City Attorney Michael Martello's retirement highlights issues with the pension system Around Town, posted by dfb, a resident of the Shoreline West neighborhood, on Dec 28, 2009 at 4:47 pm
The recent retirement of the city attorney, Michael Martello, highlights issues with the civil service pension system. According to reports in the Voice, Martello will retire from Mountain View on December 31 and immediately take the reins of the city attorney's office in Los Gatos.
See City attorney Michael Martello is stepping down, Web Link ; Martello takes interim attorney gig in Los Gatos, Web Link
There is some conflicting information about whether he qualifies to receive his pension and simultaneously receive a paycheck from Los Gatos to, in other words, double dip.
Regardless, Martello is an example of how our public service pension system has run amok and is unsustainable. I understand he will take about 80% of his regular salary, which will net him about $180,000 per year in retirement. That is 80% to do nothing or work for another paycheck.
That 80% of the final paycheck rule as applied to the pension system helps to explain why the public pension obligations are so high.
In turn, governments around the state and are having issues meeting those obligations. For example, Vallejo declared bankruptcy last year in large part to decrease its pension obligations.
The pension system was initially designed and intended to provide retirees a reasonable amount to live on in retirement. At this point, it has gone well beyond those modest goals and is unsustainable. Case in point is the $180K annual check paid to Martello from the pension system. It seems excessive, unreasonable, and not sustainable in the long run. Moreover, CALPERS is on the brink of insolvency, is cooking the books to not show its true gains or losses, and is set to face an imminent explosion in the number of retirees it must pay.
CALPERS “has been reporting an expected rate of return of 7.75 percent for the past eight years, and 8 percent before that…. Its annual return during the decade from Dec. 31, 1998, to Dec. 31, 2008, has been 3.32 percent, and last year, when markets tanked, it lost 27 percent.” David Evans, Hidden Pension Fiasco May Foment Another $1 Trillion Bailout, Bloomberg NewsService (March 3, 2009).
The pension fund is guaranteed by the state treasury. If the pension fund were to run short for whatever reason, those guarantees would compound the state's already fragile finances.
I am not asking or advocating that we abandon the pension system. I am supportive of the idea of providing pensions. I only ask that pensions be reasonable and the system made sustainable. I consider Martello's pension offensive and an abuse of public resources.
Here are some ideas on how the pension system should operate:
1) Civil servants should be required to work for 35 years in public service and until at least 65 or 70. Martello is 57.
2) The amount must be reasonable. Sorry, but I do not think $180K is reasonable. In this way, the final paycheck rule should be discarded in favor of a graduated percentage that ensures low paid workers can still live off their pension and highly paid workers get enough to live off but not live high on the hog, as Martello will.
3) Pensions should be managed by an independent agency/group that answers to the employees, not government officials.
4) Shortfalls in the pension system should be born by the employees rather than governments. That's why the pension system should answer to employees.
5) Accounting practices need to be standardized and made less misleading.
Posted by Observer, a resident of the Old Mountain View neighborhood, on Dec 28, 2009 at 5:46 pm
Great post, dfb. It needed to be said. This is exactly why California is going bankrupt and why public services decline while taxes are raised. Leave it to a lawyer to game the system with all the inside knowledge of it he gained while serving. Unfortunately any reform of the system will not be retroactive. The situation reminds me of a similar one that occurred when a past superintendent and assistant superintendent retired from the MV school district several years ago and were accused, rightfully so, of spiking their last year salary by factoring in their health benefits and transportation allowance. This wink, wink, nod, nod strategy boosted their final salary by nearly %20. Technically, it was all legal. Web Link And then we have to question why it is that so many police and fire fighters take a disability retirement right before a regular one: the difference is the first gives you your money tax free. Yet another scam at the taxpayers' expense.
Posted by Concerned, a resident of another community, on Dec 29, 2009 at 11:34 am
It's true that the city attorney can recieve his pension and also get paid by LG. He might even be able to negotiate a higher salary from LG because he wont require medical coverage (paid by MV) and also wont require a pension contribution from LG.
Regarding who is responsible for covering the massive Calpers losses, it's the taxpayers. The only thing the state, counties & cities do is consolidate the taxpayer money and then send it to calpers.
