A quarterly magazine of urban affairs, published by the Manhattan Institute, edited by Brian C. Anderson.
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Pension Envy « Back to Story
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To be fair, not all of California's state and local financial problems are the Legislature's fault. We have met the enemy here - and "he" is us, the voters in Cali. We continually vote for initiated measures which insulate, election after election, a greater part of the state's general fund, each election cycle.
The state constitution makes it essentially impossible for the legislature to fix anything, unless the "proposition" goes back to the people for a vote to amend or abolish it. But we the voters also keep electing the same senators and assemblymen and -women, year after year!!! WE get what we vote for!
The problem with California's pension systems is that highly compensated management get lucrative pensions. It is a simple fix, put the same ceiling on contributions as the Socail Security system and cap the benefits accordingly. Someone in public service getting a $150,000/yr salary should not get a pension of $125,000 or more. 35 years in state service, with a multiplier of 2.5% gets a pension of over 90%!
Your average state worker, rank and file union member gets around $25,000 to 30,000.
It ain't the regular folks that're abusing the system.
My jaw dropped at these sentences, which bear repeating:
...in reality, the unions are the legislature. Most of the Democratic leadership in the state assembly and senate comes directly out of the union movement and identifies with the public sector. For these union Democrats, government is primarily a means to improve the financial condition of those who work for the government.
What is this, other than corruption? Public unions funnel taxpayer money to Democrats, who use it to fuel their campaigns - a permanent taxpayer subsidy to one political party. No wonder Democrats want campaign reform - once they shut off the cash spigot to Republicans there will be no way to oppose these people.
When the population consisted of people who would balk at Democratic corruption, Democrats imported a more compliant population. And once in power, Democrats adopted laws that would drive those who would oppose them out of the state.
And somehow, some way, Democratic media supported all of the foregoing. That's the other scandal here, the inability of the media to respond to the construction of an edifice of nothing less than institutionalized corruption.
Revolutions have been fought over less.
With city after city going bankrupt, if there was ever a time to actually implement impactful legislation in California, it would be now. Time after time these cities had opportunities to fix unbalanced compensation costs but instead balked (http://bit.ly/PSZq4W). If cities and states continue to broker these deals based on wildly optimistic economic returns this problem will continue to persist (http://on.wsj.com/qB3BON). So yeah, California has it’s chance to actually fix this, the question is whether they have the courage to.
Today's unions are nothing like the unions that spearheaded fair wage and safe-workplace reform. Unions were necessary because they effectively protected the public.
In contrast, most have become more of an employment mafia. Workers in most union territories have to join the one applicable union if they want to work. They have to pay dues and are expected to vote with union interests.
The argument unions have for requiring enrollment is that they would lose 80% of their members if the laws were changed. What does that tell us? Most union members are not happy with their union, but have no way to leave without changing careers or moving.
The problem for the pension systems described in the article is that they did not pay out the pensions to an independent fund when they were due. Now, as was the case with many private pension funds, they are underfunded.
Take a look at the Ohio public pension systems. Money went to them on a regular schedule, and they then invested it. Because of the recession and a few bad decisions by the funds, they are a bit short for their 30-year projections, but all funds are making minor modifications, such as a hiatus in COLAs for retirees, slight rules changes for people to retire, NO additional governmental funds, etc., which, when the legislature ever gets around to approving them, will have them healthy for at least 30 years. Defined benefit plans can and do work.
It's time to look at the pensions that Congress members, state legislators and municipal executives have created for themselves.
Why can't we have the same benefits they have?
David W. Nicholas, your comment is right on the mark. This is why taxpayers should renege on funding that portion of Public Sector pensions granted as a result of the collusion between Public Sector Unions and our elected representatives (the trade of campaign contributions and election support for favorable votes on pay, pensions, and benefits).... and that "portion" is at least HALF of the total (MORE for safety workers).
Art, it's 20% ignorance and 80% arrogance/entitlement.
I have bought this up for many years in public forums, and teachers, firemen and others have said and written that i am jealous for my bad career choice to work in IT in the private sector ( with 2 master degrees and 50 hr week I make about the same as a grammar school principal). Also, even thought i have always worked for non public(stock) companies, i have been accused of getting many "stock options". There is no limit to their ignorance
We have to end defined-benefit pensions. Having everyone on defined-contribution would mean that everyone cared about healthy financial markets. But how to do it? It could be done IF state officials and legislators were willing to put their own pensions on the line: http://www.bayshoreteaparty.org/btpg-blog/2012/6/9/fiscal-responsibility-a-tea-party-cause.html
The idea that big, defined pension plans is what makes a nation great is fascinating. At this point in time, with medical advances the way they are, allowing someone to retire (even at 65) and promising them a flat pension with a COLA and guaranteed health benefits is a big gamble, one that no one would make with their own money. The individual in question, if they're in their 20s, might live 50-70 years after retirement age, because medical advances in the interim could extend life expectancy astronomically in the meanwhile. However, if you're a politician, and you're paying the worker with monopoly money you didn't yourself earn and don't have to be responsible for, then you can afford to let people retire earlier (many public employees retire in their early 50's now) with an enormous pension--it's not your problem, the *public* has to pay the pensioner, not you.
The only real solution to this problem is BANKRUPTCY !!! Let a Bankruptcy Judge deal with the Greedy Unions !!!
The current course (INCLUDING any changes the Democrats may make) is clearly over the cliff in 10 or so years.
What will the workers do then ? With most of the productive businesses and successful citizens having moved away, raising taxes won't be possible.
Those new taxes that the Democrats want come in the form of Proposition 30. Proposition 30 was purposely "electioneered" by Governor Brown and his union cronies to circumvent the 2/3rds tax increase requirement in the California Legislature. Instead, by placing Proposition 30 on the ballot, taxes can be increased with a simple majority. Naturally, being Democrats, the burden isn't shared. The majority of the tax hikes go to those that already pay the bulk of California's already-high taxes.
You can read more about Proposition 30 here.
Pension envy is real. After a systematic dismantling of the American middle class in which until recently more than 50% of Americans and their heirs held retirement security due to participation in private defined benefit pensions, that security is now held only by public employees and corporate executives. A new generation of retiring baby boomers in now facing a future of poverty and working until one's health gives out. It is interesting to see Democrats like San Jose Mayor Chuck Reed and Los Angeles Mayor Antonio Villaraigosa abandoning their core constituencies. Perhaps Big Labor needs to sit one out, and watch democrats lose previously safe seats so that the transformation of America into a third world nation can be complete, with a subsequent violent upheaval, which spurred the union movement in the early 20th Century.
Good point. The union IS the legislature! Public employees need to join the real world and enjoy defined CONTRIBUTION pensions like the rest of us.
Excellent piece which presents a clear picture of the political problem behind the numbers.
My guess is that the rhetoric about pension reform is a reflection of public alarm and is really meant to placate the public until the election's done and the union-supported incumbents are once again safely in office. Then it'll be "Katy bar the door" until the next election.