“A $76,000 Monthly Pension: Why States and Cities Are Short on Cash” (nytimes) will, I hope, inspire you to send in those state and local tax checks today!
That states and cities are bleeding out due to their pension commitments is old news (see “Pensions: How states and local governments indulge in deficit-spending” from 2009, for example). What I find interesting are the reader comments. Essentially nobody wants governments to get out of the defined-benefit pension business (essentially acting like a life insurance company that offers annuities). People, presumably most of them private-sector workers with 401k and Social Security, want state and local governments to continue performing this function, but with “reforms.”
My comment on the piece:
Why would state governments be issuing defined-benefit pensions at all? Unless you are God and know exactly when people will die and/or you have a printing press for dollars (like the Federal government does), why would you be promising to send people checks until they die?
Insurance companies can afford to write annuities like this (though usually without an inflation adjustment liability) because if people live longer they won’t have to pay out so much on the life insurance side. But for an ordinary employer to do this is madness (as GM found out!).
Taxpayers should vote to amend state constitutions so that their politicians can no longer moonlight as actuaries. Government workers can have 401k plans like everyone else, plus Social Security for a defined-benefit check (backed up by the Feds, who DO have a printing press for dollars). Maybe government workers will demand higher current compensation if they can’t get a pension worth $millions, but at least the cost would be right out in the open for everyone to see, vote on, etc.
I forgot to add that, to do this right, state and local governments also need a letter from God listing what the returns on various kinds of assets are going to be for the next 50 years.
What would it take to get the American voter motivated to terminate politicians’ rights to do this to them and their children?
I doubt most voters know the difference between DB and DC pensions and certainly not compound interest and it isn’t in the interests of the politicians or the public sector unions to clarify things so I don’t see that much will change until states start going insolvent.
In FL, every full and part-time state, county, and school district worker, as wells as most city workers, is a mandatory member of the Florida Retirement System (FRS). FRS offers a defined benefit plan and a defined contribution plan; about 95% of all members participate in the DB plan. The average annual defined benefit for retirees is $19K.
Every year, the FL state legislators try to kill the defined benefit pension plan w/o success, but have been able to trim benefits. For example, starting 07/01/11, all still-working FRS members are required to contribute 3% of gross salary to the Plan. For those hired on or after 07/01/11: the 3% COLA was eliminated and drastically reduced for most others hired before that date – I calculate my COLA to be $50/yr when I retire at age 62; and the full retirement age for general employees (i.e. non-public safety) was increased from 62 to 65. The max annual pension payment was capped at $90K for those retiring on or after 07/01/11.
Hahaha! I’m a 44-year old Boston firewhiner with 24 years of “service.” For my dedicated “service” to the good citizens of Boston, I deserve to get paid! I’ve got bills! Alimony & child support to three ex-wives, payments on my Escalade, Harley, and speed boat. I’m juggling three girlfriends, and have some serious gambling debts due to my bookie and at the Hard Rock. With overtime, I now make close to $200K per year but deserve more! Not too bad for a high school grad who was washing cars before I got on with the BFD. I did, however, earn my A.S. degree in “Fire Science” on the City’s dime. You wouldn’t believe how easy that was. The “instructors” were buddies on local FDs, so I passed w/ all As and didn’t have to do any studying! And that silly degree got me promoted three times to Sr. Deputy Assistant Deputy Big-Cheese Battalion Chief Indian Chief. I still have lots of free time to work out while on the job. I’m trying to get on next year’s “Hottest Firewhiners of Beantown” calendar.
Last year I “worked” tons of OT to spike my pension and next year I turn 45 y/o and will retire and start collecting my $100K lifetime pension with built-in annual COLA. In 20 years, I’ll be 65 (the retirement age for most of you stiffs), the 3% COLA will have nearly doubled my pension to $200K per year! My life expectancy is 88 years, so my pension will double again to almost $400K per year by the time I die. It gets better; my lovely 20-year old Filipina mail-order bride will collect my pension long after I die. Her life expectancy is 90 years. She’ll collect my growing pension for another 25 years after my death! Twenty-five years on the job will trigger almost 70 years of growing monthly pension checks! The City of Boston has been very, very good to me. And I know you don’t feel appreciated, but a big thank you to the Boston taxpayers. Now get back to work and pay those taxes! Oh, by the way, F.U. Pay Me!
“What would it take to get the American voter motivated to terminate politicians’ rights to do this to them and their children?”
Better reporting in places that people actually watch, in terms they can understand. I would suggest commercials during NFL football games, for example.
Federal taxpayers are still paying Jimmy Carter a $208K annual pension for his four years of mediocre “service” and he was fired by the American voters 37 years ago!
I am hoping that as soon as the petrodollar ends (China is starting to pay for oil in yuan), the US dollar will lose 80% of it’s value. They will make it easier to pay off debt and will make these pensions easier to pay. It will also make American engineers more competitive with their Chinese counterparts who work twice as hard, are twice as smart and cost 3X less!
We had a referendum in New York to open a constitutional convention, which the union interpreted as a move towards ending defined benefit pensions. The union defeated that referendum with a biblical vengeance.