The Next Crisis Will Be A Tax Revolt Because Government Salaries Have Just Gotten (Relatively) Outrageous
Fishermen in Alaska often finance their benefits by marrying well. Juneau especially has a concentration of government jobs that provide health care and retirement for many a fishing spouse of a bureaucrat, fishermen say. Take, for example, Jev Shelton of Juneau, 66, now in his 49th year of fishing. He's a long-term planner, the sort of man who began saving for his children's college educations when they were tiny. He wouldn't go so far as to say his wife subsidized the fishing. The business has been good to him, he said. But the government benefits are an important part of his family's financial planning, too. "It certainly makes it easier," he said. [Source]
It’s time to freeze unaffordable pension and healthcare benefits for local and state employees. Suggest giving raises to equal the private sector and put in matching 403(b)/401(k) plans. Why should government employees get to retire in their early 50s after only 30 years of service, when the private sector has to work to age 66+ with no fat healthcare and retirement benefits? How does paying a teacher an inflation adjusted pension for as long as they live help educate my kid now? If they live into their 90s, these benefits end up being potentially more than they earned while working. This is money we could be using to raise salaries and educate kids now! If Government employees want to retire early, let them. Save your money just like the rest of us. [Source]
Republican nominee for Kentucky governor, David Williams, pledged to tame an out-of-control state bureaucracy. Williams also wants to change the troubled pension system for state workers to address its billions of dollars in unfunded liability. Kentucky can't afford to pay more lifetime pensions to people retiring in their 50s, he said. He favors putting future state workers in private savings accounts, moving the burden to them to save enough for retirement. [Source]
Information technology is an increasingly precarious occupation these days. It's the default occupation of choice for a lot of workers because there are still jobs to be had there. The downside is that employers have been increasingly contracting out their IT services to contractors who love to exploit younger and immigrant workers. This results in older, more costly workers being laid off. In other words, there isn't a lot of loyalty in business anymore. In my experience, the best way to position yourself for retirement is still to get a government job. That's because you're less likely to be RIFed and more likely to receive a fixed pension. You will also likely receive health insurance benefits that will carry over into retirement. [Source]
Who are America’s fastest-growing class of millionaires? They are police officers, firefighters, teachers and federal bureaucrats, who, unless things change drastically, will be paid something near their full salaries every year–until death–after retiring in their mid-50s. That is equivalent to a retirement sum worth millions of dollars. . . . So when you hear that government workers now make, on average, 30% more than private-sector workers, you’re not getting the full story. Government workers, on average, make more than twice as much as private-sector workers when you include the net present value of their pensions. How long can this last? Until the money runs out, or the marks wise up. [Source]
The Sacramento Bee had reported that 82 percent of California Highway Patrol officers at the management level retire with a disabling injury. We’re talking mostly about back and knee problems, which are typical ailments for anyone in their 50s, not just law enforcement bureaucrats.” These are the same people who demand that tax rates be increased to pay for their benefits, then 82 percent of them duck out on contributing. This culture of “disability to avoid taxes” could be easily fixed by taxing 100% instead of 50%. If there is no financial incentive to declare your self disabled, you will not bother to do so.
Pensions for public employees have similarly not kept up with advances in life expectancy. In many places police and fire firefighters can collect a full retirement with health benefits after 20 years of work. This leaves people collecting retirement benefits for more years than they originally worked. Many other government employees can fully retire in their 50s with full pension and health benefits. Even as the private sector has moved away from defined benefit pensions to defined contribution pensions, the public sector has lagged behind and in so doing has actively encouraged early retirement. [Source]
To what extent is the problem that the retirement benefits for unionized
public sector workers have become too generous? And to what extent is
the problem that retirement benefits for everybody else have become too
stingy? The problem is actually worse for public-sector
employees, especially senior ones and government officials. They often
start collecting when they're in their late 40s or early 50s, while
they're working after retirement in other highly-compensated jobs. And since their
pensions often have full survivor benefits, their 25-year younger trophy spouse stands to get a full pension for the rest of his/her life. So, you
could easily end up paying out the pension for one retired worker for over half a century. The notion that unionized bureaucrat compensation packages are some
sort of prototype for "how things should be" is the current talking
point of government unions. Since they've never had to meet payroll
with cash generated from operations, you can see how they feel that
packages are some sort of entitlement, paid for with funny money. [Source]
California Watchdog - It has become almost impossible to exaggerate the depth of the state’s pension scandals, as more details emerge not only about the city of Bell, but about common abuses in other burgs. A new report produced by the California Foundation for Fiscal Responsibility, and championed by San Diego Councilman Carl DeMaio, for instance, found that San Diego’s top 10 pensioners stand to receive $61 million in pension payouts over the next 25 years. Those employees include the city librarian, deputy city manager, a fire battalion chief and an assistant police chief.
