Pension Funds - the next bail out.

[FIREd]

And you can get away from paying off your accumulated share of the damage, too...

True. I think that "pay as you go" is the only reasonable way to do it. Align public sector incomes on private sector incomes and do away with [-]government[/-] taxpayer-sponsored retirement benefits (and any other future liability). Allow public employees to open 401Ks and save for their own retirement like everyone else. What's so wrong with that?

 

[randyman65]

Actually, I would posit that making the FERS retirement system available to everyone would the ideal compromise. It removes the burden of retirement planning from individuals, offers more efficient funding than most 401k/403b plans, allows portability of defined benefit portions, and keeps state and local politicians out of the business of voting themselves bread and circuses.

Of course, it would require implementing a sustainable model. Defined benefit - including SS - systems need to be adjusted to reflect current life expectancies. Any "early" retirement must be funded outside of retirement vehicles. While police and firemen should achieve vesting at a reasonable career length, they should not be allowed to begin drawing pension checks until a more reasonable retirement age. There's nothing philosophical about it - its a matter of sustainability. THe feds looked at the impending burden of the previous retirement system, and recognized the need to change. A lot of people complain about the newer FERS system but without it, the fed would likely be printing even more money than they are now.

 

[Westernskies]

This argument comes up over and over and over again, but most of us municipal employees accept lower salaries to work for the government than we could get in the private sector. So in other words, you, the taxpayer, have been underpaying us our entire careers and in return we get a "fat pension". Would you rather have taxes drasctically raised now so we can earn a competitive salary instead of having a "fat pension". 6 of one, 1/2 dozen of the other. You cant expect to underpay us AND not give us increased benefits , now can you?

Most municipal employees are overcompensated in terms of overall salary, health benefits, and pension relative to their position responsibilities, IMO. Public service has always been viewed as a "safe" career choice, and so attracts many who just want to put in their time. Why else would you toil for 20+ years for less than fair market value for someone with your skills, experience and ambition? I realize that there are exceptions to this of course, but the perception is very real.

And selectively protecting public pensions on the backs of those whose private pensions have been decimated during this downturn is unrealistic, unsustainable and unethical. Sue your plan trusteees if you don't like the results, but don't expect me to subsidize your losses.

To those who worked in the public sector, I say "Thank you for your service. Sorry your retirement plan is insolvent. Now get in the bread line with the rest of us."

 

[randyman65]

"And selectively protecting public pensions on the backs of those whose private pensions have been decimated during this downturn is unrealistic, unsustainable and unethical. Sue your plan trusteees if you don't like the results, but don't expect me to subsidize your losses.

To those who worked in the public sector, I say "Thank you for your service. Sorry your retirement plan is insolvent. Now get in the bread line with the rest of us.""

I am of this opinion as well. The decoupling of risk between private and public pension systems leads to a lot of bad policy in which the needs of the privately employed worker are automatically subservient to the public employee.

For perpective, Long Island NY has two counties and - wait for it - 901 separate taxing entities, each on the state pension plan. 20% of all productivity in the region is consumed by public employment. It is a crippling burden. But when public employee unions are asked to sacrifice for teh sake of solvency, they dig their heels in (yes, the police are included in this, refusing to give up even overtime). They somehow feel they live in a magic bubble in which the laws of arithmetic do not apply.

 

[Running_Man]

Here is a good website that collects all the stories affecting pension plans in US.


Pension Tsunami

 

[RonBoyd]

Here is a good website that collects all the stories affecting pension plans in US.

Actually this says it all:

 

[dex]

Most municipal employees are overcompensated in terms of overall salary, health benefits, and pension

I don't know if most municipal employees are overcompensated (I would like to see a good study on it.)

My guess there is a "Perception" that municipal employees are undercompensated by municipal employees and others in the general public. As you outline they have benefits in addition to salary that just do not exist for the vast majority of workers in this country.

 

[youbet]

I don't know if most municipal employees are overcompensated (I would like to see a good study on it.)

.

The study could be a simple survey of quantities of qualified applicants for openings in various skill areas.

If jobs are fairly compensated, there will be no shortage of qualified applicants to fill them. Here in the Chicago area, I know of few public sector jobs going unfilled by qualified people.

