Growing deficits threaten pensions

[FinanceDude]

Quote:

Originally Posted by youbet I've been retired for a coupled of years, so my data isn't completely up to date. But, the Megacorp I worked for found that recruiting was not negatively impacted when they withdrew retiree medical benefits and defined benefit pensions for new hires. An agressive starting salary and competitive 401k match (vs other employers) seemed to do it for today's young folks.

It has changed dramatically in the past couple years...........

[Leonidas]

The reality is most citizens are woefully uninformed about what's going on at City Hall until something blows up. The politicians just want to get re-elected and they spend all of their time and energy doing magic shows to keep the uninformed appeased and in the dark. The news media knows that most people don't want to be informed as much as they want to be entertained, so they only publish/broadcast stories that show things going wrong (because bad news gets watched/read). And even then they almost always go after low hanging fruit.

When politicians start over promising services they run up against the reality that there is not enough money in the treasury to cover the bills. Administrators get pressured to produce more income or reduce spending. (God forbid they tell the citizens the truth and cut services or increase taxes, because either of those two are a sure fire way to get un-elected.)

The bottom line is that common sense is completely absent in the decisions that are made. Everybody is talking out of both sides of their mouth and doing the opposite of what they say they are trying to do. And when money is involved - logic leaves the building.

So you wind up with city services that are often just a sham that is either operating understaffed and underfunded, or is a glitzy cover up that is over funded and overstaffed in order to distract you from the stuff that isn't working very well. If something blows up and the media notices, they just shift funding and manpower until it looks good again.

I've seen entire functioning divisions created to address a problem, disbanded or reduced to transfer people and assets to someplace where there is another problem, and then brought back to bigger than ever five years later because the old problem was out of control again. It's psychotic crisis management. Not only are millions of dollars wasted, but the citizens are the ones who also pay the price in screwed up service. Sometimes they pay with their property, and sometimes they pay with their lives. But meanwhile, the politicians who created the mess keep getting reelected because they haven't raised taxes and they keep pulling off the magic show.

And the current pension crisis is just more of the same.

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."

Who is to blame? Well, I would go to sleep with a big smile tonight if we all agreed that first thing tomorrow we were going to string up all the politicians. But who bought the pig in a poke? Was it the employee who entered into a contractual agreement that stipulated everything in black and white, or the voters who kept reelecting people who sold them BS by the ton?

[Walt34]

Quote:

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

I paid into both a retirement system (7.5% of salary) and SS. At retirement I had a choice of either taking a reduced pension and having SS on top of that, or taking more immediately and having it reduced by the predicted amount of SS at 62. I took the first option.

[Walt34]

Quote:

Originally Posted by kcowan http://sfgate.com/cgi-bin/article.cg...BA6E10JVID.DTL Vallejo, CA declares Chapter 9 bankruptcy; more cities to follow?

Ya know, ya coulda gone all day without telling me that!

I don't see that happening where I worked, they are always very protective of their AAA bond rating. And if it does happen, well, there will be a lot of people in much deeper doo doo than us.

[Wags]

Quote:

Originally Posted by Leonidas The reality is most citizens are woefully uninformed about what's going on at City Hall until something blows up. The politicians just want to get re-elected and they spend all of their time and energy doing magic shows to keep the uninformed appeased and in the dark. The news media knows that most people don't want to be informed as much as they want to be entertained, so they only publish/broadcast stories that show things going wrong (because bad news gets watched/read). And even then they almost always go after low hanging fruit. When politicians start over promising services they run up against the reality that there is not enough money in the treasury to cover the bills. Administrators get pressured to produce more income or reduce spending. (God forbid they tell the citizens the truth and cut services or increase taxes, because either of those two are a sure fire way to get un-elected.) The bottom line is that common sense is completely absent in the decisions that are made. Everybody is talking out of both sides of their mouth and doing the opposite of what they say they are trying to do. And when money is involved - logic leaves the building. So you wind up with city services that are often just a sham that is either operating understaffed and underfunded, or is a glitzy cover up that is over funded and overstaffed in order to distract you from the stuff that isn't working very well. If something blows up and the media notices, they just shift funding and manpower until it looks good again. I've seen entire functioning divisions created to address a problem, disbanded or reduced to transfer people and assets to someplace where there is another problem, and then brought back to bigger than ever five years later because the old problem was out of control again. It's psychotic crisis management. Not only are millions of dollars wasted, but the citizens are the ones who also pay the price in screwed up service. Sometimes they pay with their property, and sometimes they pay with their lives. But meanwhile, the politicians who created the mess keep getting reelected because they haven't raised taxes and they keep pulling off the magic show. And the current pension crisis is just more of the same. 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." Who is to blame? Well, I would go to sleep with a big smile tonight if we all agreed that first thing tomorrow we were going to string up all the politicians. But who bought the pig in a poke? Was it the employee who entered into a contractual agreement that stipulated everything in black and white, or the voters who kept reelecting people who sold them BS by the ton?

You are so right on all counts.

In a way I think all of us are to blame because we keep on voting these rascals into office and we keep on listening to their little sweet lies.

Unfortunately at the end of the day when things hit the fan we are the one's who are left holding the bag of dung.

God Bless Us All

[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]

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Originally Posted by Ziggy29 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!

Quote:

Originally Posted by bssc 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]

Quote:

Originally Posted by Walt34 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]

Quote:

Originally Posted by 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.

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

[Spanky]

Quote:

Originally Posted by TickTock 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]

Quote:

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]

Quote:

Originally Posted by Spanky For fairness, should that be extended for private sector employees?

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

[MGYog]

Quote:

Originally Posted by youbet 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]

Quote:

Originally Posted by 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.

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]

Quote:

Originally Posted by youbet 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]

Quote:

Originally Posted by ziggy29 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]

Quote:

Originally Posted by yakers 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.

Quote:

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.