DeMaio reports that 70 percent of San Diego’s payroll budget goes to benefits for retirees, which leaves little for current employees. In the private sector, any company with this imbalance would find itself answering to a bankruptcy judge. But in the public sector, which operates mainly for the benefit of the people in the system, services get cut so the employees and retirees don’t have to scale back their lifestyles.
The report found that some San Diego pensioners are receiving four public pensions at once, many are receiving more in retirement than they earned while working, and some politicians are receiving retirement payments at age 35.
Another report, released last week by the Foundation for Educational Choice (in conjunction with my employer, the Pacific Research Institute), pinned the state government’s pension debt (not including localities) at $326.6 billion plus at least $51 billion in retiree health care obligations. These benefits are senior state obligations, meaning they have high priority, and the public soon will be feeling more pain in the form of tax hikes and service cuts.
What’s really scary is that there is no solution to the problem without a massive restructuring of current public employee pension obligations. Virtually all reform efforts have focused on creating a lower pension benefit for new government hires, which doesn’t touch the bulk of the problem. The state’s public sector unions and Democratic leaders (same thing, really) have repeatedly argued that a new tier won’t fix the problem, which they use as an excuse to avoid any reform. They argue that the stock market will rise again and solve the problem for us. This is fantasy.
Public employee pension systems determine their obligations by predicting a rate of return on their investments over 30 years. If the market performs well, then the predicted debt will be low and vice versa. The pension obligations are based on annual rates of return of about 8 percent, which, in this economy, is extraordinarily high, and is therefore leading to increased debt projections.
The pension funds have resorted to various measures to hide their debt levels to reduce the public’s alarm, but the truth seeps out. The foundation’s report quotes the head of the California State Teachers’ Retirement System: “In order to fully fund the [defined-benefit] program in 30 years, investment returns for the next five years would have to exceed 20 percent per year, a rate of return that is 2 1/2 times the assumed investment return.” CalSTRS debunks the idea that the fund can “‘invest its way’ out of the problem.”
Yet the unions are fighting even the most modest reforms. And the new state budget approved Friday – any wagers on how long before we learn that the state is once again deeply in the red? – includes pension reform, but it’s so modest that it doesn’t hope to close the unfunded liability gap.
The budget creates new, slightly lower pension formulas. For instance, most employees would receive nearly the same benefit, but would have to wait to retire until age 60, rather than 55. Public safety employees would receive 75 percent of their final year’s pay at age 55, rather than at 50. And the budget would remove one form of pension-spiking, forcing state employees to calculate their retirement payout on the final three years’ of work, rather than on the final year of work. We have a massive problem and the state is addressing it with tweaks.
Yet the most astounding pension story in recent days involved former Bell Police Chief Randy Adams, who, according to a Los Angeles Times report, “was declared disabled the same day that he was hired. Under the arrangement, the 59-year-old Adams would receive a lifetime disability benefit whenever he decided to retire, meaning he would not have to pay taxes on half of his $400,000-plus annual pension.”
The “disabled” Adams bragged in his job application to become Orange County sheriff that he loves skiing and runs in a 120-mile relay race through the Mojave Desert.
Disability pensions are common among public safety workers for reasons that usually have nothing to do with battling violent felons. The Sacramento Bee had reported that 82 percent of California Highway Patrol officers at the management level retire with a disabling injury. We’re talking mostly about back and knee problems, which are typical ailments for anyone in their 50s, not just law enforcement bureaucrats.
