Photo by Mark W. Clark. Economic storm clouds are on the horizon. Looking across the Atlantic, the New York Stock Exchange broker speculates as to the possible repercussions as he watches Greece lobby for one more stay of execution from her European brethren. Across the continent, his client glances toward China and considers what a possible collapse of that giant economy could portend for her own future. And as the Americans ruminate, Europeans and Asians stare back at us with wonder as to where we are going and what we’re going to do next with our own layoffs, foreclosures, outsourcing, and downsizing.
No one wants to be the first to blink, but everyone is wincing.
Prior to the 2009 financial crisis, law enforcement was deemed to be one of the most recession- and depression-insulated professions to be found; the sight of hundreds of applicants competing for a single law enforcement opening during an economic downturn was common.
But with thinning ranks, diminishing benefits, and increasingly consolidated responsibilities, even those otherwise inclined toward a career in law enforcement might think twice before signing on the dotted line. Even those who’d argue that cops still have it good—compared to those private sector workers who have no retirement benefits—have cause to wonder how much longer the assertion will remain valid.
The concerns go beyond mass layoffs of cops in cities like Newark, N.J., and Ann Arbor, Mich. Increasingly, there are fears that even those who retain their seniority-based employment may lose more than their jobs. Municipalities like Stockton, Calif., have declared bankruptcy, casting a shadow over the stability of their public worker pensions. And if some of America’s voters and politicians who have made public worker pensions a target have anything to say on the matter, such defined retirement benefit plans may soon be extinct.
Los Angeles County Employee Retirement Association Chair Les Robbins noted in March that Los Angeles voters did something that he never thought he would see in his lifetime: They created a Tier 6 to add to the police and fire pensions, which lowered benefits and increased employee contributions, while at the same time changing the basis for calculating pensionable earnings from the highest year of income to the average of the last two years of service. In essence, they rolled back pension benefits to what they’d been a decade before. The employees impacted will also pay their full 9% toward their pensions and for the first time will pay an additional two percent of their monthly gross earnings as their contribution to fund their retiree health insurance benefits. Robbins sees this as nothing less than a watershed move.
“If there was ever any doubt that other law enforcement and fire agencies would not be forced to change (lower) their benefit levels, this should create a bar-lowering that most every (other agency) will end up looking like,” Robbins says.
So if ever a cop had to concern himself with providing for his family today and tomorrow, it is now. To that end, some cops have taken on second and even third jobs; others have deferred their retirement. And still they worry.
Plan for the Worst
Getting your financial house in order so you don’t lose your home is something Mike Mendoza knows about.
Mendoza, a financial coach with Primerica, has for years given presentations to law enforcement personnel just beginning their careers through the Rio Hondo Police Academy in Los Angeles County.
“There’s a lot of resistance to proper financial planning,” laments Mendoza. “Part of it is understandable—historically, there’s been a great deal of comfort with pension plans. These pension plans allowed many officers to feel they were OK and they didn’t really have to worry about it: The system would take care of them. The problem is that things are changing and so are the pension plans and benefits that are being offered. There are questions about whether these pension plans will hold up.”
Mendoza cites CALPERS, one of the largest in the state of California, as a microcosmic example. “It’s going the way of a lot of other pension plans, which is to say it’s seriously underfunded. The reason that plans such as 457 deferred comp plans exist is so that the (beneficiaries) can understand that the pension plan in itself will not be enough to sustain them, particularly under the current systems.”
Do You Need That Toy?
A spendthrift mentality has played and will continue to play a considerable role in cops undermining themselves, as they revel in buying expensive new cars and trucks and other toys and status symbols. In a country where 95% of people are broke or in debt, this behavior is hardly unique to officers.