What’s driving up state workers’ retirements?

In 2010, 11,554 state workers hung up their ID badges and applied for retirement benefits from CalPERS, the state’s pension fund for the majority of rank and file workers.  
That’s up 23 percent from the 9,400 workers in the system who retired in 2009. And both those numbers are way up from 2007, when 7,778 workers applied for first-time benefits from CalPERs, and from 2008, when 7,895 workers retired in the system.

In other words, between 2007 and 2010, state worker retirements in the CalPERS system jumped a whopping 49 percent.

With the state desperately needing to find ways to save money, lots of people might think “good.” But others point out that many of those retiring are older, skilled workers who may be hard to replace — or who may come back and still work for the state as private contractors or retired annuitants, former state workers who come back and work up to 960 hours a year while simultaneously drawing their pensions. Cuts under the Arnold Schwarzenegger administration also cut into the number of retired annuitants who collected paychecks from the state.

These aren’t targeted layoffs, but workers with options who are voluntarily leaving. The reason, some say, is the pressure put on state workers in recent years – with pressure ranging from mere bad press to the financial strain of furloughs and salary cuts.

“Maneuvering by politicians is creating a brain drain in the state workforce,” said Steve Maviglio, a former high-level Democratic staffer and now a political consultant heading his own firm, Forza Communications.

Maviglio is a spokesman for Californians for Retirement Security, a coalition of state workers’ groups that have been pushing back against allegations that it is state workers’ pay and benefits that are bankrupting the state.

One key area where this conversation is happening is around pensions. GOP legislators have been openly talking about moving state workers to the types of 401(k)/defined contribution plans that workers in the private sector often have — something Maviglio said is causing unease within the state workforce.

But Edd Fong, a spokesman with CalPERS, has a different explanation: the Baby Boom.

“There was an increasing trend due to the large number of baby boomers reaching retirement age,” Fong said. “It’s pretty much consistent with demographic trends across the board.”

According to a report put out last month by the Legislative Analyst’s Office, “In the state’s three largest public pension systems, the average state or local employee retires at about age 60.” The first wave of boomers – defined as those born between 1946 and 1964 – turned 65 this year. In some departments within state government, there are estimates that up to three quarters of workers are now eligible to retire, even if many are choosing to wait.

One interesting caveat: CalPERS is also the pension system for thousands of local government workers, and at the local level there has been a smaller, though still significant, increase in retirements. There were 15,163 retirements among these CalPERS-eligible workers in 2007, 15,860 in 2008, 18,564 at 2009 and 21,483 last year. This means that there was 42 percent growth in retirements among these workers from 2007 to 2010, and only a 16 percent increase between 2009 and 2010.

Paradoxically, if the state is losing more of its boomers than other employers, one could argue that there could be long-term advantages. With an anemic job market facing younger workers, it could be a good time to hire. On the other hand, the recession hasn’t hit the college-educated as hard, and a large proportion of those hired by the state have college or advanced degrees.

Others say that, at least for current workers, talk about changing pensions is a red herring.

“People who have existing pensions aren’t going to have their pensions damaged,” said Bruce Blanning, executive director for Professional Engineers in California Government (PECG). “While I’m aware there may have been some concerns around that, I’m not aware of anyone who has left for that reason. We have seen people leave for other jobs because of the better pay and the furloughs.”

As an example, he pointed to Will Kempton, who headed Caltrans from 2004 to 2009. Two years ago, Kempton left to head up the Orange County Transportation Authority, bumping his salary from $150,000 to $255,000 in the process.

While pension changes have been in the news, these have all been for new hires. Most politicians in the state, even Republicans who are eager to trumpet how much more they think state workers make than those in the private sector, have said they believe it’s important to honor commitments made to existing workers.

“It’s one thing to say the courts have always ruled a certain way, it’s another to trust that the courts and politicians won’t change that,” Blanning said. “One thing about the future, it’s always uncertain.”

But he added, “Even some of these wacko ballot measures haven’t gone that far.”

The “wacko measure” that has gotten the most attention from labor is the “Public Employee Pension Reform Act” proposed by former Assembly Budget Committee Vice Chair Roger Niello. It would set a minimum retirement age of 62, limit pensions to annual payments of 60 percent of the highest average take home pay from any period of three consecutive years, and add several other limits.

While the Democrat-controlled Legislature would never pass anything like this, there are concerns among state workers that it could pass among angry voters. While most of the bill would apply only to new workers, one key provision — the 62 minimum retirement age — would hit existing workers.

In any case, retirements show little sign of leveling off. More workers filed in January than any other month, because many choose to retire at the end of the year, and recent years have shown January filings as a pretty accurate leading indicator of what is going to happen the rest of the year. This January, retirement filings with CalPERS jumped 3.7 percent. When compared to 2007, the 2,744 retirements represent a 75 percent increase.

Through April, 4,271 state workers had filed with CalPERS, compared to 4,121 a year ago and a mere 2,647 for the first four months of 2007 — a 61-percent jump over four years.