded 69 percent of San Jose voters to pass Measure B, his municipal pension-cutting measure that forces city workers to cough up an additional 16 percent of their take-home pay into their pensions while paring benefits for new hires — or it will, if the measure can survive a gauntlet of lawsuits challenging its constitutionality.
If Measure B is any indicator, and if Reed’s new effort qualifies for next year’s ballot, California voters can look forward to a barrage of claims from Reed’s anti-pension forces who will employ his voter-tested mix of statistics, distorted bookkeeping and exaggerationabout the prodigal lifestyles enjoyed by public pensioners, and the unsustainability of such taxpayer largesse.
These campaign strategies include cherry-picking the six-figure retirement compensation packages of top-tier city and county executives to create poster children for “skyrocketing pension costs.” Yet according to CalPERS, the average pension for state workers is about $25,000 per year and that half of CalPERS retirees receive $18,000 per year or less in benefits.
While Reed and company aren’t explicitly articulating their vision of how the Golden State’s public retirees are supposed to survive on less during their golden years, Frying Pan News recently spoke with some former state, county and municipal workers for a picture of how their retirements have been living up to their expectations.
Norma Anders, Long Beach
Retired career librarian Norma Anders’ eyes light up when she speaks of her 30 years in the City of Los Angeles’ public library system. “We make a big difference,” she declares proudly. “We’re one of the forces that’s giving our country an educated workforce, an informed citizenry. [It’s how] we’re going to be able to keep our [nation] growing and growing.”
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