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Steven Greenhut
Tackling the Pension Problem « Back to Story

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I now live in Australia, where we have a employer paid superannuation system. Employers pay in 9% of salary and employees can add more, up to a maximum of $25,000 p.a. The 9% will rise to 12% over the next few years (0.5% p.a.).

This is probably the best system I have worked under, employers know the costs and build it into wages. Employees like me pay in an extra 5%, and the money is invested in mutual finds, which I can switch between and also choice between industry (not for profit/ Co-op) and private providers.

I moved from shares to cash in 2008, moved a little early and returned to shares a little late in 2010, but avoided the real drop. If you have enough in "super" you can set a private super fund, but it requires doing some complex tax returns, but worth it for the rich.

The beauty of this system is it is seemless as you move from employer to employer, or even self employment.

I think that the writing is on the wall for the defined benefit, where a pension is paid in proprotion to final wage and years of service. We need to move to money purchase like the Australian system.

Detroit is the start there will be defaults on bonds and pensions, or there will be massive inflation to make the debt less costly in real terms. I am still not sure which.

Ben Bennacke is an extremely clever man, as are the banker types (like or loathe them, they are among the worlds smartest). I think the printing presses are running hot to create inflation. In manufacturing the Asian advantage will be lost in part, as food inflation pushes up their wages (old fashioned cost push), while boosting US farm income. Oil will also go up, but that is not too bad as the US has new accessible deposits.

I may be wrong, but I am expecting defaults on public pensions and debt, food inflation, higher import prices and gas prices. US food production would benefit, as would oil and gas exploration and production, plus global brands more able to pass on price rises in the global inflation - eg McD, Coke, ColgateP, Google, Apple, Procter and Gamble etc...Oh - the Plutocrats would do well at the serfs pain..

I think B.S.Davies you are right about the Republicans, but too many rich ones have just given up and are creating Plutocrat enclaves and gaming the system for every penny they can.

When I was entering the job market in the early 1980's, government jobs were known as make less, work alot less, but with some offsetting benefits such as vacation time. My experience in government work, mostly summer jobs in various county facilities, confirmed the work less part of the equation - no private employer would ever put up with what I observed.

Now, the whole thing has turned around - gov't employees still have the work less part of the equation, to which the "make less" has been changed to "make much more." And, as taxes have increased to the point of insanity the number of government workers has increased significantly. That, with the combination of high taxes driving away private enterprise, has limited population since there are not that many jobs, which means that in places where Democrats are in control,like New York City and many other areas, government workers are now a significant voting block, especially in low turnout local elections.

In New York, government workers have even formed their own party, the ironically maned "Working Families Party." There is nothing to be lost in caving in to demands by government unions since citizens are not tuned in to what's going on, or have simply given up - I know many in the "gviven up" catagory. Immigration plays into this since more pliable,less educated populations can be imported.

For those used to the old way of things it is a nightmare - any complaints about anything are turned against them with screams of "racism" if they oppose immigration, and "cheapskate" if they deny "hard working" government workers more money. The media is more or less controlled by the Democratic Party so there is no relief there.

The only way to deal with it for many people is to leave, but that's not a solution, leaving only strengthens the Democrats

We can see the end result of this scenario is places like Detroit where unions, public and private, along with politicians and media destroyed an entire city. And it's coming to California as business flees the state.

And there's the hapless Republican Party, which, aided by Democrat media, is saddled with blind and deaf leadership. One can only wonder how it can be possible that Republican leaders can't offer themselves as an alternative in places like Detroit. The problem is that the Republican leadership has been cowed by Democrats into sbubmission, and offer only Democrat lite solutions to problems that call for bold leadership. Unfortunately, Democrat media has made it clear that any Republican politician that challenges the Democratic vision for America will be pilloried non-stop.

And so a nation is destroyed, not from without, but from within. What is illustrated in this article is how it is being done.
greg hauenstein July 20, 2013 at 3:39 PM
The concept of "public union" does not have a long history, Roosevelt thought that "public unions" though possible in theory would be immoral and advised against them. When there is no direct vote to validate increased benefits for a particular union, the citizenry are being taxed without representation. If we want to continue down this road we need an elected board to set all salaries and pensions so there are citizen reps on the other side of these union negotiations. The way it is now is simply legalized extortion of taxpayers.
Conservatives were never "the only ones" concerned about the problem.

These megadeal retirement packages got rolling with handouts to police officers. The pattern featured a reliance on privatized contract resolution, where conservative law firms produced state-mandated arbitration deals. The mention of PORAC could be filled in usefully with mention of their allies from the 90s and 00s.

