Commentary: Pension discussion must compare apples to apples

There has been a lot of rhetoric lately about the “outrageous” pensions being paid to some retired public employees, and the “ridiculously” high compensation being paid to some Costa Mesa city employees. These claims deserve closer scrutiny.

One of the arguments often posited against pensions has been that the highest pensions are more than the average earnings of a working Costa Mesan. This is a misleading argument. One could as easily say the average public pension is considerably less than the highest private salary. But, does that make it unfair? Does the comparison even make sense? To make a useful comparison, one has to compare the proverbial apples to apples. Trying to compare apples to watermelons is a frustrating task and doesn’t reveal much useful information.

Let’s start with the highest. The highest pension being paid by the California Public Employees Retirement System, or CalPERS, which is the one Costa Mesa belongs to, is $510,0000. Most of us would agree that a half-million dollar pension (for a retired administrator from the city of Vernon, by the way) is a bit much. Of the 536,000 retirees in the CalPERS system, about 9,000 — only 1.7% of the total — receive more than $100,000 in annual pension payments.

By comparison, the highest private sector salaries in California are in the tens (and maybe hundreds) of millions of dollars. In Costa Mesa, it’s probably in the hundreds of thousands. So, yes, some retired public employees receive annual pensions of more than $100,000. But, the number or percentage of the total is relatively small, just as the percentage of private workers making more than $1 million is relatively small.

Now, let’s talk about averages. As of June 30, the annual CalPERS pension payment to the 536,000 retired public employees in California averaged just under $28,000. According to the Bureau of Labor Statistics, the average annual earnings of working Californians at the end of 2010, was just under $59,000. So, the average public pension is about 47% of the average working wage or salary.

The Costa Mesa City Council seems to take delight in publicizing, and creating a furor over, the “total compensation” of city employees. For this information to be useful, one must first consider what “total compensation” means. As publicized by the city, it refers to all monies paid to, or set aside for, city employees in a given year: base salary, overtime, leave payoffs, health benefits, retirement benefits, and all other compensation or benefits.

What is not often mentioned is that not all the overtime paid to police officers, for instance, is paid by city taxpayers. The city is reimbursed by promoters of special events for traffic control and other police services. The city receives state or federal grants for special traffic safety programs and other specialized programs. While this state and federal money ultimately comes from taxpayers, it would go elsewhere if Costa Mesa did not take advantage of these grants. The point is, it doesn’t impact Costa Mesa’s budget.

Also not obvious from these total compensation charts is the fact that, when the city is understaffed, overtime is necessary to get all the work done, or to provide the necessary amount of police and fire protection. So, instead of paying the salary and benefits to a new employee, the city pays overtime to an existing employee.

Employees are often criticized for taking “leave payouts.” One of the big contributors to this category is pay taken in lieu of vacation time. Critics often point to both this category and overtime as problems. But if all employees took all their allotted vacation time, someone else would have to work even more overtime to fill in for those on vacation. When the city is understaffed, as it is now, they can’t save on both vacation leave payouts and overtime.

Another myth is that retirement benefits are based on this “total compensation” number. That’s not true, because overtime, health benefits, etc. are not taken into account when calculating pension benefits.

The bottom line is that is costs a lot to run a city, but before we exercise our right to complain about how much, we have a responsibility to understand where the money comes from, where it goes, and why. By the same token, public employee pensions are a significant part of the budget, but any search for solutions must be based on a realistic assessment of the costs. We can’t expect to make a credible contribution to the dialogue with meaningless rhetoric such as comparing the highest public pension to the average private wage.

Costa Mesa resident PERRY VALANTINE is a retired city employee.