Public safety workers often view disability retirements as a perk. They rarely are disabled in any serious sense. We think of a disabled worker as someone who no longer can work. But police and firefighters routinely retire under disability, then go on to take other strenuous jobs, or to run marathons and to live life to the fullest, albeit with a tax shelter more amazing that one finds in Swiss banks or the Cayman Islands. Until the Bell revelations, few people really questioned these scams.
Adams’ attorney said the former chief did nothing wrong. So many officials take advantage of these retirements, and they don’t even think of it as being wrong. This is a reflection of the corrupt mindset that has enmeshed itself deeply in the world of government work. That and other mindsets need to change if the state will ever find itself back on a fiscally sane course. Don’t expect your elected officials to wise up, but the financial markets eventually might impose some discipline.
December 3, 2010
Warner Todd Huston, Publius Form - There really is no excuse for any public servant to retire with a pension worth $1.3 million dollars of the people’s tax money. None. But that is precisely what happens in the City of Chicago according to Chicago’s Civic Committee.
Crain’s Greg Hinz reports that the Civic Commission sent an email blast out to its members late last week reporting that the typical Chicago Fireman who retires after 20 years of service will make $1.3 million in pension benefits. Cops make a bit less at $1.2 million.
These public servants can also retire at in their 40s and 50s, two decades or more earlier than the rest of us. This means that these retired city officers can potentially live one third of their lives or more on the public dime. After 20 measly years’ service.
Now, I certainly realize that cops have a high stress job. I also realize that both policemen and firemen can be called upon to put their personal safety, even their lives, on the line (volunteer firefighters do these jobs for free in their spare time). But these pensions are an impossible corruption of our system. No one deserves such luxury on the backs of the poor taxpayer.
Public employees unions have played their part in the suicide pact that our elected officials have initiated. This corrupt bargain was joined by our politicians in order to get handsome campaign contributions from the unions that dug deep into their pockets in order to get more favorable laws and regulations, ever richer benefits and pay scales, and permanent favored status from the pols. But the butcher’s bill is coming due, after all.
The public employee pension crisis is here. Will our elected officials have the guts to tackle it before there is utter collapse?
Few Solutions To Pension Mess
October 11, 2010California Watchdog - It has become almost impossible to exaggerate the depth of the state’s pension scandals, as more details emerge not only about the city of Bell, but about common abuses in other burgs. A new report produced by the California Foundation for Fiscal Responsibility, and championed by San Diego Councilman Carl DeMaio, for instance, found that San Diego’s top 10 pensioners stand to receive $61 million in pension payouts over the next 25 years. Those employees include the city librarian, deputy city manager, a fire battalion chief and an assistant police chief.
DeMaio reports that 70 percent of San Diego’s payroll budget goes to benefits for retirees, which leaves little for current employees. In the private sector, any company with this imbalance would find itself answering to a bankruptcy judge. But in the public sector, which operates mainly for the benefit of the people in the system, services get cut so the employees and retirees don’t have to scale back their lifestyles.
The report found that some San Diego pensioners are receiving four public pensions at once, many are receiving more in retirement than they earned while working, and some politicians are receiving retirement payments at age 35.
Another report, released last week by the Foundation for Educational Choice (in conjunction with my employer, the Pacific Research Institute), pinned the state government’s pension debt (not including localities) at $326.6 billion plus at least $51 billion in retiree health care obligations. These benefits are senior state obligations, meaning they have high priority, and the public soon will be feeling more pain in the form of tax hikes and service cuts.
What’s really scary is that there is no solution to the problem without a massive restructuring of current public employee pension obligations. Virtually all reform efforts have focused on creating a lower pension benefit for new government hires, which doesn’t touch the bulk of the problem. The state’s public sector unions and Democratic leaders (same thing, really) have repeatedly argued that a new tier won’t fix the problem, which they use as an excuse to avoid any reform. They argue that the stock market will rise again and solve the problem for us. This is fantasy.
Public employee pension systems determine their obligations by predicting a rate of return on their investments over 30 years. If the market performs well, then the predicted debt will be low and vice versa. The pension obligations are based on annual rates of return of about 8 percent, which, in this economy, is extraordinarily high, and is therefore leading to increased debt projections.
