Growing deficits threaten pensions

[bssc]

In a democracy, we get the government we deserve. (I think Oscar Wilde said this).

I know in Arizona, when they were cutting back on things to balance the budget, they changed the time a driver's license expired to when you were 65. That allowed them to decrease the number of DMV employees (and their pensions). I haven't been to one since I moved here in 1996.

 

[Dan]

I'm a 20 year public employee for a local gov't in Texas. A few years ago the state legislature passed a constitutional amendment protecting pensions for vested or retired public employees. It lists the items which are not benefits (health insurance, disability benefits) and everything else is protected by law.

Recently one city attempted to reduce the calculation on their pension formula. Atty General ruling said unconstitutional. So the law has some teeth. I look for benefits for new hires and non-vested employees to be reduced gradually, but it hasn't happened yet. The amendment can be found online.

 

[Milton]

Defined-benefit ension plans are simply unsustainable with people retiring earlier and living longer, AND with unrealistic expectations about return in the pension funds. Grandfather all the people already participating in them if you must, but I think public pensions should go the way of private pensions and rely exclusively on defined contributions for new hires .

Most union representatives (not widely admired for realistic expectations) might have other views about that!

In a democracy, we get the government we deserve. (I think Oscar Wilde said this).

I believe you mean G.B.S., who wrote that "democracy is a device that ensures we shall be governed no better than we deserve". He also wrote that "democracy is a form of government that substitutes election by the incompetent many for appointment by the corrupt few", and "a government that robs Peter to pay Paul can always depend on the support of Paul".

On a related note, H.L. Mencken said that "democracy is the theory that the common people know what they want, and deserve to get it good and hard", and "democracy is a pathetic belief in the collective wisdom of individual ignorance".

 

[TickTock]

In any event, a deal is a deal, and I fully expect the contract to be honored.

It may be time to resurrect my old signature: "TickTock Rule Of Finance - heavily discount any promises of money/benefits to be paid to you in the future"

I think Youbet also has a good point - Social Security rules have been changed in the past and will almost certainly be changed in the future - given that, why not other governmental 'promises'?

 

[samclem]

"The biggest argument against democracy is a five minute discussion with the average voter."
- Winston Churchill

 

[Spanky]

I'm a 20 year public employee for a local gov't in Texas. A few years ago the state legislature passed a constitutional amendment protecting pensions for vested or retired public employees.

For fairness, should that be extended for private sector employees?

 

[Spanky]

I think Youbet also has a good point - Social Security rules have been changed in the past and will almost certainly be changed in the future - given that, why not other governmental 'promises'?

All institutions including the government and individuals should honor their promises if they had any integrity.

 

[Spanky]

To the taxpayers and voters they said "Hey, we can keep services at their current superior levels without raising taxes. Pleeease reelect me", and to the employees they said "Pleeeease stay, we can't replace you. We'll give you a mediocre raise but we'll make your retirement golden if you'll just stay a few more years."

The sad thing is that we believe them.

 

[samclem]

For fairness, should that be extended for private sector employees?

Different issue. The state is guaranteeing the promise made by the state.

 

[MGYog]

Local govt pension

Just curious, in your public sector job do/did you pay into SS or is your job one of those excused from participation?

Worked in the private sector for 25 years and paid SS before I joined the county. Best move that I've ever made. County job is exempt from paying SS, and nearing retirement, I get to get a COLA'd pension, and a slightly reduced SS (at 62) when I leave. IMHO, I've gotten the best of both worlds.
P.S. They actually did manage to raise taxes again for 3 years in my neck of the woods! Unbelievable - but then we are a Democrat ruled county.

 

[ziggy29]

I'm a 20 year public employee for a local gov't in Texas. A few years ago the state legislature passed a constitutional amendment protecting pensions for vested or retired public employees. It lists the items which are not benefits (health insurance, disability benefits) and everything else is protected by law.

And as a Texas taxpayer, I'm okay with this. I believe in keeping promises and that a deal is a deal.

