Last year, 8,088 retirees in the Los Angeles County Employees’ Retirement Association (LACERA) received yearly pension and medical benefits packages worth at least $100,000, a more than 11% increase from the previous year, according to Transparent California’s recently published 2014 pension data.
At the same time, the employer’s annual required contribution – the cost borne by taxpayers – hit a record high 20 percent of payroll, more than double the 8.9 percent paid in 2001.
Topping the pension list was former Los Angeles County Sheriff, Leroy Baca, who is collecting a yearly pension and benefits package worth nearly $340,000.
The next three highest compensated members were:
- Larry Waldie, retired from the Sheriff’s Department in 2011, received $333,009.
- Thomas Tidemanson, retired from Public Works in 1994, received $332,200.
- Michael Judge, retired from the Public Defender’s Office in 2010, received $325,078.
The average pension and benefits package for a retiree of the Fire Department with at least 25 years of service was $128,729 and the average for a retiree of the Sheriff’s Department was $106,299. For all other members who had retired with at least 30 years of service, the average pension and benefits package was $74,568.
Current LACERA members are able to include a variety of supplemental pay items as part of their pensionable compensation – which is their highest single year of pay that will be used to calculate their pension benefit. Additionally, LACERA allows employees to sell back any unused vacation, holiday, or sick leave and counts that as part of their pensionable compensation.
While the Pension Reform Act of 2012 sought to ban “abusive practices used to enhance pension payouts” and calculate pension benefits “based on regular, recurring pay” only the practice of selling back unused leave was banned, and only for employees hired after January 1, 2013.
LACERA’s unfunded liability has more than doubled over the past 10 years – rising from $5.6 billion in 2004 to $13.3 billion in 2013, despite having hit their investment target over that same time period.
A Moody’s Investment Services report calculated LACERA’s adjusted net pension liability at nearly $40 billion. They also found that the rules governing public plans inappropriately emphasize investment returns over yearly contributions, resulting in shortfalls even under ideal investment conditions.
Moody’s also cautioned against the increased risk public pension portfolios have taken. When comparing LACERA’s most recent investment portfolio they found a higher allocation of riskier investments such as private equity and hedge funds, as compared to prior years.
This “increases the risk of sharp asset declines” and, consequently, increases the likelihood that taxpayers will be required to pay substantially more to keep the system afloat.
A recent paper published in the Journal of Retirement found that many public pensions will remain underfunded, even if they hit their investment goals, because they rely on flawed actuarial assumptions that understate the true cost of benefits.
Pete Constant, Senior Fellow at the Reason Foundation, observed that there are strong incentives for pension boards to adopt assumptions that are wrong. Doing so directly benefits both the pension system and its member agencies – which now have more tax dollars at their disposal – while the costs are borne by future generations.
To view the complete 2014 pension report in a searchable and downloadable format, visit TransparentCalifornia.com.
Robert Fellner is the Director of Transparency Research at the California Policy Center.