If jobs are over compensated, there will be huge demand for them. In our town, two openings for general laborers drew "lines around the building" quantities of applicants.

Over time, the only instances of shortages caused by undercompensation I'm aware of result from public employee union pay schemes where sub-categories in a field are all paid the same. For example, all teachers with a MS and 10 yrs experience make $X. In that case, there is sometimes a shortage of math and science teachers because they can be paid no more than the PE and history teachers which are in over-supply at prevailing wage rates.

 

[ziggy29]

Over time, the only instances of shortages caused by undercompensation I'm aware of result from public employee union pay schemes where sub-categories in a field are all paid the same. For example, all teachers with a MS and 10 yrs experience make $X. In that case, there is sometimes a shortage of math and science teachers because they can be paid no more than the PE and history teachers which are in over-supply at prevailing wage rates.

In fact, if I lose my current job, one of the options I've considered is to go through the state alternative certification program and become a high school math teacher. My background is specifically CS, but I have enough math education to qualify.

 

[Midpack]

Most municipal employees are overcompensated in terms of overall salary, health benefits, and pension relative to their position responsibilities, IMO. Public service has always been viewed as a "safe" career choice, and so attracts many who just want to put in their time. Why else would you toil for 20+ years for less than fair market value for someone with your skills, experience and ambition? I realize that there are exceptions to this of course, but the perception is very real.

And selectively protecting public pensions on the backs of those whose private pensions have been decimated during this downturn is unrealistic, unsustainable and unethical. Sue your plan trusteees if you don't like the results, but don't expect me to subsidize your losses.

To those who worked in the public sector, I say "Thank you for your service. Sorry your retirement plan is insolvent. Now get in the bread line with the rest of us."

I am in this camp too. I worked for 17 years in the private sector and my pension was frozen and retiree health care taken away entirely. I was disappointed and it changed my financial plans forever, but I'd never have tried to tell anyone "someone" had to make it up to me. Exactly why are government/munincipal employees supposed to be protected by the rest of us no matter what? I suppose you're going to contend that everyone should get SS with no reduction in benefits forever too.

My father retired from the military with a COLA'd pension and health care. He has lived for 27 years in retirement now at a higher standard of living than the almost 40 years that he worked - and he knows almost nothing about investing. That's clearly not sustainable...

 

[ERD50]

Paying $120k to a police officer in a city with a median family income of $50k is not only unfeasable, its immoral.

I disagree.

They should compensate police officers (all employees actually) no higher or lower than what is needed to attract qualified people for the job. I can see where police pay might be inversely proportional to median income of the community - aren't low income areas also generally high violent crime areas?

If that is $1,000,000/year, so be it (must be a horrendous place to work!).

If it is $10,000/year, so be it (must be a fun place to work!).

It is called Supply and Demand. And it's the LAW!

-ERD50

 

[Bimmerbill]

When I left my fed job in 2000, I got almost a 50% increase in pay. It was the IT field. I still think there is a large pay disparity in IT between public/private.

Heck, the state of NH is hiring IT guys and my brother makes more. He drives a trash truck...

 

[youbet]

In fact, if I lose my current job, one of the options I've considered is to go through the state alternative certification program and become a high school math teacher. My background is specifically CS, but I have enough math education to qualify.

Instead of the state alternative certification program, consider doing a MAT/Math. The Masters of Art in Teaching with the math emphasis would get you a real certificate plus the Masters which = higher pay. Most schools that offer it can get you through in 12 months. If you're going to spend more than a year or two teaching in the public school system, you'll want your Masters anyway so why not start out with it and collect the higher pay from the get-go. In Illinois, the difference in pay between BA/BS and MA/MS is significant.

 

[cashbalancetrouble]

Here is info from PLANSPONSOR that gives the skinny on Public P funding. The shortfall in the public P are probably no different that the private sector. The difference is who will bail them out. Public will be the state and local taxpayer and private will first be the other private pensions thru insurance with PBGC and then the federal taxpayer.