But also as a Texas taxpayer, I think "the deal" needs to be changed for new hires. I don't think we can continue to afford it. Even if it means higher base pay and more generous 401K/403B matching, I'd rather pay now than increase the volatility of the ticking time bomb a few years from now.

 

[youbet]

And public sector employees (local, minicipal, state, teachers, etc.) should not be excused from contributing to SS. Among other things, it's just a public relations nightmare having "no SS" considered to be a generous perk/benefit. If SS is good enough for tax payers, it's good enough for tax paying public sector workers. Their pension plans, whatever they turn out to be, can be layered on top of SS.

The feds did the right thing when they transitioned to SS participation.

 

[yakers]

The feds did the right thing when they transitioned to SS participation.

That is one reason there is no raging debate at the federal level. I am on the 'old' system which ended in the mid 1980s. The new system 'can' be better but requires the employee decide how much and in what fund to save. Overall it has not worked out as well for the employees as the old, more fool proof defined benefit program. Many do not contribute even enough to get the employeer match. Others choose inappropriate funds when there are perfectly decent target retirement funds choices. And it includes SS. It has defused the discussion enough that I hope to carry my old defined benefit system to my grave quietly. Also many years ago there was legislation that severely reduced any SS I could qualify for if I collected the necessary 40 quarters. folks back in the 1970s got full federal and SS retirement.

 

[akck]

And as a Texas taxpayer, I'm okay with this. I believe in keeping promises and that a deal is a deal.

But also as a Texas taxpayer, I think "the deal" needs to be changed for new hires. I don't think we can continue to afford it. Even if it means higher base pay and more generous 401K/403B matching, I'd rather pay now than increase the volatility of the ticking time bomb a few years from now.

What you suggest is pretty much what Alaska did. There are now 4 tiers, with the 4th tier being a defined contribution plan with a tighter benefit package. The first three are defined benefit plans that reduced benefits with each new tier. I'm guessing it's the way most public plans will have to go, but they'll only have two tiers.

 

[youbet]

The new system 'can' be better but requires the employee decide how much and in what fund to save. Overall it has not worked out as well for the employees as the old, more fool proof defined benefit program. Many do not contribute even enough to get the employeer match. Others choose inappropriate funds when there are perfectly decent target retirement funds choices.

I know it's been an issue. And it's an issue that doesn't speak well for public employees....... My DW is a retired teacher with a DBP and almost no SS. Just yesterday, her union magazine arrived and contained an article to the union members warning them about upcoming attempts by the state to switch new hires to a 401k + match type system. I was amazed that the article, written by the union president, said teachers would be hurt by the new proposed system because they would never be able to figure out how to invest! Oh boy....... College grads and their union president says they couldn't pick an appropriate target retirement fund..... That doesn't sound good.

And it includes SS. Also many years ago there was legislation that severely reduced any SS I could qualify for if I collected the necessary 40 quarters. folks back in the 1970s got full federal and SS retirement.

Yeah....you got caught by WEP. My DW did also. She has the necessary quarters for SS from pre-teaching jobs and summer jobs, but WEP reduces her SS to less than $100/mo. When she starts Medicare, she'll have to send in a check every month since Medicare costs more than her SS! But no complaints.... The provision is there so that folks like DW and you, whose SS earnings history makes you look like low wage earners, don't benefit from SS's progressive payout scheme which benefits low wage earners and those with short careers such as moms.

 

[Wags]

CNN Money - Fat pensions spell doom for many cities
Vallejo, Calif., took the extreme step of filing for bankruptcy to get out of generous obligations to public employees. Other cities and states are watching.

Fat paychecks and pensions spell trouble - Jun. 3, 2008

Excerpts from the article

Here's the skinny: In late May, Vallejo, Calif., became the largest city in California history to declare bankruptcy. Its financial demise was brought about partly by the real estate crash, which decimated home prices in the area and put a major dent in the city's tax revenues.

