AURELIA VENTURA/LA OPINION/Newscom
James Mussenden could very well be the face of California's municipal pension crisis. His friends seems to think so, at least.
Mussenden, the former city manager of El Monte, California, pulls down more than $216,000 in retirement benefits each year, along with free health insurance and the promise of annual cost-of-living increases. He's getting two pensions—one from the city and one from the state—thanks to a loophole created in 2000 that allowed El Monte city employees to double-dip legally.
While Mussenden is living the good life—he recently took a trip to Scotland to play golf at the famous Old Course at St. Andrews, according to a Los Angeles Times piece published Friday—the city of El Monte and its 116,000 residents are struggling. More than a quarter of the population lives in poverty and the city government is groaning under the weight of pension bills that consumed more than 28 percent of the budget last year, giving El Monte one of the worst budget-to-pension ratios in a state full of municipalities with bad finances.
When Mussenden plays golf with his buddies—presumably not people who are on the low end of El Monte's economic scale—he doesn't talk about his pension.
"The guys I play golf with, they get very angry about my pension because they don't have anything like it," Mussenden told the Los Angeles Times.
Anyone who has been reading Reason or following state and local politics for the past decade knows all about the fiscal consequences of poorly run public retirement programs. Cities across the country are struggling beneath the cost of promises made to current and former employees. Some have entered bankruptcy to escape some of those bills, and others likely will.
There's other consequences, though, and Friday's Times story touches on one of them. Out of whack public pension systems essentially are functioning as massive wealth transfer programs, sucking tax dollars from private sector workers (who largely are responsible for funding their own retirements, too) and transferring it to retired public workers.
If pension benefits are in line with community norms, there's little social friction. If Massenden was getting the same sort of retirement benefits as his golf buddies, for example, he wouldn't worry about their reaction.
In El Monte, though, the system is broken. The median household income in the city is just $32,000, while Massenden and other former city workers are pulling down pensions in excess of six-figures. Harold O. Johanson, another former city manager profiled in the Times story, gets $250,000 in annual benefits. Since retiring at age 58, he's earned $3 million in pension benefits.
Unlike most cities in California, where public employees pay between 7 percent and 9 percent of their paychecks into the pension system, El Monte has covered those costs for employees since the 1980s, the Times reports. Public workers there have not had to contribute a dime to the pension system in order to get these lavish benefits (while most private sector workers contribute at least 3 percent to 401(k) plans and other investments).
No wonder Mussenden's golf buddies are mad. Everyone should be mad about that.
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