State Retirement System Funding Down Sharply in 2008March 4, 2009 (PLANSPONSOR.com) - The funding ratio for 59 state pension plans that reported actuarial data for 2008 was 77%, down from 88% for the same plans in 2007, according to a report from Wilshire Consulting.Among these 59 plans, pension assets declined by -7.6%, or -$65.9 billion, from $869.4 billion in 2007 to $803.6 billion in 2008, while liabilities grew 5.9%, or $57.6 billion, from $982.9 billion to $1.04 trillion. This led to a significant increase in the aggregate shortfall, as the -$113.5 billion shortfall in 2007 widened to a -$237.0 billion shortfall in 2008, the report said.

Of the 59 state retirement systems that reported actuarial data for 2008, 93% are underfunded, and the average underfunded plan has a ratio of assets-to-liabilities equal to 73%. By comparison, of 117 state retirement systems that reported actuarial data for 2007, 66% were underfunded, and the average underfunded plan had a ratio of assets-to-liabilities equal to 82%.

Among all 125 state retirement systems included in Wilshire's study (66 of which were late-reporting for 2008), they have, on average, a 68.4% allocation to equities - including real estate and private equity - and a 31.6% allocation to fixed income.

The report indicates asset allocation varies widely by retirement system. Thirty-one of the 125 retirement systems have allocations to equity that equal or exceed 75%, and one system has an equity allocation below 50%.
Rebecca Moore

 

[utrecht]

I'll respond to just a few of these points.

I wish to god I made $120,000 per year

I wish to god I could retire with my pension at 38...or 42 or whatever other age was quoted.

My department would be glad to hire you (Ziggy) at 43. Come on down.

Eridanus...I dont know if your numbers are correct, but assuming they are..its very close. Hardly a good argument that public employees are riding a gravy train.

Overtime is NOT figured into my pension so I cant pile on overtime in my last few years to juice my pension. Theres an easy fix to be made to some of these pensions that are in trouble.

Lastly, as someone said, its supply and demand. You have to compensate people at a rate that you can fill all of the positions. If there are not enough qualified people to fill the spots, you have to raise the pay and benefits until more qualified people are willing to do the job. So, whatever police departments someone said has a long line to get hired should lower thier compensation package to save the taxpayers money. My department never stops hiring. We dont have testing once a month or anything like that. You can walk in our doors any day you want and get hired if you meet the qualifications, because we cant hire enough people. That tells me, we need higher pay and / or better benefits. Its pretty simple.

Is that article about state pensions suppossed to be shocking? So what if state pensions are only funded 77%? They dont need to be funded 100% unless everyone retires the same day. Theres not going to be any bailout. You should be more worried about a bailout of the social security system. That problem is astronomically worse that the public pension problem. Anyone want to guess how many more people are drawing and or will be eligible for SS as compared to how many people in the public pension system? Why arent you guys lobbying to lower SS benefits before the system goes bankrupt? Nevermind, I know the answer.

 

[utrecht]

When I left my fed job in 2000, I got almost a 50% increase in pay. It was the IT field. I still think there is a large pay disparity in IT between public/private.

Heck, the state of NH is hiring IT guys and my brother makes more. He drives a trash truck...

Anyone want to respond to this? This is an actual case...not some stat that was quoted in some article that nobody can even verify.

 

[Leonidas]

They should compensate police officers (all employees actually) no higher or lower than what is needed to attract qualified people for the job.

DING! DING! DING!

I could hire you an entire police agency for just about any salary amount you wanted to pay. Probably fill a stadium with all the people who would take $1 a year. Not the people you really want to give badges, authority, and access to.

There is a consistent average of applicant rejection for major police agencies in the U.S.: 95-98%. The funny thing is that during poor economic times we get more applicants, but the rejection rate stays pretty consistent. Probably because, unlike most jobs, our qualification demands reach into areas of consideration that would be illegal hiring practices for most employers. Credit history, drug & alcohol use, criminal behavior (not limited to convictions, or even arrests), physical fitness, etc.

When the budget crunch is on there is a lot of pressure to lower standards. We had a mayor once who realized she could hire people as cops all day long even if she cut the salaries and reduced benefits. She was absolutely right about being able to hire people - she was just totally wrong about them being the kind of people you wanted doing that job. And there were years of ugly outcomes as a result. People who should never been hired were given badges, and, unlike the average job, the damage they do affects innocent people in some profound ways. Experienced employees who did the job right were lured away by other places. Many took pay cuts to go to federal agencies because the benefits were better, the retirement was better, and there was the potential for salary improvement in the future.

