Are state workers resuming their rushing to retirement?

The State Worker: Why state-employee retirements are on the upswing

By Jon Ortiz
jortiz@sacbee.com

Are state workers resuming their rush to retirement?

California’s eight-month streak of declining state-pension applications ended with a 24 percent jump in July, according to CalPERS data. August followed with a hefty 64 percent surge, the largest single-month percentage increase since July 2010. Retirement filings last month rose 23 percent compared with a year ago.

It’s a small sample size, about 3,000 retirees total. Still, we’re talking about a 36 percent rebound for the third quarter and the first time the numbers have gone up in consecutive months since the end of 2012.

State leaders have long fretted about a government brain drain triggered by the baby-boom generation’s retirement en masse. Their fears intensified when more than a quarter of the state workforce, 52,000 employees, entered retirement from 2009 through 2012, prodded by furloughs and budget cuts.

Then furloughs ended. So did the mad dash to the door, since the unpaid days off and years of stagnant wages had pushed so many state workers to the exits already. Those still hanging on had survived an unprecedented fiscal bloodletting. Some said returning to regular hours and pay almost felt like a raise. Almost.

Now the retirement trend is headed back in the other direction. Why?

Raises of up to 5 percent kicked in July 1, 2013, for top-step employees and set a new baseline for long-timers’ pensions after one year. Some of them likely kept working just long enough to take advantage of that.

(The state switched to using the average of an employee’s three highest-salary years, but it doesn’t apply to everyone. The three-year standard that began with SEIU Local 1000’s contract for 2005-08, for example, affects employees hired Jan. 1, 2007, and later. Very few state workers have retired under the average-three-year formula.)

Richard Reed, an independent labor consultant who works with unions, said many long-timers probably stuck around long enough to get “a last, larger purchase” out of the way or get their finances in order ahead of qualifying for the pension bump. And although state employees are receiving across-the-board pay increases of up to 4.5 percent spread over two years, their pension contributions and health insurance premiums have gone up, too.

“So there are no big raises on the horizon for state workers, and they’re paying more for benefits,” Reed said. “A lot of people probably said, ‘It’s time to adjust my lifestyle,’ and retired.”

The push away from state service is matched by the private sector’s allure.

State employees considering retirement a couple years ago felt the uncertainty of an anemic housing market and unemployment in the double digits. Now home values have rebounded. The unemployment rate is shrinking. There’s more opportunity for a second career, Reed said.

It’s all showing up in the retirement numbers. The plug on the state’s brain drain has been pulled.