Council steals money from police widows, blames budget shortfalls

Once upon a time, Oakland had something called the Police and Fire Retirement System (PFRS) (PDF). PFRS is a long and interesting story on its own (well, not really PFRS itself, but money stuff related to it), which I will have to reserve telling until another day. All you really need to know is that we don’t use it anymore (today everyone gets CalPERS), and the PFRS system is underfunded to the point where the City is probably going to have to cough up around $56 million annually starting in 2011 to cover it.

So, if your husband has a pension from his job, and he dies, you keep getting his pension for the rest of your life. You’re entitled to that money just as much as he is, the State of California considers pensions community property. Now, when the PFRS system first started, widows who were eligible to receive their former husband’s pensions would become ineligible if they got remarried. The idea being, I suppose, that in some weird antiquated way of thinking about women and inheritance and such, is that if you got remarried you were now your new husband’s responsibility to take care of, and God forbid you have any means of support of your own.

Anyway, we amended the retirement plan in 1986 to be more sane, so that widows who remarried in 1985 or later would continue to get their former husband’s retirement benefits even after the second marriage. (This is normal – CalPERS does it this way too.) Of course, this amendment left out some people – widows who had remarried before 1985 still did not get the pensions. There are three of these women still alive, not receiving retirement benefits from PFRS because they remarried before 1985. One of the women’s husband died naturally while still working at 60 after 35 years of service. The other two were killed in the line of duty. The women are 96, 84, and 58 years old.

Now, the Police and Fire Retirement Board wants to change the system so these three women will get those retirement benefits. Doing so would require voter approval. The Council’s Finance & Management Committee considered a request on Tuesday to place such a measure on the ballot (PDF). Under the proposal, the women would not receive any retroactive pay. They would simply start receiving current benefits. The total cost over the lifetime of all three women is estimated to be $1.7 million. Initially, the annual cost would be $237,000.

Incredibly, the Committee declined to move the proposed measure forward to the full City Council. (This isn’t the first time they’ve denied this request either – it’s come up at least twice before.) District 5 Councilmember Ignacio De La Fuente said that the City simply couldn’t afford it:

One of the things I really believe is that, especially pension and medical benefits, obvously it’s a benefit that we have to protect not only for the past but for the future and for our employees, in this case OPD. I sit in a pension in the private sector and I can tell you that I have gone through situations like this, where for whatever reasons, at some point there’s changes in the plan where a group of people don’t get either an additional benefit or less benefit, and it’s tough, but at the same time, overall, I think that 1% or 1/2% over the long term of 20 years is gonna be a lot of money.

And I know that it’s not specifically directed to this, but it is. Because the contribution that’s gonna be required in 2011, It’s going to be 50 or 60 million dollars, so I think that it plays a role. I also believe that our City employees have enjoyed a very good pension, and I – in all good conscience, with the budget that I’m seeing and with the deficit that we see in front of us, I cannot support this.

Of course, this isn’t an issue of these women not getting additional benefits, or getting less than other people. They’re receiving nothing. Pat Kernighan and Jean Quan agreed with him, suggesting that the City simply cannot afford to add $1.7 million to the obligations to the PFRS system, which, at the estimated 2011 rate, would be like $1.12 billion over the next 20 years. Which is so unbelievably wrong. But it gets even worse. District 3 Councilmember Nancy Nadel, incredibly, said she didn’t think we should give pensions to remarried widows at all:

As a widow myself, I am not supportive of somebody who’s getting remarried still getting benefits. I think that’s really generous and I never got any benefit from my husband’s passing, but I’m just amazed that we still have this. As opposed to supporting this, I’m wondering if we have the opportunity to undo any benefits to widows who remarry.

Then she asked the City Attorney to look into whether or not we could just undo the payments to remarried widows permanently!

I can’t even decide which of these positions is worse. Nancy Nadel’s ideas about women are totally bizarre. But at least it’s ideological. Quan, De La Fuente, and Kernighan, who presumably acknowledge that a woman is not simply the responsibility of whoever she happens to be married to at the time, are willing to deny money that should rightfully be theirs to widows because the City has budget problems. And not just widows, police widows. And not just police widows, widows of policemen who were killed in the line of duty! And not just deny these women their money, but deny the voters of Oakland the choice of whether or not they want to pay these three women.

The only public speaker on the item was Sanjiv Handa, who berated the Committee for their incredibly hypocrisy, the way they lamely talk about social justice and equity all the time, but won’t even let the voters decide if they want to provide survivor benefits to three widows. I have never been in more agreement with Handa’s comments:


I cannot recall the last time I was so sickened by something the City Council did. Quan and Kernighan want to increase the amount of money the City gives from its General Fund to non-profits providing after-school programs, but they’re not willing to pay spousal retirement benefits to a lousy three widows because the City is too poor? What’s wrong with this picture? It’s just completely morally bankrupt and all four of these Councilmembers should be ashamed of themselves. This is a question of basic human decency. It isn’t the widows’ fault that the City has a budget deficit, and it’s totally fucked up to punish them for the Council’s own poor financial planning.