Exactly why are government/munincipal employees supposed to be protected by the rest of us no matter what? I suppose you're going to contend that everyone should get SS with no reduction in benefits forever too.

It's part of the same equation. Consider the military - what would the retention rate be for experienced NCOs and officers if the pension, salaries, hiring, training, etc., were cut because of a temporary budget shortfall? When the budget is fixed and you go back to hiring, where do you find a platoon leader who has actualy led troops in combat? A rotary wing pilot who has conducted hundreds of insertions and extractions in hot landing zones safely? A sonar chief who knows the difference between an enemy sub opening its missile doors and whales humping?

And if you find them, how much will it cost to lure them back?

And the people that stayed while their compensation and retirements were jacked with - how motivated and dedicated are they going to be?

People that join the military, become cops and firefighters, do it for a lot of reasons. Most of them have profound feelings of loyalty and a commitment to service. But they have families and dreams like everyone else and money is obviously an important element there. There comes a point in budget cutting when those people decide that they're just not going to do more with less today.

We went through about a decade of seeing our salaries and benefits erode and cut partly because there was a period of fiscal difficulty, and partly because the elected officials thought they could cut us and still achieve the same results.

"Why do we spend so much money on training cops? Can't they just get most of it in the form of experience?" Followed a few years later by, "Why have we lost so many lawsuits for failure to train or supervise?"

"Hey, if we have only three firefighters per truck, look how much money we will save." Followed a few years later by, "Why did three firefighters die in this building?"

Eventually we had difficulty in hiring qualified applicants, we lost tons of experience (it takes years to make a rookie into a capable field officer, and a decade to take a capable field officer and make him a good detective), and eventually commitment and dedication fell off the chart. Going from #3 in compensation in the country to #5 in the county caused a lot of people to take a hard look at why they were risking their lives and busting their butts for an employer who did not care.

You can cut salaries and you can cut pensions, but you have to realize there will be an impact on performance. And the impact is not something like it will take a few months extra to roll out our next product. It's more like, "Sorry sir, we have nobody available at the moment. Can you put out the fire / shoot the intruder / stop the bleeding by yourself?"

 

[ziggy29]

Anyone want to respond to this? This is an actual case...not some stat that was quoted in some article that nobody can even verify.

One cherry picked example does not a robust argument make:

Government salaries vs. private sector salaries - CNN.com

It depends, on some degree, to what sector you're working in. And anecdotally -- admittedly not a solid argument -- what I've seen in recent years indicates that most public sector pay is catching up to the private sector even as the difference in the gap in the value of their respective employee benefits widens.

For example, someone could counter with another cherry-picked example from the link above for librarians:

Government average: $74,630
Nationwide average: $49,110

Again, this is but one example that can be cherry-picked to make a point that doesn't necessarily tell us anything about the picture overall. But across all the occupations listed there is no clear trend that public sector workers are paid less overall.

 

[ziggy29]

People that join the military, become cops and firefighters, do it for a lot of reasons. Most of them have profound feelings of loyalty and a commitment to service. But they have families and dreams like everyone else and money is obviously an important element there. There comes a point in budget cutting when those people decide that they're just not going to do more with less today.

See, here's the thing. When people talk about public sector pensions, it seems like all we hear about are the military, cops, firemen and so on.

But there are a huge number of government workers who are not in these public safety/national defense positions. What about things like clerical or administrative staff? IT guys? People in HR or Finance? Do they need "retention" any more than the private sector does? And if retention for these jobs was so critical, why doesn't the private sector continue paying pensions to people doing those jobs to encourage longevity? Seems that if longevity were that crucial in those positions, businesses would be paying out pensions or at least longevity bonuses...

 

[youbet]

When the budget crunch is on there is a lot of pressure to lower standards.

The quality of the work force is determined by the standards that are kept. The ability to attract and retain employees willing and able to work at those standards is a function of the salary offered.

It is not a case of higher salary = better workers. It is the case that higher standards = better workers and the salary needs to be set where it attracts and retains the desired quantity of employees.