But the real nail in Vallejo's coffin was the city's labor costs. Under the current labor agreement, the average police officer walking the beat in Vallejo will be paid $122,000 this year before overtime, according to city documents. An average sergeant will make $151,000; a captain, $231,000. The average firefighter, meanwhile, will bring in $130,000 before overtime.

That's just the salaries, though. The final budget-crusher was the city's pension plan. Thanks to retroactive benefit enhancements approved by the city council in 2000, police officers and firefighters can now retire at age 50 and receive an annual pension equal to 90% of their final pay (assuming 30 years on the job), an amount that gets increased every year to help keep pace with inflation. The old plan had given the workers a pension equal to 60% of their final pay at age 50.

So a Vallejo police sergeant making $150,000 a year can now retire at age 50 and receive an annual pension of $135,000, increased each year for inflation. To put that amount in context, you would need to amass a retirement nest egg equal to about $3.5 million to produce a similar retirement income on your own.

It wasn't just police and firefighters who benefited from the city's largess. The annual pensions for rank-and-file city employees were jacked up from 60% of final pay at age 55 (after a 30-year career) to a whopping 80% of pay, increased each year for inflation.

End of excerpts.

Folks, it seems as though the Grim Reap·er just might be coming after all the poor devils who have local government pensions and fat cat jobs.

After that who knows the Grim Reap·er may be coming after the rest of our state and federal pensions.

IMO, the ones who are to blame are our politicians who made promises and deals that they could not fullfill and we the voters who voted the varmints into office (for repeated performances).

God Bless Us All

 

[Notmuchlonger]

Here you go Wags.

YouTube - (Don't Fear) The Reaper-Blue Oyster Cult-Lyrics Included

 

[Wags]

Here you go Wags.

YouTube - (Don't Fear) The Reaper-Blue Oyster Cult-Lyrics Included

Thank you, Great Song.

As a so-called alleged rabble rouser I enjoy letting my hair down every now and then and this song hit the spot.


God Bless Us All

 

[Basenji]

another reason y'all won't want to move to Texas

CNN Money - Fat pensions spell doom for many cities
Vallejo, Calif., [snip]
Under the current labor agreement, the average police officer walking the beat in Vallejo will be paid $122,000 this year before overtime, according to city documents. An average sergeant will make $151,000; a captain, $231,000. The average firefighter, meanwhile, will bring in $130,000 before overtime.

That's just the salaries, though. The final budget-crusher was the city's pension plan. Thanks to retroactive benefit enhancements approved by the city council in 2000, police officers and firefighters can now retire at age 50 and receive an annual pension equal to 90% of their final pay (assuming 30 years on the job), an amount that gets increased every year to help keep pace with inflation. The old plan had given the workers a pension equal to 60% of their final pay at age 50.

So a Vallejo police sergeant making $150,000 a year can now retire at age 50 and receive an annual pension of $135,000, increased each year for inflation. To put that amount in context, you would need to amass a retirement nest egg equal to about $3.5 million to produce a similar retirement income on your own.

It wasn't just police and firefighters who benefited from the city's largess. The annual pensions for rank-and-file city employees were jacked up from 60% of final pay at age 55 (after a 30-year career) to a whopping 80% of pay, increased each year for inflation.

[snip]

IMO, the ones who are to blame are our politicians who made promises and deals that they could not fullfill and we the voters who voted the varmints into office (for repeated performances).

God Bless Us All

Wow! I apparently made a big mistake in working for the State of Texas (rather than California). Those salaries and pensions mentioned above are almost triple the typical Texas levels (maybe double for firefighters).

In the 1980s and 1990s, the State of Texas used to pay about 50-60% of the comparable private sector wage for a given position (at least in the legal and science/engineering fields). Many smart, highly dedicated, hardworking folks took that deal because of the relative job security and the promise of a pension that is reasonably good if you work at least 20-25 years for the State. I felt that at least 60% of the employees were in the good-great employee category, and turnover was low.