The pension funds have resorted to various measures to hide their debt levels to reduce the public’s alarm, but the truth seeps out. The foundation’s report quotes the head of the California State Teachers’ Retirement System: “In order to fully fund the [defined-benefit] program in 30 years, investment returns for the next five years would have to exceed 20 percent per year, a rate of return that is 2 1/2 times the assumed investment return.” CalSTRS debunks the idea that the fund can “‘invest its way’ out of the problem.”
Yet the unions are fighting even the most modest reforms. And the new state budget approved Friday – any wagers on how long before we learn that the state is once again deeply in the red? – includes pension reform, but it’s so modest that it doesn’t hope to close the unfunded liability gap.
The budget creates new, slightly lower pension formulas. For instance, most employees would receive nearly the same benefit, but would have to wait to retire until age 60, rather than 55. Public safety employees would receive 75 percent of their final year’s pay at age 55, rather than at 50. And the budget would remove one form of pension-spiking, forcing state employees to calculate their retirement payout on the final three years’ of work, rather than on the final year of work. We have a massive problem and the state is addressing it with tweaks.
Yet the most astounding pension story in recent days involved former Bell Police Chief Randy Adams, who, according to a Los Angeles Times report, “was declared disabled the same day that he was hired. Under the arrangement, the 59-year-old Adams would receive a lifetime disability benefit whenever he decided to retire, meaning he would not have to pay taxes on half of his $400,000-plus annual pension.”
The “disabled” Adams bragged in his job application to become Orange County sheriff that he loves skiing and runs in a 120-mile relay race through the Mojave Desert.
Disability pensions are common among public safety workers for reasons that usually have nothing to do with battling violent felons. The Sacramento Bee had reported that 82 percent of California Highway Patrol officers at the management level retire with a disabling injury. We’re talking mostly about back and knee problems, which are typical ailments for anyone in their 50s, not just law enforcement bureaucrats.
Public safety workers often view disability retirements as a perk. They rarely are disabled in any serious sense. We think of a disabled worker as someone who no longer can work. But police and firefighters routinely retire under disability, then go on to take other strenuous jobs, or to run marathons and to live life to the fullest, albeit with a tax shelter more amazing that one finds in Swiss banks or the Cayman Islands. Until the Bell revelations, few people really questioned these scams.
Adams’ attorney said the former chief did nothing wrong. So many officials take advantage of these retirements, and they don’t even think of it as being wrong. This is a reflection of the corrupt mindset that has enmeshed itself deeply in the world of government work. That and other mindsets need to change if the state will ever find itself back on a fiscally sane course. Don’t expect your elected officials to wise up, but the financial markets eventually might impose some discipline.
Chicago Cops/Firemen Retire as Millionaires
This is happening all over the country...These people are retiring in their 50s, and collecting government checks equaling more than most people make every year...For the rest of their lives...Government is gang raping the American private sector....December 3, 2010
Warner Todd Huston, Publius Form - There really is no excuse for any public servant to retire with a pension worth $1.3 million dollars of the people’s tax money. None. But that is precisely what happens in the City of Chicago according to Chicago’s Civic Committee.
Crain’s Greg Hinz reports that the Civic Commission sent an email blast out to its members late last week reporting that the typical Chicago Fireman who retires after 20 years of service will make $1.3 million in pension benefits. Cops make a bit less at $1.2 million.
These public servants can also retire at in their 40s and 50s, two decades or more earlier than the rest of us. This means that these retired city officers can potentially live one third of their lives or more on the public dime. After 20 measly years’ service.
Now, I certainly realize that cops have a high stress job. I also realize that both policemen and firemen can be called upon to put their personal safety, even their lives, on the line (volunteer firefighters do these jobs for free in their spare time). But these pensions are an impossible corruption of our system. No one deserves such luxury on the backs of the poor taxpayer.
Public employees unions have played their part in the suicide pact that our elected officials have initiated. This corrupt bargain was joined by our politicians in order to get handsome campaign contributions from the unions that dug deep into their pockets in order to get more favorable laws and regulations, ever richer benefits and pay scales, and permanent favored status from the pols. But the butcher’s bill is coming due, after all.
The public employee pension crisis is here. Will our elected officials have the guts to tackle it before there is utter collapse?
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