There is a just released book (Plunder: How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation - Steven Greenhut (Author)) that explains the issues that concern the taxpayer. You can read an excellent review on the amazon website. Here is what the Howard Jarvis Taxpayer association has to say about the book:
Posted by Patrick, a resident of another community, on Dec 29, 2009 at 2:51 pm
I would like to know how the author of this article came up with the 80% figure. I remeber a recent pal alto weekly article that discussed the number of retired employees making over $100,000 a year in palo alto and that list was pretty short. I think the majority of people on the list had been there for at least 30+ years (not 16 years) or were fire and police (they have a much better rate than most other employees). If you could please shed some light on how you came up with 80% it would be greatly appreciated. Thank you.
Posted by Daniel DeBolt, Mountain View Voice Staff Writer, on Dec 29, 2009 at 3:50 pm Daniel DeBolt is a member (registered user) of Mountain View Online
After 16 years of employment for the city Martello's pension is 43.2 percent of his highest annual salary. The deal with the city's managers allows their annual pensions to be 2.7 percent of their highest annual salary multiplied by the number of years worked. So if Martello was paid $230,000 in 2009, his annual pension after his 16 years would be $99,360. Only after 30 years of employment would it reach 80 percent.
I reported on this pension deal when it was made in 2006 and some further details are here: Web Link
Posted by Political-Insider, a resident of the Sylvan Park neighborhood, on Dec 29, 2009 at 4:33 pm
Pers benefits are a function of time worked, highest salary, and age which determines the multiplier and percentage benefit. People with high incomes will receive higher retirement incomes.
It is the city councils responsibility to set PERS rates for their employees. Most councils have chosen to reward local unions and offer very high multipliers (3 @ 50 for police and fire and 2.75 @55 for others). These lead to retirement incomes almost equal to 100% of a retirees working income. Ask your council member how they justify these high multipliers. The council offered 2.75 and you can see why most dept heads and others are retiring. They are essentially working for free.
PERS does not care what cities offer, they just adjust their premiums to cover future benefits. Current public safety premiums are over 30% and for other employees are expected to rise to over 25%. PERS is not bankrupt, they just expect cities to pay higher premiums. For state workers this will not be much of a problem because most rates are still 2 @ 55.
Posted by dfb, a resident of the Shoreline West neighborhood, on Dec 29, 2009 at 7:05 pm
Thank you Daniel for joining in. A city hall staffer told me 80%. That is apparently the whispered number.
My understanding is that the rate includes the cumulative years of public service, not necessarily only for one public agency that qualifies for the pension system. So if Martello worked 30 years altogether in public service, then he would be entitled to the 80% figure now.
Posted by curious, a resident of the Cuesta Park neighborhood, on Dec 30, 2009 at 2:59 pm
Mr. DeBolt or dfb
Thanks to the San Jose Mercury News lawsuit, the pay packages of government employees must be released to the public. Since the issue has come up, I think it would be a great service by the Voice to find out Mr. Martello's actual retirement pay package and to report it instead of trying to infer it. This should include the charges for medical and life insurance and other fringe benefits.
Posted by Outraged, a resident of the Shoreline West neighborhood, on Dec 30, 2009 at 3:01 pm
So Martello earned a huge salary bilking the taxpayers of Mt. View, then retires with a huge pension, and then takes a high paying job as City Attorney in Los Gatos! Sounds like he never left Redding where such collusion and underhanded deals are a common occurrence. It never ceases to amaze the waste of public funds being used to subsidize marginal employees and now retirees.
Posted by ceecee, a resident of another community, on Dec 30, 2009 at 7:19 pm
[Portion removed; disrespectful language] Stop worrying about other peoples money, go get a law degree, and then work your arse off as a civil servant. Then you would like PERS. Stop The Hate!!! MM made MV better. [Portion removed; disrespectful language] Get a Life. Stop the Hate. Go Make Money.
Posted by PeterMc, a resident of the Old Mountain View neighborhood, on Dec 31, 2009 at 1:54 pm
I may be mistaken but if Mr. Martello is to receive 80% from PERS it is my understanding that Mr. Martello can only work part time for Los Gatos. Can the Voice confirm how many hours per week he is allowed to work without affecting his retirement package?