But, starting in the mid-late 1990s, Texas State employees went for many years without any pay increases. So ... in the 2000s, State employee pay has now become about 35-40% of the comparable private sector wage for a given position (at least in the legal and science/engineering fields). So, you won't be surprised to learn that turnover has skyrocketed (30+% in many years), and the percentage of good-great employees is down to about 25%. (Compensation is not the only reason; gross mismanagement by unqualified political appointees is another.) The disgruntlement level is very, very high.

I know many State employee secretaries and janitors being paid $15-20,000 / year. None of them can afford to live in Austin. They have to drive quite far. Given the increasing price of gas, their cost of living has got to be hurting them.

The State has never matched any 401(k) contributions (to my knowledge).

The "good news" is that the Employee Retirement System of Texas is in good shape (though the Teachers Retirement System of Texas is hurting). (Gotta wonder why TRS is hurting, and teacher pay is low, given that property taxes are obscenely high.)

In any event - I agree with the above: shame on the legislators, and shame on voters for not demanding integrity and honesty instead of pandering, flim-flam, shady accounting that violates GAAP and common sense.

 

[barbarus]

They're already bringing in engineers and programmers by the cargo-container load from India and China to w*rk for much less pay in industry.

No reason this can't be done for the various state and municipal workers being discussed here.

 

[kcowan]

Wow! I apparently made a big mistake in working for the State of Texas (rather than California). Those salaries and pensions mentioned above are almost triple the typical Texas levels (maybe double for firefighters).

Yabbut maybe you will actually get your more conservative pension.

 

[MGYog]

My 2 centavos

[quote=Basenji;
the percentage of good-great employees is down to about 25%. (Compensation is not the only reason; gross mismanagement by unqualified political appointees is another.) The disgruntlement level is very, very high.

Sounds like Cook County, Illinois, too.

 

[Wags]

Wow! I apparently made a big mistake in working for the State of Texas (rather than California). Those salaries and pensions mentioned above are almost triple the typical Texas levels (maybe double for firefighters).

In the 1980s and 1990s, the State of Texas used to pay about 50-60% of the comparable private sector wage for a given position (at least in the legal and science/engineering fields). Many smart, highly dedicated, hardworking folks took that deal because of the relative job security and the promise of a pension that is reasonably good if you work at least 20-25 years for the State. I felt that at least 60% of the employees were in the good-great employee category, and turnover was low.

But, starting in the mid-late 1990s, Texas State employees went for many years without any pay increases. So ... in the 2000s, State employee pay has now become about 35-40% of the comparable private sector wage for a given position (at least in the legal and science/engineering fields). So, you won't be surprised to learn that turnover has skyrocketed (30+% in many years), and the percentage of good-great employees is down to about 25%. (Compensation is not the only reason; gross mismanagement by unqualified political appointees is another.) The disgruntlement level is very, very high.

I know many State employee secretaries and janitors being paid $15-20,000 / year. None of them can afford to live in Austin. They have to drive quite far. Given the increasing price of gas, their cost of living has got to be hurting them.

The State has never matched any 401(k) contributions (to my knowledge).

The "good news" is that the Employee Retirement System of Texas is in good shape (though the Teachers Retirement System of Texas is hurting). (Gotta wonder why TRS is hurting, and teacher pay is low, given that property taxes are obscenely high.)

In any event - I agree with the above: shame on the legislators, and shame on voters for not demanding integrity and honesty instead of pandering, flim-flam, shady accounting that violates GAAP and common sense.

Do Texas state employees pay into social security?

I know that the teachers do not and some of my friends who had (already retired) or have (still working) 40 credits under Social Security are reallyabout the system because of the pension offset.

God Bless Us All

 

[Milton]

Those salaries and pensions mentioned above are almost triple the typical Texas levels (maybe double for firefighters).

Dunno why they would pay a police sergeant $150,000 a year. And pensions that pay 80-90% (indexed!) of final salary are simply unsustainable.

No wonder they're going bankrupt.