18 thoughts on “Council steals money from police widows, blames budget shortfalls

  1. MarleenLee

    At first I questioned the number of $1.7. Seemed awfully high for just three women, two of whom are likely to die very soon anyway. But then I did the math, and sure enough, it actually does seem reasonable. Just goes to show how incredibly expensive pension benefits are, and why they are crippling public agencies these days. When these women married their husbands, and/or when their husbands took the jobs they did, and when the wives remarried,they understood that there were no survivor benefits if their wives remarried, and they knew or should have known that they would be giving up potential survivor benefits by marrying again. While I agree that the law the way it currently stands is more fair, I don’t think what the council did was unreasonable. The City is broke. There are lots of other causes that the money could support. I also don’t think that if the Council thinks it is a bad idea, it is okay to pass along such important decisions to the voters. Voters sometimes get it wrong. Really wrong. Like with OO. Like with Prop 8.

  2. V Smoothe Post author

    I find that attitude unconscionable. These women paid into the pension fund from their household income. It’s incredible to suggest that they should not get what’s rightfully theirs because they had the audacity to move on with their lives after their husbands were killed in service to the City.

    Yes, they knew they were sacrificing retirement benefits when they remarried. We corrected that rule because it was antiquated and unfair. Now the Council has an opportunity to right a wrong committed against these three widows and is refusing to do so. That’s indefensible.

  3. dto510

    V, Oakland has had an unfunded pension liability of $1.2 BILLION dollars for decades, and that number is just going up (ie, the Council isn’t paying it off). When does the bill come due? How has the Council been able to ignore this for so long?

  4. V Smoothe Post author

    The answer to that question probably merits a post of its own, dto510. I’ll add that to my pending list, and try to give the short version here.

    PFRS is not the same as pensions for current City workers. Now both the City and the employee pay into CalPERS annually. PFRS covers retirement benefits for policemen and firemen hired before July 1, 1976. As of last May (PDF), PFRS membership was 1255, with 3 active employees, 900 retirees, and 352 beneficiaries. PFRS members contributed to the fund from their pay throughout their career.

    The City has not been contributing to the fund. Instead of paying into the fund annually, they issued $417 million in Pension Obligation Bonds in 1997 which deferred the City’s need to pay. The bonds cover the City’s contributions through 2011. In 2011, the City will then have to find a way to pay their contribution every year until everyone in the system dies because the money currently in the fund does not fully cover all the obligations. Currently, we expect that this contribution in 2011, when they have to start paying, will be $56 million. That will not be the figure every year – the amount will vary.

    The $1.7 million that would add to the system’s requirements is over the lifetime of all these women, assumed to be 20 years. I used the $1.12 billion figure ($56 million, the expected City contribution in 2011, multiplied by 20) to illustrate what a small portion of the money the Councilmembers are complaining about the request represents. But I might have done that in a confusing way. We don’t know right now what the total liability the City will have to PFRS over the lifetime of the system.

  5. MarleenLee

    I’m just not convinced that these women have been harmed, or that they have any right to the money. If they really had a legal right to the money, they would have and could have filed their own lawsuits years ago. Of course their families paid into the pension fund. But the contributions to the fund probably were a lot smaller back then, given the rules that existed at the time. Now that pensions do not depend on whether the spouse remarries, I bet that the contributions are higher. (The costs certainly are). An employment relationship is a contract between the employer and the employee. The police officers and their wives were never promised any benefits if the wives remarried, so no promises/contracts were broken. The law has now changed, and if the same thing happened to them today, they would absolutely be entitled to the money. No argument there. There’s a lot of injustice out there, and as a society we need to pick and choose our battles. Given the ages of these women, what we’re really talking about is putting something on the ballot that will in all likelihood benefit only one person! And we don’t even know her financial circumstances – she might be a multi-millionaire, for all we know. And while two of them had husbands who were killed in the line of duty, they likely got substantial death benefits as a result, separate and apart from the pension issue.

  6. V Smoothe Post author

    I don’t see why it matters what a widow’s financial circumstances are. We changed the rules to this system because they were bad rules, representing an antiquated attitude towards women, and in that process, three people got left out of the fix. So when given an opportunity to correct that inequity, we’re just going to shrug our shoulders and say too bad for them? The City is within their legal rights to do so, but ethically, the decision is obscene.

