- It's up to OC residents to decide what to pay public servants, but a good first step is to know what they're currently paying.
- UnionWatch.org reports that the average firefighter in OC pulls in total pay and benefits of $234,000 per year
- An average year an Orange County firefighter accrues future pension benefits worth over $118,000.
UnionWatch.org reports that the average firefighter in Orange County, California pulls in total pay and benefits of $234,000 per year, making them among the best-paid public employees - and, for that matter, among the best-paid of any kind of employees - in the country. But is this true? No. But yes.
UnionWatch relies on compensation data provided by Orange County itself, which appears to buttress their claims. Average salaries for firefighters top $91,000, on top of which they typically receive another $65,000 in overtime and other supplementary pay. Firefighters then receive an employer pension employer contribution of around $61,000 and health insurance benefits of about $15,000, for a total of over $234,000.
So why is this not right? Because in Orange County and most other cities and states, much of the employer's pension contribution is to pay off unfunded liabilities from prior years, which is different from pension benefits earned by employees in the current year. Only the latter is truly compensation. The "normal cost" of Orange County Fire pension benefits accruing this year is about 23.49 percent of salaries, or around $37,685. So, average annual compensation would be around $23,000 less, so make that total compensation of about $211,000. Still not shabby, but less than the headline.
But here's the bad news: total compensation is actually a lot higher than $211,000, and even higher than UnionWatch's $234,000 figure. The reason is that Orange County calculates its pension contribution based on the assumption the plan's investments will 7.75% investment returns every year. Maybe they will, maybe they won't - but that's Orange County's problem: under California law, firefighters' benefits will be paid regardless. The way to account for this guarantee is by valuing benefits using a lower "discount rate." If we assume a 4% interest rate - something above the riskless Treasury yield, but lower than the pensions' own risky investment return - the normal cost of Orange County Fire pensions rises a lot - to about 75 percent of salaries. (Before you think I'm making this stuff up, note that the Congressional Budget Office applied the same risk-adjustment in valuing pensions for federal government employees.) In other words, in an average year an Orange County firefighter accrues future pension benefits worth over $118,000.
So total annual compensation for an average Orange County firefighter is somewhere in the neighborhood of $290,000 per year. It's a difficult and sometimes dangerous job, to be sure - but there are other difficult and dangerous jobs as well. It's up to Orange County residents to decide what to pay public servants, but a good first step is to know what they're currently paying.