University of Alabama head football coach Nick Saban is America’s highest paid public employee, pulling down a cool $11 million from the publicly funded college this year.
On its own, that fact is probably not too surprising. College football coaches are the highest paid public employees in most states, and Saban is the best college football coach in the country. When his Crimson Tide take the field on Saturday in one of the national semifinal games, he will be two wins away from a second consecutive national championship (and a sixth in just 12 seasons at Alabama).
Yes, $11.25 million is a heck of a lot of money for a public employee, especially since Alabama’s football program is $225 million in debt. In the fundamentally corrupt world of college sports, however, Saban is at least a winner.
But what about when he retires? Long after the glory of Saban’s national championships fade, it turns out, the taxpayers of Alabama will continue to fork over seven-figures in annual pension payments. That’s according to Adam Andrzejewski, founder and CEO of Open The Books, a nonprofit that claims to have the largest database of state and federal spending records. In an article for Forbes, Andrzejewski calculates that Saban is due $2.4 million in annual pension payments from the state of Alabama, based on the coach’s current salary and tenure with the school.
That staggering figure reveals one of the major flaws with the so-called “defined benefit” structure used by most public pension systems. Under a defined benefit plan, an employee is guaranteed an annual pension that’s based on an employee’s years of service, final salary (or, as is common, an average of the employee’s salary during his or her last three or five years on the job), and a multiplier that’s a special bonus for employees with special status (cops will generally have a higher multiplier than desk clerks in the Department of Motor Vehicles, for example).
Plug in the numbers, do the math, and the pension amount is set. An investment portfolio’s earnings don’t matter, and neither does the state’s contributions to the pension plan. This largely why some states have fallen so far behind in their pension obligations: because the benefits keep accumulating even though they aren’t being adequately funded.
One of the problems with a defined benefit system is that, for employees at the very top of the earnings scale, the pension plan becomes a massive transfer of wealth rather than a retirement safety net. It’s certainly not in the best interest of Alabama taxpayers to continue spending $2.4 million on Saban every year for the rest of his post-retirement life. And with a state pension system that’s already more than $16 billion in the red, it’s also not in the best interest of Saban’s fellow government pensioners.
The same is true of other highly paid public employees. As I’ve previously covered, California has more than 62,000 retirees getting six-figure salaries and seven retirees getting $1 million annually—led by Earl Paysinger, a former deputy police chief in Los Angeles.
Defenders of traditional, defined-benefit pension systems will often argue that the average pension is far less than what these outliers receive. That’s true, of course, but the outliers are still a problem, even if they’re a lesser concern than the overal structure of public pensions. As America slowly reckons with its massive pension liabilities, means-testing retirement payments for recipients with seven-figure net worths—maybe even eight figures, in saban’s case—should be a no-brainer.
Saban, Paysinger, and the rest should, of course, be allowed to reclaim whatever percentage of their pensions they funded with their own contributions (a significant amount, in Saban’s case). That’s what 401k participants get.
But if Alabama, California, or any other state has to dig into its own tax revenue to fulfill pension promises, those six- and seven-figure pensions should not be part of the obligation. Better yet, switching to a 401(k)-style pension system for all public sector employees would remove those obligations from the outset, allowing the next Nick Saban to invest his massive salary and save for his own retirement without obligating taxpayers to replenish his pantry with oatmeal creampies until he croaks.
Put another way: Alabamans might worship Nick Saban for what he’s accomplished on the gridiron, but that doesn’t mean they should be forced to add to his already astounding personal wealth with their own hard-earned money.
from Hit & Run http://bit.ly/2ThT4hM
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