  7. MarleenLee

    FYI – there are still plenty of pension systems out there that operate the same way, i.e. terminate benefits when the spouse remarries. Social security, veterans benefits etc.

  8. Jennifer

    I agree this is disgusting. It’s women’s history month, for g-d’s sake, Obama just created a Council for Women and Girls. And we have this crap coming out of my councilwoman? Hello!!!!! 1952 called, it wants its councilmember back!

  9. Max Allstadt

    So wait… How many councilmembers agreed on this? Did they not pause to envision the mailer they’re all setting themselves for in the next election cycle?…

    “Councilmember X voted against giving police widows their dead husbands pensions”

    Imagine a picture of a police funeral with this caption, on a 5×7. Now imagine 10000 of them. I can think of half a dozen felonies you could commit that would be less carreer threatening. Yeah, you could explain your vote and your rationale. Do you want to?

  10. Steve Carney

    I agree with Max. Our city council members should put their re-election and future political aspirations ahead of what, in their minds, is best for Oakland, its citizens and the City’s budget. Instead of voting in a way that they feel is responsible, they should envision how their vote will be manipulated in some sleazy mailer. Yes, let future hypothetical mailers guide their decisions!

    =)

  11. len raphael

    if it wasn’t messing up people’s lives, it would be entertaining to watch the city council members close the barn door after the many years of annual mega high raises they gave to city employees; and settlement upon settlement to various citizens for a huge array of reasons often related to city’s inability to properly supervise it’s own highly paid employees.

    our council members should feel very frugal and self sacrificing after their courageous vote.

    -len raphael
    temescal

  12. Max Allstadt

    Steve, I didn’t actually weigh in either way on the issue itself. I just was pointing out my surprise at the fact that they all were willing and able to knee themselves in the political nuts.

  13. We Fight Blight

    V. Let me get this straight.

    “In 2011, the City will then have to find a way to pay their contribution every year until everyone in the system dies because the money currently in the fund does not fully cover all the obligations. Currently, we expect that this contribution in 2011, when they have to start paying, will be $56 million.”

    Where the hell is the City gonna make up another $56 million? Service cuts, staff cuts, or tax increases or all of the above? I know a lot of communities are in the same boat with unfunded pension obligations–but is this even on the City Council’s radar screen and are they even working pro-actively to address this massive looming budget problem?

    Maybe Ron Dellums can use his federal connections to get some grants…

  14. CitizenE

    There was a lot of misinformation floating around at that meeting. The most recent actuarial calc shows a $322 million unfunded liability for the plan and an annual contribution, beginning in fy11-12, of $37 million. Not $56 million. The $56 million sounds like the previously-reported annual requirement to fund the City’s OPEB (other retiree benefits). Another ugly number, but unrelated to this discussion.

    In 1985, CalPERS passed an amendment to begin covering widow(er)s who remarry. PFRS followed suit and passed a similar amendment. Neither CalPERS or PFRS made the amendment retroactive. Prior to 1985, neither plan covered any survivor (male or female) who remarried. So this was not a gender issue, but a remarried survivor issue. (Admittedly, the police and fire ranks in 1985 were most likely predominantly male.)

    Whether or not these widows should receive benefits is open for debate. I do wonder why the issue comes up now — over 20 years later. This issue could have been settled a number of times over the years at the negotiating table and the unions could have taken slightly smaller pay increases, for example, to pay the additional cost. Now they want the City to cover the full cost almost 25 years on?

    Finally, the sergeant claimed that the City has paid nothing into this plan for years. True, because the City issued over $400 million in pension bonds in 1997 to fund the plan. The taxpayers of this City pay over $45 million a year in a special property tax to pay for these bonds.

  15. V Smoothe

    CitizenE – My understanding was that the expected contribution had risen from $37 million to $56 million due to a recent decrease in the fund’s value – those actuarial figures are from nearly two years ago.

  16. CitizenE

    My bad…..just read the February staff report to the PFRS Audit Committee. Unfortunately for the City, you are correct. One can only hope that the market comes back. CalPERS has also taken a bath, which does not bode well for member agencies.

  17. len raphael

    the magnitude of the unfunded retirement plan contribution obligations, and retirement health benefit costs has been known by the entire council and mayors’ for years. the main twist is that calpers will be probably add their makeup demands for all covered employees to the above because of their investment declines.

    as far as those three police widows, i’d like to say that oakland should do what the feds did on a much larger scale granting back pensions to filipino national veterans but then i found out that the feds totally excluded all widows, which is even worse than Oakland.

  18. Jason

    I think the city needs to get real about its pension liabilities. I would propose the City offer the women $150,000 each in cash right now and see if they bite. I suspect they would