The main attacks on pension funds have come from private organizations -- the law firms. Again and again they abused the arbitration system and then spider-webbed a win in one municipality to spread that result to neighboring victims.

Yes, at the start of California's boom years, the arbitration system produced balanced results. But the law firms and their buddies on the bench turned that around. Since the initial beneficiaries were law enforcement officers, no one complained enough to stop it.

David, When the Unions/workers say ...
"that through no fault of their own" ... we should examine the truthfulness of such statements as they have exhibited an enormous amount of greed and arrogance, both in threatening our elected officials and in buying their favorable votes on pensions & benefits via Union campaign contributions and election support.

Here's just 2 of MANY examples:
(1) In Contra County the Unions have recently sued to overturn a recent law restricting end-of-career "spiking" to goose one's final pay and hence their pension. Their rationale ... well, it's always been allowed, so we're entitled to do so too. Really ????

(2) go to and play the 3-rd video down on the right side, labeled SEIU Threat. THAT'S the Public Sector Union mindset.

I have always called for EQUAL Public and Private Sector "Total Compensation" (cash pay plus pension plus benefits), and with "cash pay" in the 2 sector very close in most occupations, there is zero justification for ANY greater pensions or benefits lets alone pensions that are MULTIPLES GREATER now.

And it's not just the richer Public Sector pension "formulas". It's the very costly "provisions" as well. Unreduced retirement at age 60 or 55 or 50 is VERY VERY costly, and while virtually all Public Sector Pensions are COLA-increased, very very few in the Private Sector are. Did you know that adding a COLA provision to an otherwise identical Plan w/o COLA increases it's "value" by 1/4-1/3 ?

The Taxpayers have been mugged by this unholy relationship between the Unions and our elected representatives for FAR too long.
The mayor of San Jose, Chuck Reed, is the example of pennywise/pound foolish. Now that the economy has started to turn around and money is becoming available to hire more police officers, guess what? The applicans are going elsewhere.

New hires will only stay long enough to get picked up by another agency.

San Jose will have to backtrack, Reed will be proven an idiot, and hopefully his political carrer will be over.
Tough Love: If what you say is true (and I have no reason to doubt it), then it sounds as if California's taxpayers have let themselves be duped by the very same politicians they've elected to represent their interests. I fully agree with your solution; it's how my "pension" is funded, and I somehow make it through life w/o guaranteed benefits. I am not taking the side of the union in any of my comments. They continue to harm this country more than they help it. But, too, I can see how unionized workers might think that through no fault of their own (let's face it, if any of us could get the salaries pulled down by BART's workers we probably wouldn't tell the State to keep its money), they're about to get shafted. Get rid of the unions, keep the best workers, and pay them fairly. That's all I'm saying. As for your earlier comment about judges, you hit it on the head. Judges, non-unionized though they may be, are the one group of government workers who seem keenly able to look out for themselves quite well. It's unfortunate, though, that they don't seem to feel the same about their staffs. (But that's another issue.)
Quoting David, ..." For years, it would seem, Californians have been willing to pay the taxes necessary for the services they're getting. But now, for whatever reason, either the cost has gotten too high or the services are lacking (or both). Change needs to happen."

Not really, you see, the true cost of the promised pensions have ALWAYS been materially understated. This benefits all the stakeholders EXCEPT the Taxpayers. If the TRUE costs were known, the annual costs to fund them would be MUCH higher, resulting in (a) smaller pension promises to these workers, and (b) greater annual costs means less money for the politicians to spend on their pet projects.

But phony accounting eventually catches up with you, as this has now.

There are ZERO "solutions" that do not AT A MINIMUM include material (50%) reductions in the pension accrual rate for the FUTURE service of CURRENT workers.

The better solution (because it end the "moral hazard" of self-interested politicians) is to hard freeze these DB pensions (i.e., ZERO further accruals) and replace them for future service with DC (401K-style) Plan with a modest Taxpayer "match" of 3-5% of pay which is typical in Private Sector Plans.

Ann did your parents help you with your work at school? If not were they socialists expecting the State to look after them? By your reasoning I would say they were.
DD, I just looked at the first 3 pages of the 138 page salary list for BART employees. I can say, in all honesty, that even if I continue to work in my current position until I retire, I won't come close to making what many of the individuals working for BART make. So it's obvious that unionization has helped BART workers enormously--probably too much. But, again, I'm sure that Bay-Area citizens want their public transit to run on time and get them to and from work as quickly and efficiently as possible. If BART does this (and I claim no knowledge on this issue), then maybe the citizens are getting their money's worth. Probably not, but like I said earlier, it's all about reaching an agreement that everybody is happy with while leaving out the middle man (the union). For years, it would seem, Californians have been willing to pay the taxes necessary for the services they're getting. But now, for whatever reason, either the cost has gotten too high or the services are lacking (or both). Change needs to happen. If the change is too severe, though, the level of service may very well plummet.
Quoting ..."The courts have said that benefit increases, even retroactive ones, constitute binding contracts that must be paid for the life of all current employees. "

YUP .... the JUDGES (with the SAME pensions with the SAME retroactive increases) have judged that to be the case ..... surprise, surprise.

