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Old 03-04-2009, 01:36 PM   #21
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Those figures would be easy enough to look up. Id be willing to guess the city engineer makes at least 15% less and also has to pay 5-10% into his pension. 20-25% extra saved over 25 years would really add up. This doesnt even take into account my cities health care plan which sucks big time.
It's complicated with many variables but I'm giving it a shot.


An Electrical Engineer C at my city water utility makes a median $72,000/yr.

An EE III in my region makes about $84,000/yr.

The city engineer puts in 7.5% into the pension, which makes her pay ~67,000. The private employee can then put in 17,000 into a 401k, and they'll have the "same" pay.

The city engineer can retire after 23 years of service. Let's say they started right after college, so ER is possible at 45. The public employee also gets basic medical and dental plans.

A 45 yo public engineer retiring this year, at the above salary, would receive $48096/month (with survivor benefit).


Q: Can the private engineer retire after 23 years of saving $17,000 and have a safe WD of $48096?

The private engineer would need $1.2MM, at a WD rate of 4% (risky, in today's climate).

Given a 10% return, the private engineer would have $1.129 million at age 45. That's not too far off the public engineer but there are two factors to consider:

1) Risk. The public engineer takes little risk yet receives $48096. A private engineer can lose 25% the year before she retires, thus delaying ER by potentially years.

2) Medical benefits. This, depending on the health of the recipient, can be a huge benefit.


Conclusion: The public engineer has the edge, especially when factoring in health and dental care.
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Old 03-04-2009, 01:38 PM   #22
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Actually, in the case of Vallejo, they were.

Parts of the country in which most wealth is generated tend to also pay civil servants rather generously. Unfortunately, these areas also tend to have a lot of civil servants, and tend to have very generous pension plans with lots of loopholes.

This leads to the unsustainable practice of paying civil servants more than private sector equivalents (in the case of teachers. I can't really think of who cops and firemen are competing with, unless its Blackwater), while at the same time giving them civil service protections, often programmed, mandatory raises, and early retirements with COLA'd defined benefits. It is a system subject to abuse and can be sustained only by increased taxes. The effect surburban NY has been a net exodus of workers who cannot afford enter the housing market nor afford to pay property taxes which rise 6-8% per year (yes, every year). So in areas in which public pension costs are excessive, the net population decreases due to high living costs, employers relocate to less expensive regions, and the tax base further decreases, and so on, and so on.

But no representative of public employees will ever commit to reducing benefits to a sustainable level. I have no problem vesting in retirement system, but the payouts simply cannot begin at 38 years old.
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Old 03-04-2009, 02:06 PM   #23
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So in areas in which public pension costs are excessive, the net population decreases due to high living costs, employers relocate to less expensive regions, and the tax base further decreases, and so on, and so on.
Yes, that's the beauty of state and local taxes: unlike federal taxes, there is an easy way to avoid paying punishingly high rates... move.
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Old 03-04-2009, 02:09 PM   #24
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Yes, that's the beauty of state and local taxes: unlike federal taxes, there is an easy way to avoid paying punishingly high rates... move.
And you can get away from paying off your accumulated share of the damage, too...
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Old 03-04-2009, 02:10 PM   #25
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I'd like to mention also that they have an inverser relationship with property values. Since the majority of Americans buy the payment and not the price, increases in property taxes result in a decrease in property values as the pool of buyers who can qualify for the higher PITI dwindles. In most areas, house prices are keyed to median incomes. If the median income does not rise, or if the taxes and insurance on a house rise, the median house price must decrease, assuming no change in interest rates or external, artificial inputs (such as tax credits or downpayment assistance programs).
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Old 03-04-2009, 02:17 PM   #26
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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?
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Old 03-04-2009, 02:25 PM   #27
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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.
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Old 03-04-2009, 02:28 PM   #28
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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."
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Old 03-04-2009, 02:33 PM   #29
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"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.
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Old 03-04-2009, 02:45 PM   #30
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Here is a good website that collects all the stories affecting pension plans in US.


Pension Tsunami
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Old 03-04-2009, 03:06 PM   #31
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Here is a good website that collects all the stories affecting pension plans in US.
Actually this says it all:

Pensioner Job.jpg

Pension Fault.jpg
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Old 03-04-2009, 03:24 PM   #32
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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.
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Old 03-04-2009, 04:33 PM   #33
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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.
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Old 03-04-2009, 04:42 PM   #34
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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.
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Old 03-04-2009, 05:27 PM   #35
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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...
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Old 03-04-2009, 05:52 PM   #36
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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!

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Old 03-04-2009, 06:52 PM   #37
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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...
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Old 03-04-2009, 09:37 PM   #38
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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.
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Old 03-05-2009, 07:45 AM   #39
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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

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Old 03-05-2009, 09:55 AM   #40
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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.
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