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OPINION: Nov. 7 vote would pad two annual retirements $8,100 avg.

Supervisors De La Cruz and Botelho would reap huge retirement bumps, almost all at taxpayer expense.

If Supervisors Anthony Botelho and Jaime De La Cruz vote on November 7 to give themselves the proposed $26,821, 55-percent annual pay raise to $75,015, they would also be giving themselves more than a 48 percent, $8,100, average increase in their annual retirement checks at the end of their current terms in January, 2021.  When they retire almost all of those increases will be funded by the county taxpayers in the long run.

The total increased payroll cost to the county over the next 2.5 years for all Supervisor compensation is estimated at more than $434,000 for the raises, associated FICA, Medicare and the county’s portion of CalPERS contributions. It’s likely to be even higher based on CalPERS projections.  That amount would cover the pay and benefits of one mid-level or two junior analysts for the same period that the board could use to reduce what it claims is a crushing workload that cuts into their real jobs.

Using the CalPERS online retirement estimate calculator through election of June, 2020, after the raise, the estimated retirement increase for Supervisor Botelho is $8,592 a year (to $26,502) and $7,608 a year (to $23,348) for Supervisor De La Cruz. Those estimates may change slightly based on birth month and other factors, but the retirement increase is approximately 48 percent..

If they serve another term the retirement increases get even larger as they get 36-months of increased average salary for retirement calculation. Note that none of the Supervisors campaigned for this level of compensation when they ran.

This is a perfect example of how the CalPERS system can be played – neither of the Supervisors nor the county have been contributing to CalPERS based on a salary progression to the level of what would be their new, steeply increased, lifetime benefits. Now the future CalPERS impacts will come due over a short period driving up our rates and unfunded liabilities.

Both Botelho and De La Cruz are serving their fourth terms on the board and for more than three terms they were able to tell their constituents they did it all at great sacrifice while they were making small contributions towards retirement; now they want us to believe they just discovered that they were severely underpaid all along.

This is no accident - it’s time to cash in.

 

About:
Marty Richman (Marty Richman)

Born and raised in Brooklyn, NY, Marty (Martin G.) spent his teen years in northern New Jersey. He served more than 22 years on active military duty, mostly in Europe, and is a retired U.S. Army Chief Warrant Officer 4, Nuclear Weapons Technical Officer.Marty then worked 25 years in various engineering and management positions in the electronics and energetic materials industries supporting the communications, computer, aerospace, defense and automotive sectors. He is a graduate, summa cum laude, from The College of Hard Knocks, among his numerous awards and accomplishments. He was a regular weekly Op/Ed columnist and feature writer for The Hollister Free Lance for seven years and a member of its editorial board for five years. Marty is a frequent commentator and contributor to BenitoLink on a wide variety of local, state, national and international subjects. You can follow Marty Richman on twitter @Marty_Richman. Marty and his wife, Joyce, have been residents of Hollister since 1996.

Comments

One of the issues that came up is the source of CalPERS retirement funds.  Most of the funding comes from investment returns, but who funds those investments?  I'm not suggesting a change, just pointing out that who funds the investments is one of the key issues when it comes to retirement funding.

Over the last 10-years to 2015-2016 CalPERS-wide employees have contributed $36.7 billion while employers contributed $80.7 billion, a little over twice as much.  Pooled investment returns have to be in the same proportion regards source, therefore the fund is 69% to 31% employer sourced.

Additionally - and this is important - the employers are carrying huge unfunded liabilities - the employees are not carrying any unfunded liabilities.  For San Benito County this liability is hundreds of millions of dollars because the investment returns are short 20% to 30% of total liability.  If we quit CalPERS right now the county would have to pay them hundreds of millions of dollars - the employees would not have to pay them anything.

That is the general case. the specific case is that the two long-termed Supervisors paid their employee share of a low salary for 13 years based on low earnings, 3-years after the proposed raise their retirement pay would have been based on the new, much higher, salary for life.  The difference will go  to increase our unfunded liability. There is no free lunch at CalPERS.

Retirement dollars are based on your 36-month final pay, not your earnings over your career.  It does not work when anyone gets a big bump going out the door. That's a unique situation. 

Marty Richman

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