Dear Taxpayers .... find a way to renege on the 50+% 75% for judges and safety workers with the richest pensions) of ALL Public Sector pensions that would have NOT been granted in the absence of the you-scratch-my-back-and-I'll-scratch-yours relationship between the Public Sector Unions/workers and our self-interested, vote-selling, contribution-soliciting, Taxpayer-betraying elected officials.
DD, I speak from personal experience. I don't live in California, and although I work for the government I'm not unionized. That's my choice, and I'm not complaining. My point, though, is that the "taxpaying citizen" (of which I, too, am one) complains mightily about their money paying the salaries and benefits of the government workers who provide the services all taxpayers demand. I agree that unions have taken extreme advantage of the powerful position they hold in many states and municipalities. Again, however, I caution people to stop and think before they begin slashing salaries and benefits to the point where workers such as teachers, police officers, firefighters, and others in government cannot earn a decent living. Get rid of the unions, most definitely. But keep in mind that when a problem arises that requires some government worker's intervention, and there's nobody around to answer the call because, like auto and steelworkers, they can't earn a living wage, it was "the people" who spoke. You can't have it both ways: you can't expect government services to always be provided on the cheap. Perhaps right now in California that's not the case. But 40 to 50 years ago, that wasn't the case in cities like Cleveland, Buffalo, Detroit, and even Gary. These cities were thriving based on the wages earned by those who worked in the steel and auto industries. Now? The industries are gone, the people are gone, and the cities are beginning to rot. The unions ruined a good thing. But, too, the steel companies and auto manufacturers refused to pay a living wage w/o being coerced by the unions. What do I have to "prove" what I say? Again, my own experience. A tiny little knowledge of history (and I do mean that; I'm not being facetious), and of having grown up in a small town not far from Gary where many fathers were laid off once the mills started shutting down, are also useful. There has to be balance, and right now I don't see or hear balanced approaches from either side. So, in the end, both sides will ultimately suffer, as will the country as a whole.
"It remains to be seen whether reformers can generate enough funding to run a viable statewide initiative campaign. Union spokespeople continue to portray them as the tools of Wall Street and right-wing groups."

This is one of the greatest ironies - Wall Street is NOT anti-union. There is no bigger alliance in America than the one between Wall Street bankers and public sector unions. When governments borrow because unions caused deficits, bankers earn interest and commissions. Similarly, when unions force pension benefits up, bankers get more money to invest and collect commissions.

What a crock.
David... "For too long (and still in many parts of this country), government workers have seen, and continue to see, their overall financial well-being stagnate and in some cases decline as the market continues its never-ending drive towards higher profits for those who gamble therein. The unionization of so many public workers, then, is only the natural result of public sector wages that, for so long, failed to keep up with rising costs." Please tell me where this is? Most government workers make more than their counterparts in the private sector and their benefits are so far above they are not even comparable. Every retired government employee I know receives almost as much as their last salary and they are in their early 50's. Check the BART salaries @
About 65% of BART employees make over $100,000 in total compensation. I do not know what the educational requirements are for BART employees, but I know many in the private sector with MA's and more and they do not make that much, either in salary and definitely not in benefits.
Fair wages are important, but not at the expense of the taxpaying citizen.
I wonder if a constitutional amendment disallowing the state and its municipalities from entering into union contracts should be pursued? It is inherently dangerous for any government and its citizens to allow public employees to unionize.
Using taxpayers funds to further the cause of the public sector unions. I hope that the unions are not depending on the taxes of the unskilled and uneducated that they have created!
Steven, San Jose is attempting to break fully-vested retiree COLA contracts. This attempt is unconstitutional on its face, and will be struck down. I know that the goal is to cut public employee compensation (including deferred public pension compensation), but breach of contract is not "pension reform." Breach of contract merely kicks the can, and costs taxpayers millions for fruitless litigation. Embrace prospective pension reform and stop trying to claw back benefits that have already been earned and paid for over decades.
Isn't it great that taxpayer funds filtered through unions are being used to urge voters to essentially agree to pay more taxes? And so it goes round and round,since the lunatics have taken over the asylum - and if you don't like it then leave - Democrats can always make up the lost population with more pliable people from across the border or overseas.

