California Gov. Jerry Brown has unveiled his seven-point plan for pension reform. While the proposals are all good, they will not solve the half-trillion-dollar problem facing the Golden State. But the first item mentioned is something I've been meaning to bring up for a while:
1. Eliminate Purchase of Airtime. Would eliminate the opportunity, for all current and future employee members of all state and local retirement systems, to purchase additional retirement service credit. (RN 14777) (Note Walters, SB 522, would eliminate Air Time)
What is "air time"? In addition to being more proof that you could sooner count every grain of sand on the beach than find every variety of government-employee featherbedding, it's a practice that raises a serious question: If a government employee worked for five fictitious years, would anybody notice? The gist:
State law allows the employees to increase their retirement benefits by tacking up to five fictitious years — known as "air time" — onto their public service. Although they pay a fee for the privilege and officials say it is high enough to cover the eventual payouts, critics of air time note that the boost can cost taxpayers millions when the state pension system's investment income falls short, as it has in recent years.
Air time offers a return nearly twice as generous as a similar benefit — known as an annuity — that can be purchased on the private market, said Dan Pellissier, who advised former Gov. Arnold Schwarzenegger on pensions. Pellissier, who as a state employee purchased five years' credit, is now pushing to eliminate air time as president of California Pension Reform.
Private financial advisors agree.
"It's a phenomenal deal for retirees, but it's an absolute fleecing of the taxpayers," said Scott Hanson, a principal in Sacramento-based investment firm Hanson McClain.
Hanson said he gets calls about air time frequently and advises nearly all state employees to sign up. It offers a guaranteed 7% to 8% return, as opposed to a 3% return available for similar investments in the private sector, he said.
The practice has an honorable tradition in legislative staffers who were disgruntled that they couldn't collect taxpayer salaries while campaigning. Gov. Gray Davis signed off on the benefit just before getting recalled, but 47,000 pension-richer employees have followed Hanson's advice and purchased air time.
There is truly no end to the methods California's government employees have devised to fleece the taxpayers.