Posted by Jack, a resident of the Old Mountain View neighborhood, on Dec 31, 2009 at 9:59 pm
Let's work to reduce public pension benefits and competitive salaries. Then we can hire security guards to be our police and have a volunteer fire department to come rescue us. We'd save tons of tax payers dollars, and get competent, professional service, just like in developing countries! Then we'd feel good that public employees won't make enough to be able to live in our exclusive community. Oh, but they don't. How much would you want to work for the public? Certainly more than they get paid, otherwise you would be a public employee. We should publish everyone's salaries. Then we would see how they compare to those of us in the private sector.
Posted by John Q. Public, a resident of the Blossom Valley neighborhood, on Jan 1, 2010 at 3:04 pm
I hope the City Council reads all these posts. There are many good ideas and references to informed articles/books that explain how serious the public pension situation is. I am tired of seeing and hearing about firefighters and police officers who can work for 20 years and get paid large amounts of overtime in their final 3-4 years in order to boost their retirement pay. It is indeed outrageous that taxpayers must support the out-of-control public employee pension payments. I would implore the City Council to find a way to solve this problem. Do some financial projections and if pension payments will really force the City to cut back on essential services or go bankrupt - then it is high time we figure out a way to manage the pension payments - and maybe even declare bankruptcy like General Motors to reverse this unsustainable and unconscienable situation.
Posted by Kathy, a resident of the Sylvan Park neighborhood, on Jan 1, 2010 at 3:18 pm
Of course civil servants deserve these huge pensions because they missed out on all incredible salaries, stock options and huge windfalls from company stock that the rest of have enjoyed.....right.
So does he get free healthcare as well? If not, is it highly subsidized? At 57 he has a way to go before Medicare kicks in. As an HP retiree of that age with 20+ years service he and a spouse would potentially be paying about 8K per year for premiums for United Healthcare in 2010. I should have worked for the Post Office.
Posted by Ed, a resident of the Rex Manor neighborhood, on Jan 1, 2010 at 4:45 pm
Great link and list, concerned. Does anyone know how many of these were via a disability retirement, and therefore tax-free? If I recall correctly the first on is. How do you get such information for CALSTRS so we can see how much the past superintendents have fleeces the system for?
Name Monthly Annual Employer
BRUCE BARSI $13,015.55 $156,186.60 MOUNTAIN VIEW
TIMOTHY KO $12,227.85 $146,734.20 MOUNTAIN VIEW
MARC REVERE $11,551.51 $138,618.12 MOUNTAIN VIEW
STEVEN CONTE $11,096.97 $133,163.64 MOUNTAIN VIEW
PAULA BETTENCOURT $10,857.11 $130,285.32 MOUNTAIN VIEW
RONALD GEARY $10,237.58 $122,850.96 MOUNTAIN VIEW
LARRY BERTUCCELLI $9,994.43 $119,933.16 MOUNTAIN VIEW
MICHAEL FREEBERG $9,633.41 $115,600.92 MOUNTAIN VIEW
MICHAEL ALEXANDER $8,882.52 $106,590.24 MOUNTAIN VIEW
GLENN LYLES $8,827.09 $105,925.08 MOUNTAIN VIEW
CHARLES GIBSON $8,822.86 $105,874.32 MOUNTAIN VIEW
Posted by PeterMc, a resident of the Old Mountain View neighborhood, on Jan 1, 2010 at 5:56 pm
Re: John Q. Public
Please get your facts straight when you make such erroneous comments.
Overtime does not affect their retirement pay; PERS retirement is ONLY, and ONLY based on there base pay. Also, do people not know that public employees also contribute into their PERS retirements. It's akin to private firms using a 401K.
Posted by Elaine, a resident of the Old Mountain View neighborhood, on Jan 1, 2010 at 7:45 pm
What about for CALSTRS? How were those two superintendents from Mountain View able to fold the cost of their health benefits and transportation allowances into their base bay to "spike" their last three? That's a fact, not fiction. I'm not so sure you are correct.
Posted by concerned, a resident of another community, on Jan 2, 2010 at 9:32 am
Re: Peter MC
It's true that overtime isn't used in the pension calculation, but it's not true that only base pay is used in the calculation.