 

[Westernskies]

my brother makes more. He drives a trash truck...

....for the county.

 

[eridanus]

Eridanus...I dont know if your numbers are correct, but assuming they are..its very close. Hardly a good argument that public employees are riding a gravy train.

My numbers are correct for one municipal area for an Engineer III. That's the only open city engineering job available.

It's not as close as it seems.

The private engineer has to save $17,000 a year starting at age 22 (or whatever age we want to start with). The public engineer can save 7.5% each year regardless of salary. This means that the public engineer has a MUCH better standard of living than the private engineer in the early years. For example,

22 yo public engineer: $35000 pays in 7.5% = $32375 to live on
22 yo private engineer: $40000 pays in $17,000 = $23000 to live on (!)

We can play with the numbers but compounding works for the private engineer and not for the public engineer. If the private engineer contributes less in her 20s, she would have to contribute MUCH more in her 30s. The public engineer contributes 7.5% each year, regardless.

Medical benefits are a lot of what we discuss on this ER board. A private engineer, if she can even qualify for a plan, may be paying $500/month or more. The public engineer stays in the city pool. No worry about being denied for a pre-existing condition.

Private pensions take a beating when the company can't afford them anymore. The PGBC can and does reduce benefits. For public pensions, taxes are raised. This is unsustainable. GM has finally admitted this, and cities will have to admit it in the future.

 

[youbet]

See, here's the thing. When people talk about public sector pensions, it seems like all we hear about are the military, cops, firemen and so on.

But there are a huge number of government workers who are not in these public safety/national defense positions. What about things like clerical or administrative staff? IT guys? People in HR or Finance? Do they need "retention" any more than the private sector does? And if retention for these jobs was so critical, why doesn't the private sector continue paying pensions to people doing those jobs to encourage longevity? Seems that if longevity were that crucial in those positions, businesses would be paying out pensions or at least longevity bonuses...

A key difference between govt employers and private employers is that govt employers generally offer compensation packages that sweep across the entire workforce without regard to recruiting or retention concerns for particular skills.

Example: My dad was a janitor for the Chicago Public Schools. That means he had a union job that required appropriate Dem Party connections. His compensation was 3X that which janitors for parochial schools received. (If you have read my posts over the years, you know that I and the rest of the family performed many "volunteer hours" for the local Dem organization to keep dad, his brother and his BIL, who all worked for the city, securely employed). There was no recruitment or retention reason for dad's compensation package to be as good as it was (although I appreciated that we led a more or less normal life on a janitor's salary). It was just a function that, at the time, the municipality of Chicago was an excellent payer and jobs were tied to the political machine. So janitors were rolled into the package and, thankfully for us, highly overpaid.

An example of equal pay across broad categories of job funtions would be teachers. Generally, in Illinois public education, teachers receive pay based on length of service and amount of education. Subject matter taught is not considered. In our area, special ed, language, math, science and certain vocational areas have shortages at existing pay levels. General elementary classroom teachers, subject area teachers associated with Liberal Arts majors such as history, English, and the like, are in oversupply at existing pay levels. Yet, the unions are successful at keeping with the tradition of equal pay for all subject areas. In local private schools, there is more flexibility in pay to allow administrators to recruit and retain difficult to find subject matter teachers by paying more.

 

[Leonidas]

See, here's the thing. When people talk about public sector pensions, it seems like all we hear about are the military, cops, firemen and so on.

But there are a huge number of government workers who are not in these public safety/national defense positions. What about things like clerical or administrative staff? IT guys? People in HR or Finance? Do they need "retention" any more than the private sector does?

Hey, we agree completely here.

I remember being a 20 year-old rookie in court one day and watching a city attorney blow a case. We're talking a simple misdemeanor case that I could have won, but this guy was a disaster. When I commented something to that effect the reply I got from an experienced hand was "What do you expect for $8 an hour?"

My experience has been that they paid slave wages to the non-classified folks, but they never expected much out of them. The standards of production and quality were a lot lower than they should have been, but anybody who was worth a darn wasn't interested in the low pay, or they quickly left for the private sector where they made more. What was left were mostly the unwanted, unwilling, and incompetent.