This is pretty much how the world ends for Claifornia and the rest of the country. Voters will be urged not to vote against "hard working" government employees, slaving away in jobs, serving the public, when of course they could go into the private sector and make more money.

Yes, it comes down to the fact that it is the voters put these people in office, but new voters don't seem to have a problem with the system, since they have been promised goodies at taxpayer expense, from an endless and bottomless pit of money.

We can say, well, when it all falls apart the Democrats will be sorry, but I think conservatives underestimate: (1) how foolish these people are, (2) how effectively Democrats are able to use the media, and finally and (3) most grievously, how poorly Republicans are at painting themselves as an alternative to Democratic corruption.

After all in Detroit, Camden, Nevada and yes California (and many other places) voters have and continue to vote for Democrats even as their community has fallen or falls into poverty or just falls. There is no bottom for California, and if Republicans leave, well more Democrats can be imported - a ready population far more accepting of corruption since in the home countries corruption - open corruption - is the assumed status quo and the way of life. So for Democrats, the more people leave the better - and if conditions deteriorate, well that's good too since it will force more people to leave.

Good luck, but California, the country is a lost cause. Got to admire those who try to soldier on against the tide, but with the spinelessness of the Republican leadership, we've pretty much given up. After all, who is there left to vote for?
In the Pacific Grove case the Charter prohibited the grant of a vested pension right, but that evidence was not presented to the court. The Charter did provide that the council would fix compensation, but the case of Spencer v. City of Alhambra 44 cal app 2d 75(cited by 27 subsequent cases, including the Supreme CT.) held that such a provision does not deny the voters the right to fix compensation by an Initiative. That line of cases was not cited to the court by the city. The city atty., who supervised the case was openly opposed to the Initiative did not allow the Attys defending the City to interview the creators of the initiative. In short, vis its legal briefs, the city in effect stipulated to everything the unions contended. A farce.
Education was never the goal of the teachers union. Its benefits the democrats to keep poor Hispanics and African Americans unskilled and uneducated. This way the poor can blame the "Capitalists" for their poverty. The teachers can continue with the lie of "you are poor because the rich are rich" God forbid the poor learned the truth is that they are poor because they are unskilled and undereducated and because of other unions in California, can not even find entry level work (I had to start off at McDonalds and work in a supermarket)
Then the teachers can blame the republicans for the reason that they are unable to get medical care. Little to the poor realized that under Obamacare, they may be able to get a mammogram, but good luck in getting medical care if it is discovered that a poor woman has breast cancer.
People in the United States are shocked when they saw Ms Rachel Jeantel speak. Little to they realized that Mr Jeantel is not the exception but it the norm in Ca.
If only the poor in California realize that the democrats and the unions are not their friends
My biggest fear however is that Unions will use the poor the same way Pol Pot used the poor-Khmer rouge if the "rich" do not go along with the lefts program
Public unions need to be abolished in all cases, everywhere, and every corrupt "agreement" reached between them and public officials they installed through massive political contributions financed by the very taxpayers they are intent on robbing needs to be vacated permanently as the corrupt thievery it always was. No public union worker (there's one for the oxymoron hall of fame) can be permitted to keep a benefits package negotiated in such a corrupt manner. Any pension not specifically funded through employee contributions deducted from their paychecks need to be ended NOW and public retirement benefits brought into line with the benefits received by the average taxpayer. Not a penny more, ever.
Stuart commented that unions are just a symptom of the problem. And to a large extent, he's right. I think many public employees' unions have outlived their usefulness--or, at the very least, they've taken as much as they can w/o regard to the overall fiscal stability of the municipalities and states w/in which they operate. But I think it's worth considering that public employee unions (nor any union, for that matter) would never have gotten as powerful as they did if "the people" recognized one basic fact of life in this country: namely, that when something goes wrong for somebody, or when one's children need teaching, or when somebody requires assistance, who do they call? Government. In almost every facet of our lives, government is called in to right the wrongs, fix the problems, educate our children (not to mention providing them with daycare and babysitting), keep public transit moving, etc. This all costs money. And part of the costs of such services include paying a living wage (and benefits) to those who perform these tasks, be they police, firemen, teachers, or any of the numerous others who answer the phone and help Mr. and Mrs. Citizen with whatever problem they may have. For too long (and still in many parts of this country), government workers have seen, and continue to see, their overall financial well-being stagnate and in some cases decline as the market continues its never-ending drive towards higher profits for those who gamble therein. The unionization of so many public workers, then, is only the natural result of public sector wages that, for so long, failed to keep up with rising costs. Granted, and as I said above, unions have grown way too powerful. With this power they are beginning to see their own destruction. But like the unions that used to put a chokehold on Detroit and other manufacturing cities throughout the Rust Belt, once public sector unions are cut down to size, and once local and state governments are able to extricate themselves from the unconscionable contracts they've negotiated over the years with public sector employees, it seems more than likely that public sector employees will go the way of auto and steelworkers in this country. Just like those who once labored in heavy manufacturing, public sector employees will be unwilling (perhaps unable) to work for the wages and/or salaries they are offered. Somehow, this nation needs to find a middle ground--somewhere between the exhorbitant sums paid to union employees and the non-livable salaries paid to those who are not unionized. It seems that, so far, the only businesses who have found how to make this work are in the service industry, and then decent wages are reserved for managerial and executive positions. As I've stated, public sector unions have gotten too large, too powerful, and take too much of the pie's share. They need to be reigned in. But, as those who live in the Rust Belt might tell you, be careful how much reigning in you wish for. If teachers, police officers, and firefighters go the way of steel and autoworkers, I can only imagine that the vast majority of Americans will be ill-pleased.
I was wondering if anyone looked at the CAFR for CA to compare whether they're actually telling the truth about how much money they have/don't have. I've seen cities and states be untruthful saying that they don't have the money to fund their pensions before when they have two separate funds, and no one reads the CAFR to find out. (
Perhaps also to limited indebtedness of Local, State and Federal Governments. We are borrowing against our children's earnings; and that is selfish and wrong.
When the leadership is paying itself out of borrowed money, that workers in a position to get in on the act also do the same, is not rocket science, but it is wrong.

