The Pension Bell Tolls

Want $600,000 a year in retirement? Work for the government.

Tuesday, August 10, 2010

For an illustration of everything wrong with the nation's public pensions, look no further than the compensation in Bell, California.

Bell City Manager Robert Rizzo stepped down three weeks ago after news broke that he was making $800,000 a year to oversee the blue-collar town of 40,000. Now the Los Angeles Times reports that records show Mr. Rizzo's compensation was double that amount—some $1.5 million a year. That number included the 28 weeks of vacation and sick time Mr. Rizzo was allowed annually—at a cost of $386,000. Good work, if you can get it.

Mr. Bell's comp also spiraled up thanks to the city's contributions to his pension and other retirement plans. Mr. Rizzo is in line to collect at least $600,000 annually in guaranteed pension payouts upon retirement, thanks to California's generous formulas based on time served and compensation. Those payouts—which could add up to tens of millions of dollars over Mr. Rizzo's lifetime—help explain why the Golden State is currently $6.2 billion in the hole for retiree pension and benefit payments.

According to the California Foundation for Fiscal Responsibility, a nonprofit that advocates pension reform, Mr. Rizzo is hardly alone. The foundation lists 9,111 retired California government workers receiving pensions in excess of $100,000 a year. The top earner, one Bruce Malkenhorst, receives $510,000 a year for his tenure as city administrator of Vernon, California (population, 91). Not including health benefits.

These paydays are the inevitable result of the dominance of government unions in city and state politics. While most private workers have 401(k)-type plans that rise and fall in value with economic growth, unions negotiate guaranteed payouts that stay lucrative whether or not the cities can afford them. California Attorney General Jerry Brown is investigating the Bell episode, but he'd enhance his chances to become the next Governor if he proposed more ambitious pension reform.