The quality of the work force is determined by the standards that are kept. The ability to attract and retain employees willing and able to work at those standards is a function of the salary offered.

It is not a case of higher salary = better workers. It is the case that higher standards = better workers and the salary needs to be set where it attracts and retains the desired quantity of employees.

I thought that was the main point of my post. If you want to hire and retain the right people you have to pay. And compensation includes benefits and pension rights. If you cut one factor you have reduced overall compensation and your ability to hire and retain qualified employees is reduced. A good pension allows agencies to be less generous on the salary side and still be competitive. Plus it has the added benefit of putting the financial burden of that on to some other sucker's budget.

I was a supervisor in recruiting at the height of this mess. We were under constant pressure to modify our standards so we could hire people at lower overall costs. Our standards were developed by an outside group that did an excellent job in defining the minimum standards for a beginning officer. After they were developed we never lost an EEO complaint on hiring practices. We even explored giving the local EEOC office a copy of our standards manual if they would stop forwarding complaints that were easily defeated and wasted so much time responding to.

Recruiting was pressured to relax their scrutiny of applicants. We were told "The academy will weed out the ones who can't be trained." The academy was pressured to retain cadets at a higher rate. They were told "The field training program will weed out probationaries who can't apply the training." FTOs who tried to fail poor probationary officers were sometimes browbeaten into changing grades. The field training command often overruled FTOs and their supervisors and allowed the unqualified to stay.

Nothing gross and glaring, just little things here and there.

But the end result is that small deviations from standards can create catastrophes:

The officer involved, rookie Arthur Carbonneau, did not pass a weapons-handling stress test as a cadet. He still graduated because of the department's reliance on overall averages. Carbonneau later failed his initial field training in part because he was easily flustered, the documents show. Also, Carbonneau testified he never had learned that he should not draw and point his weapon at someone who did not present a real threat to him or others.

Carbonneau, who resigned from HPD and was convicted of criminally negligent homicide in 2005, said he had done the best he could with Escobar, given the training he had received, according to a deposition.

BTW, Carbonneau's comment that he never learned not to point a weapon at someone not posing a real threat is vehemently denied by his firearms instructors.

Carbonneau incompetently shot and killed a 14 year-old boy in 2003. It was just one of two shootings of young teens that year which were alleged to be the result of officers using improper tactics and standards with their weapons.

I don't know if Carbonneau was a hiring mistake, but it seems evident that he was sure as hell a retention mistake. As a result, someone's child is dead, a man who should never have been allowed to go about armed as a police officer lives with tremendous guilt, the taxpayers are out several millions dollars ($1.5 mil judgement, legal fees, new training and administrative procedures, etc.).

I recognize that there have been pension abominations made, mostly by shortsighted elected officials who only care about "cleaning up" this year's budget and to hell with the future. My pension is independently administered and doing okay so far. But I am trying to point out that military and classified civil service pensions and retirements (police and fire) are a different creature for good reasons. These are jobs in which human beings making critical decisions is the difference between really good things happening or really horrible things happening.

You can look at my pension and say "that's screwed up and could have been done better", and I would probably agree with you. But if you look at my pension and say "that's screwed up because I didn't get the same thing", or "that's gotten to be too expensive and I don't want to pay it" then I disagree with you.

You can hire Arthur Carbonneaus all day long and they will be cheaper in the short run. In the long run they are very costly. And you can see that the price is paid not just in dollars, but in innocent blood as well.

Or you can hire people like me, and you can expect and receive a much better employee who won't cost you as much as a Carbonneau in the long run. But I'm not cheap. And if you decide you want to reconfigure the pension, that's fine - but you are going to pay up somewhere else in the compensation package or I'm not doing the job. When people like me don't want to do the job then you can either go with the Carbonneau plan and wait for the obvious results, or you can do the job yourself.

It's a matter of pay me now or pay me later - your choice.

 

[al_bundy]

Anyone want to respond to this? This is an actual case...not some stat that was quoted in some article that nobody can even verify.

i've seen NYC IT jobs advertised that pay around what the private sector pays. same with federal government jobs. a lot of federal IT jobs are now through contractors and they pay private sector wages.

everything will vary depending on the government that is paying and the local populace