January 2012 Archives

The military pension plan, the envy of nearly every retiree in the nation, may well be going the way of the Dodo bird.  Under the existing system, anyone who serves 20 years in the military is eligible to retire at half their salary for the rest of their life.  This means a person who joined up at 18 years of age could draw retirement pay at the age of 38 and pursue a second profession with additional pension benefits, plus social security after reaching the age of 65. However, this may come to an end as a panel of military advisors (Defense Business Board) are recommending the existing retirement system be replaced with a 401k style plan which would require the existing 1.4 million service members to wait until normal retirement age (65) amounting to a budgetary savings of $250 billion over the next 20 years.

As long as Military Pensions are coming under fire, it is only fair to evaluate Congressional & Federal employee pensions as well.  You ask a Congressman about his retirement and he will hasten to point out he pays into Social Security, but he will not mention the Federal Employee Retirement System (FERS)  as amended under Federal Employees' Retirement Act of 1986.  Both the military and Federal pension plans utilize the same formula: top three year salary average times number of years served times 2.5%.  The military employer (The American Taxpayer) pays 100% of pension costs for the military, but the retiree must serve full 20 years to qualify.  The Federal employee, on the other hand, pays 1.3 percent of his salary and can qualify for the pension after 5 years but cannot draw the retirement until 62; however, if he serves 20 years he can retire at 50, and 25 years of service allows retirement at any age.  Congressman Ron Paul has always refused to participate in this pension plan labeling it "immoral" and North Carolina Congressman Howard Coble campaigned against it in 1984.

A military retiree who puts in 40 years of service can receive 100% of his top wage; however Congress and federal employees are limited to 80%.  Even so, any Congressman (current salary of $174,000), with a minimum 5 years of service would be eligible ($174,000 x 5years  x .025) for an annual pension of $21,750 at age 62, and if he sticks it out for 20 years, his retirement is a whopping $87,000 plus Social Security plus income from the "Thrift Savings Plan".   For perspective, the average American retiree on Social Security considers himself lucky if he can get $1,000 per month at age 65 after contributing 6.2% of wages for a lifetime.  

Possibly, one might wonder why the President and Congress agreed to reduce employee contributions by 2% to a financially troubled Social Security system.  Obviously, their own retirement plan involves smaller payments and a larger return upon retirement.  Social Security, therefore, is a bad investment.

Military and federal employees (Congressmen included) are able to draw from more than one pension plan and many are able to "double-dip" as the saying goes.   Neither the Military nor FERS has a "Trust" fund.  They are strictly hand to mouth and 80% of these pensions are funded by the employer which, of course, is the U.S. taxpayer.  Obviously these costs are an increasing part of the soaring national debt.

On a local level, California's pension systems: CalPERS and CalSTRS, which also use retirement formulas very similar to FERS, are projected to be $-billions in the red which will require additional funding presumably by increased taxes.

It is obvious that most, if not all, pension plans are in jeopardy because of serious abuses, double dipping and just plain greed.  Never-the-less, immediately following food on the table and a roof over our head, a realistic form of retirement income is mandatory.  As long as Congress is looking into solving soaring retirement costs, there is little doubt that all of the many different retirement schemes should be eliminated in favor of one "National Pension Plan" which does not favor special interest groups.  All American citizens, including elected officials and military veterans, are entitled to equal treatment with respect to retirement.  We are in this together!

I applaud any effort to reduce the national debt, but am a bit puzzled by the House Speaker John Boehner & Republicans' refusal to include the wealthy as part of the solution.  It was the George Bush Administration who went to war but reduced taxes favoring big business under the guise of some sort of theory that big business would then hire on a bunch of people and, like a child's fairy tale, everyone would live happily ever after.

As of January 5, 2012 at 12:52 a.m., the national debt is $15.2 trillion, a figure beyond comprehension.  The daily interest on this debt is $3.99-billion and accrues additional interest of nearly $2.7 million per minute; so by the time you read this article, our national debt will have risen over $3-million in interest and counting.

There are those in Congress who propose cuts in Medicare and Social Security benefits to reduce our national debt - why not?  After all, the aged and afflicted paid into this fund believing they would get some form of benefits upon retirement; therefore, they should be penalized for their stupidity!    

For many years Social Security received funds in the form of withholding which exceeded the amount necessary to pay benefits for retirees.  Our National leadership replaced these excess funds with 5 ½% interest bearing Federal notes.  The annual interest was paid by another government bond.  Shucks, this was a private source of revenue to help balance the budget.  But in this bad economy, there are no surplus funds to take which leaves the Social Security Trust with no actual cash only U.S. Government notes.   Apparently certain Republicans conclude that, since there are no funds left to take, it is time to take away the benefits!

According to the "2011 Annual Social Security and Medicare Trust Fund Report" presented by the Boards of Trustees, Social Security did have a $49 billion deficit last year and is projected to have an additional $49 billion shortage this year; however, these figures do not include the $108.2 billion interest earnings which has accrued on the $2.5 trillion in Federal notes or bonds; hence, Social Security is not running a deficit but rather this merely means our Government, who borrowed this money in the good times, now is called upon to honor its debts and pay up.  Bernard Madoff was convicted of ripping off a few thousand investors - a mere "piker" compared to the Federal Government's handling of Social Security!

House Speaker Boehner wants to put everything on the table - o.k.  How about looking at the more than $23 billion in annual foreign aid and the more than $6 billion in military aid of which Pakistan received approximately $11.5 in direct military aid since 9/11/2001 - part of which conceivably could have been used to house Osama bin Laden - the very man we wanted to bring to justice.

