A Look at Santa Clara (CA) Pension Payouts

Pension Payouts For Santa Clara County “Miscellaneous” Employees
Each week there are newspaper articles that reveal the ever-growing salaries of public officials.
In Palo Alto, both the Superintendent of Schools and the Palo Alto City Manager are each
drawing about $260,000, the Department Head of the hapless Palo Alto Utility is drawing about
$220,000 yearly, the County Manager of Santa Clara County makes about $310,000 and a
Sheriff in San Mateo County is making about $320,000 yearly. The latest salary data for Santa
Clara County shows a surprising number of employees (doctors) making between $400,000 and
$450,000 yearly. There seems to be no limit to what elected officials will pay these people, who
have none of the obligations of executives in the private sector.
What the newspaper articles are not saying, however, is just how lavish their pensions are—at
least not in dollars. This is because the pension matters have been outsourced to CalPERS an
CalSTRS, which do not see the public as part of their constituency. CalPERS and CalSTRS sees
itself only responsible to its enrolled members—meaning the government sector.
The general pension payout formula can be applied across a range of exit salaries and years of
employment, to provide an accurate table of payouts that would be true for any individual.
The following table provides a fairly good estimate of what people will draw in pension payouts,
once they hit $150K+ a year:
Santa Clara County "Miscellaneous Employees" High Salary At Time of Retirement (@2.5%)
Years of
Employ-
ment $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000
30-Year Pension Payout
5 $760,651 $1,014,202 $1,267,752 $1,521,303 $1,774,853 $2,028,404 $2,281,954
10 $1,521,303 $2,028,404 $2,535,505 $3,042,606 $3,549,707 $4,056,808 $4,563,909
15 $2,281,954 $3,042,606 $3,803,257 $4,563,909 $5,324,560 $6,085,212 $6,845,863
20 $3,042,606 $4,056,808 $5,071,010 $6,085,212 $7,099,414 $8,113,616 $9,127,818
25 $3,803,257 $5,071,010 $6,338,762 $7,606,515 $8,874,267 $10,142,020 $11,409,772
30 $4,563,909 $6,085,212 $7,606,515 $9,127,818 $10,649,121 $12,170,424 $13,691,727
35 $5,324,560 $7,099,414 $8,874,267 $10,649,121 $12,423,974 $14,198,828 $15,973,681
40 $6,085,212 $8,113,616 $10,142,020 $12,170,424 $14,198,828 $16,227,232 $18,255,636
Table.1
What this table is saying:
For any given “miscellaneous” Santa Clara County employee (such as those in the District
Attorney’s Office), that person will receive 2.5% of their “high” salary times the number of years
of service at retirement (plus a COLA). So, by intersecting the number of years of service, and
the exit salary, the 30-year payout can be determined.
What we see in this table, is the once employees hit $100K a year in salary, that employees with
20-30 years of employment will also receive a 30-year payout of $3-$4M on the low side, and
$10-$14M on the high side, which is generally not see in their compensation model.
The “pension multiplier” is variable, based on the agreement that a given local government
agencies makes with CalPERS. Also, Public Safety personal also have a higher multiplier and
can retire with few years of employment. Therefore a family of tables like the one above needs
to be developed, in order to accurately determine the pension payout obligations of an agency.
Real Data
The following table contains the final salaries and years of service for former employees of the
Santa Clara County District Attorney’s office:
Years of
Employ- Final
ment Position Salary
1 34.5 DISTRICT ATTORNEY $211,596
Table.2
Source:
Santa Clara County
Using Table.1, we see that employee #1 in Table.2 will be given about $7M additional dollars
over 30 years of retirement, which is doubtless close to twice what this employee earned during
his/her working years. Why? What has this employee done for the County, or the taxpayers, to
justify what can only be seen as a gift?
Current and Future Obligations
Today, CalPERS claims that its average payout is about $24,000 a year. This comes to about
$1M over a 30-year timeframe per employee. But when this next generation of employees has
retired, with salaries routinely being closer to, or exceeding, $100K per year, and 30%-50% of
the work force making between $100K and $400K, these pension payouts and taxpayer
obligations will be much larger.
For example:
Using salary data from Santa Clara County (which is on-line via the San Jose Mercury News
WEB-site), there are a goodly number of employees with salaries well over $400K/year. Using
$400K as a retirement salary, the Table.2 shows that such an employee with thirty (30) years of
service will be awarded another $12M yearly (that’s 1M a month in pension payout/service
retirement allowance).
There are currently 2M full time employees, and retired, former, government employees enrolled
in the CalPERS and CalSTRS funds. For every $1M (on average) in 30-year payouts that have
been promised by local/state agencies, “California” is on the hook for about $1.6T in payments
to people that are not linked to any particular activity, other than number of years of former
employment. These pensions, it would seem, are just gifts of money to these people for having
worked for a government agency in the past.
As typical exit salaries shift into the $100-$200K range, then the aggregate obligation for
retirement benefits will jump by $1.6T. So, within 15-30 years, California will be looking at an
aggregate $8-$10+T in obligations for its retirees--keeping in mind that “government” will get
nothing back directly for this money.
Conclusion
Most local government agencies have little, or no, responsibility for knowing how much their
employees’ pensions will be. These government agencies do not seem to consider these pension
payouts as “deferred salary”. Most of these agencies seem to call pensions simply a “defined
benefit”--without having any idea how sizable these benefits will be, or who will be responsible
for paying these people in the future. Other than CalPERS and CalSTRS, it is unlikely that very
many people in California government, at any level, have any idea what the long term financial
obligations to these former employees might be, or the destabilizing effects on the ability of
government to provide services without having to continually increase taxes.
It is clear that this system is designed to bankrupt California, and must be changed. Having local
government agencies required to develop, and publish, their compensation models, and ridding
ourselves of “defined benefit” as a basis for any post-retirement benefits are clearly two of the
first steps that must be taken to allow a full appreciation of just how deeply in debt to the future
we are at the current time, and to set the stage for the discussion that are necessary to decide
what we need to do next.
On-the-NET:
2009 Public Employee Salaries:

http://www.mercurynews.com/public-employee-salaries
State Worker Salaries:

http://www.sacbee.com/statepay/
Pension News Articles:

www.pensiontsunami.com
Santa Clara County Grand Jury: Cities Must Rein In Unsustainable Costs:
http://www.sccsuperiorcourt.org/jury/GJreports/2010/CitiesMustReinInUnsustainableEmployee
Costs.pdf
Wayne Martin
Palo Alto, CA
www.twitter.com/wmartin46
www.youtube.com/wmartin46
www.scribd.com

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Pension Payouts For Santa Clara County “Miscellaneous” Employees

Current and Future Obligations

2009 Public Employee Salaries:

State Worker Salaries:

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