Here are some things that are also included in the pension calculation: EMT Pay, educational incentive pay for junior college, educational pay for a bachelors degree, longevity pay, bi-lingual pay, and others. Here are some that don't make sense, but are included in pension pay: uniform allowance (mostly for safety and maintenance workers, a safety employee that recieves 1000 per year in uniform allowance will effectively be paid that allowance for every year of retirement), Car allowances of as much as $600 per month can add $7200 per year to the pensionable income (multiply that by 80 or 90%) and the taxpayers are paying for the employees car for the life of his/her retirement, Holiday pay can be saved and converted to cash to increase pensions, management bonuses. Pensions are also spiked by giving generous sick leave and allowing the employees to covert the sick leave to additional years of employment credit (i.e. it's possible to work 28 years and have your pension based on thirty years).
Posted by concerned, a resident of another community, on Jan 2, 2010 at 10:22 am
Pers pensions are hardly akin to a 401k. You say you contribute 9% but 1.45% of that is for YOUR portion of the medicare contribution. Nevertheless, the city contributes 24.3 percent (24 cents on the dollar) and it's going up substantially. The city's contribution rate could hit 38% in 4 years. That's quite a bit better than the 401k I get. And I can assure you, nobody has guaranteed me a 7.75% return.
Posted by Ed, a resident of the Old Mountain View neighborhood, on Jan 2, 2010 at 5:09 pm
Thanks for the link. Great resources. Our last two retirees from the school district were able to get into the $100,000 club, board approved through spiking of their final salaries. All during the same year that the closed Slater School! Archibeque increased her salary by almost 8% in the last few months prior to retirement. Yick negotiated a higer salary as she walked out the door leaving the district one school short. That's right, the same board that just gave Ghysels another 2% as he walks out the door. Voter beware the current district administration is currently in place and working on much higher retirement salaries funded by YOU THE TAXPAYER. Game the system from within and you really can't go wrong.
Posted by mike, a resident of another community, on Jan 4, 2010 at 2:17 pm
The public safety pensions were bargained for during the dot.com era when PERS and the rest of the world was convinced we were in a "new economy". There is really no way to change the pension for existing employees, but there is building momentum across the State to introduce a two tiered pension with the second tier being more fiscally sustainable for newly hired employees. A perfect solution? No, but about the only thing left. As a side note, how come only one member of the public spoke during the Budget Hearings?
Posted by another concerned taxpayer, a resident of the Waverly Park neighborhood, on Jan 4, 2010 at 2:28 pm
Public employees should have 401Ks like most of the rest of us in Silicon Valley. I have never heard of any Silicon Valley employers contributing more than 4-6% of salary to the 401K plans. There are hardly any companies in the Valley who have any kind of pension plans. They went out 20 years ago. Why didn't the town councils, county boards, and State legislators wake up and manage costs? They should have implemented 401Ks a long time ago. Since they didn't they should do it now for all new public employees. $35K for government employees? Wake up - check out the lists above for all the $100K club. When was the last time anyone ever heard of productivity improvements amongst public entities?
Posted by Happy taxpayer, a resident of another community, on Jan 4, 2010 at 7:30 pm
When you all get tired of beating up the City of MV, have a look at the deals at El Camino Hospital. CEO Graham gets some giant cookies from the public cookie jar for a whole lot less time than even the overpaid, underworked lawyer that started all this brouhaha. Or, visit Palo Alto Unified School District to see the co-Chief Business Officer – a retiree on 101% of his inflation-adjusted, full-benefits salary + now working essentially full-time …well, 80% but goodness knows what that "extra pay" amounts to ...and in his old job! Sweet. Gotta love all the sacrifice of these big wigs on our behalf, the overpaid public.
Posted by Concerned, a resident of another community, on Jan 4, 2010 at 8:33 pm
"There is really no way to change the pension for existing employees, but there is building momentum across the State to introduce a two tiered pension with the second tier being more fiscally sustainable for newly hired employees"
Not true. Everything is negotiable. I keep hearing that but it's nothing more than an old wives tale. You can't take something away that has been earned but you can negotiate 3@50 down to 2@50 for future years. The Unions will fight that but you can argue that the cities contribution rate will soon be over 40% (and it will) and the unions need to pay the increase if they want to maintain the benefit (and they wont). You can also lower the pension obligation by lowering the compensation.
My guess is that that a starting FF receives a compensation package of 100K, and the job requirement only calls for a high school diploma. Their is plenty of room to negotiate contracts down. It is one of the safest blue collar jobs on the planet, and you can retire at 50. People need to look at the cities salary survey, and then read the employee contracts. They should be available online and they will probably shock people.