Then there is the 2012 Department of Defense spending of $707.5 billion and if you add in FBI counter-terrorism, CIA, Veterans Affairs Homeland Security, NASA satellites, interest on debt incurred in past wars, etc. this budget is more like $1.4 trillion.  This figure does not include our war expense in Iraq, Afghanistan and Pakistan of nearly $2.7 trillion which the Brown University study concludes that, even if we pull our troops out now, it will cost this nation more than another $-trillion in medical, psychological and related military issues.  And what about all those military bases all over the world; is this necessary?  How much is it costing this nation to put in the anti-ballistic shield along the Mediterranean Sea to protect Europe?  Why can't other nations pay for our help?

It was not all that long ago that Soviet Russia pulled out of Afghanistan because that war led them on a path to bankruptcy.  It is obvious we are a nation of busy-bodies and feel compelled to insert ourselves into the middle of other peoples' problems; however, at what point in our national debt do we determine to mind our own business?

Your gardener would never get away with charging you for his grass mower and other tools as part of his service fees, nor would your family doctor bill you for all those years of medical training prior to providing you with medical treatment.  Accordingly, why are customers asked to pay the $150 million over a five year period to cover costs incurred by PG & E while looking into renewable energy sources supposedly in conjunction with Livermore Labs?  And yet, along with the August utility bill, there appears an application for approval by California Public Utilities Commission to increase utility rates for recovery of these costs.

"3 Phases Renewables," a private energy supplier, already offers electricity through renewable sources and they didn't gouge the public $150-million in the process.  If capital is needed for research and development, PG & E has the option of selling stock to generate funds - it is outrageous to expect ratepayers to fund research and/or "capital" improvements as a means to compete against private suppliers who seem to be able to provide the same energy at a lower cost.  But then requesting rate increases is something PG & E does on a monthly basis:

February 15, 2011:  A.11-02-011: Specifically, the request seeks to recover in rates the costs PG&E has incurred to comply with the mandated Market Redesign and Technology Upgrade (MRTU) initiative - $47.2 million effective January 1, 2012. (In other words, they wish to charge the ratepayer because they have to follow the law.)

March 1, 2011:  A.11-03-001: Application proposes a total demand response related revenue requirement of $228 million: $76.8 million in 2012; $73.8 million in 2013; and $77.4 million in 2014.  PG&E claims this expense is related to ". . .costs incurred by motivating electric customers to reduce electric usage during high-demand, or peak usage periods to other periods when electric demand is lower."   Why is this a ratepayer expense?

March 24, 2011: A.11-03-014 - PG & E proposed that ridiculous "opt-out" provision of smart meters resulting in a whopping $270 fee to remove recently installed "smart" meters (the ones we didn't want installed in the first place) and then charge a monthly fee to read the old meters.  They have since reduced these charges to smaller fees subject to approval by the CPUC.

April/2011 - PG & E proposed its customers pay for one-third of the cost to cover a ridiculous $35-million retirement package for Peter Darby.  Governor Jerry Brown denounced this plan and PG & E agreed to give back the $9.6 million.

May/2011 PG & E proposed a rate increase ($104-million) to pay for the discarded old meters claiming they had a useful remaining life - ignoring the fact that most of us did not want the new meter in the first place and PG & E had probably recovered the full value of these old meters through depreciation.

June 1, 2011: A.11-06-004:  PG & E proposed a rate increase beginning January 2012 to cover $205-million in forecasted increases of energy costs. (With all these other rate increases, it would be hard to justify the basis for any forecasted increase of energy costs!)

June 9 - August 26, 2011: R.11-02-019: Pipeline safety enhancement plan - resulting from the infamous San Bruno disaster - whereby PG&E is proposing the ratepayers ought to shell out $247.3 million in 2012, $220.8 million in 2013 and $300.6 million in 2014 to pay for safety measures which should have been in place when these pipes were originally installed.

It is hard to forget Federal investigators have charged PG&E with gross negligence and the CPUC with poor supervision in this matter!!!!

June 27, 2011: A.11-06-028: Proposed a rate increase ($32.4 million) effective January 1, 2012, to cover the energy savings incentive program - but it's not a savings if we have to pay for it!

July 18, 2011: A.11-07-008:  PG & E is asking customers to pay $150 million over a five year period to cover costs incurred by PG & E while looking into renewable energy sources supposedly in conjunction with Livermore Labs.  "3 Phases Renewables," a private energy supplier, already offers electricity through renewable sources and they didn't gouge the public $150-million in the process.  If capital is needed for research and development, PG & E has the option of selling stock to generate funds.  

September 21, 2011: A. 11-09-014:  PG & E seeks to recover costs related to Catastrophic Event Memorandum Account "CEMA" estimated at $32.44 million over a 1-year period.  These costs would probably be recovered under their rate increase of June 1, 2011 "forecasted increases of energy costs."

November 21, 2011: A. 11-11-017:  PG & E seeks to pass on costs of being more efficient and cost effective as well as prepared for future development because the State Legislature told them to do it.

PG & E is a public utility and there are some things the ratepayer is expected to pay, but who is being held responsible for the gross negligence involved with San Bruno?  I see no indictments and apparently no one is accountable for what has been determined by Federal investigators as gross negligence on the part of PG & E and poor supervision by the CPUC.

These are not all of the rate increase proposals advanced by PG & E to the CPUC, and there is little doubt California's ratepayers need better protection from this corporate "bully".  Possibly, at least three members of the CPUC board "ought" to be elected so that the public has opportunity to judge them in accordance to their performance.  In any case, something must be done as the current system appears to be broken!

PG & E is required to provide us with a notice of rate increase requests and we, the ratepayers, are allowed to respond to these requests.  Prior to paying your utility bill, take the time to read these rate increase proposals.  There is no requirement the ratepayer has to have some compelling reason to deny these requests - just say no!