A massive apology for the rant, but I just re-read Economics in One Lesson after twenty years. We in the West are Alvin and not Ben in the inheritances chapter. The West rightly or wrongly, inherited a huge wealth, if we spend it all and over borrow we will become poorer, weaker and indebted. If we live well compared to most of the world, but save and invest 10 - 20% we will stay rich. It is our choice. Unions, vote buying Politicians and under regulated bankers are all symptoms. That kids were given credit cards without checks says it all.
God middle age makes you grumpy!!
I studied economics at undergraduate and post graduate, I am pro free market, but I also think the free market needs controls. It isn't just the Unions they are a symptom of the problem, which I think is one of the "entitlement mentality". Thrift was a virue, we had a saving rate, people generally bought houses and cars with a view to putting as much of a deposit down as they could and to pay it off as quickly as posible.
when we freed the financial market people could borrow more and this pushed up house prices. Then the next group borrowed more and so on, houses then went up to silly prices and were used as cash machines. Banker knew this was a pack of cards (I was one working at the now bankrupt Sakura Bank). People watching dumb TV thought they were entitled to all of lifes luxuries, hell the bankers and loan salesmen were making hay.
Unions reacted as any business would, it maximised profit, pushing for big deals increased power and member numbers.
Now we are relying on consumption for our growth, it is seen as a good idea to lend too much and spend too much to get the economy going.
We need to value thift once more, save and really think about the value we add to the business or organisation and accept a wage in accordance.
Like Volkers words of wisdom about printing money, it is easier to put your foot on the accelorator than take it off; it will be hard to live modestly when you have been used to the high life.
I live now in Australia, but this is a Western issue, smaller cars and houses (cut oil dependancy), save money and repay debt all on a more modest wage - it won't be easy. I do it, but it is hard. My children are 6 and 5, they actually know no different and find second hand toys and clothes the norm, just like the large vegetable garden and playing games as a family or having friends round for dinner and not going to the restaurant. I actually like it, but my wife always said I am tight! I also am debt free at 50.
Unions are the symptom, there were rules on borrowing limits they must be put back in place, and credit cards limited, it is as my old boss at Sakura said "debt for the dumb", and the dumb will just max out on them, they should be limited just as we criminalise drugs.
As an ex Roman slave once said "debt is the slavery of the free", Union as just a symptom of the problem, like a nasty boil they just need popping.
We can only hope Ben Stein's father was right when he said that when something can't go on, it won't. And Steven, when you're at the convention, see if you can get the voting districts apportioned by population instead of the gerrymandering which has given the Democrats and the unions the unstoppable power they now have.
As if it shouldn't already be obvious to anyone with an IQ above room temperature, unions are ruining the nation - from towns, to cities, states and right up to the federal government, unions have a strangle hold on taxpayers at all levels.

This can't go on.