The public pension system is broken and needs fixing. Despite being a long-time beneficiary of the system, County Assessor and past Rotary Club of San Jose President Larry Stone has championed meaningful pension reform that has earned him the wrath of some of his colleagues and friends in the public sector. Nevertheless, Larry’s reform proposal is dramatically different from those currently being advanced that would merely replace public pensions with a 401(k). As expected, Larry Stone’s proposal was provocative
Rather than defend a broken system, Larry has advocated for over six years that we either overhaul the (current pension) system or face the likelihood of a “cram-down” by angry voters that merely punishes public employees and creates unintended consequences for local government jurisdictions, severely affecting their ability to compete for the next generation of talented civic service employees.
Public pensions were first established during the administration of Franklin Delano Roosevelt (1936-1945). The actuarial data of that era established that men’s longevity was 62 years; so retirement was established at 65 years. Thus, the expectancy was that the employee would ‘pay in premiums due’, but not collect the full amount paid in. Larry Stone said, “FDR was no dummy, the original pension system had 10 or so workers paying in to the pension fund, with the actuarial expectation that only one or two would collect retirement benefits.
The following corrective actions are necessary per Larry Stone:
1) Prohibit double dipping. Design pensions to care for retirement needs only. 2) Stop pension payouts to beneficiaries who are employed elsewhere. 3) Establish new payout windows which eliminate payout between ages 55 to 65; 4) if high pension payouts are the objective, then the employee must make higher contributions during the ‘pay-in years’. 5) Understand that the general public does not know enough to make complex pension decisions via the ballot and ‘measures such as Measure B’ which was defective (it eliminated pension payouts for catastrophic events). 6) With longer life spans, the whole definitions and expectations of ‘retirement’ and ‘pensions’ needs total redefinitions. The current ‘usual and customary’ standards were established during the 1930’s and are entirely out of date and unrealistic when many individuals live to ages exceeding 90+ years.
These pension decisions need to be made by a select group of fair-minded decision-makers whose judgements are accepted by the public. By going along without addressing these current required pension changes, many jurisdictions (such as Vallejo, CA and Detroit, Michigan) face bankruptcy which will be used to restructure their obligations unfairly to many who expect to receive a pension.
Larry Stone favors assembly of those decision makers who will make the many touch calls required to rectify this current situation before undesired consequences begin to occur.