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Bring Fenty Back
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Mitt W. Bush
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Education’s Medicaid Problem
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The NEA’s Progressive Turn
December 9, 2011 | 13 comments
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Taking Over Lousy Schools
December 2, 2011 | 29 comments
Special Report
The Unsustainable Cost of Local Pensions
Wisconsin and New Jersey are just the starting point in the escalating war to clean up this mess.
You wouldn’t think that Erie County, Pa., epitomizes the least visible yet most insidious aspect of the nation’s pension crisis. With just 280,566 residents, the county is better known for its once-grand status as being the hub between the Rust Belt metropolises of Pittsburgh, Cleveland, and Buffalo, for the sandy Presque Island State Park, and for being the site of one of the few battles won by the Americans in the War of 1812. But these days, Erie County taxpayers are learning plenty about the high cost of pension and retiree healthcare deals struck over the past five decades by politicians and public sector unions.
In the county seat of Erie, taxpayers have seen the city’s pension deficit increase by a 12-fold between 2003 and 2007 to $22 million. Given that the most recent audit by Pennsylvania’s state auditor only accounts for pension costs from four years ago — and doesn’t account for the last decade’s financial meltdown, the current economic malaise, or new deals such as a new contract with the city’s firefighters’ union that forces it to hire 20 more hook-and-ladder men — the cost to taxpayers is probably even higher.
Residents in nearby Millcreek Township — where police officers and other civil servants get free healthcare — must cover $5.4 million in pension deficits; residents in the city of Corry struggle with a $2 million tab.
While Erie County residents must struggle with a $30 million pension tab for its municipalities, they also face even bigger costs from the county government. The county’s pension is underfunded to the tune of $23 million, while the county has set no funds to cover its $69 million in unfunded retiree healthcare costs. And those costs are increasing rapidly. This year, taxpayers will shell out $5 million to cover immediate pension costs — a 41 percent increase over the costs paid out three years ago.
Erie County residents aren’t alone. The $3 trillion tab faced by American taxpayers for state civil servant and teachers’ pensions has captured much of the public attention — and has been the driving force behind heated battles in states such as Wisconsin, Ohio and New Jersey between school reform activists and public-sector unions. But taxpayers must also worry about the nation’s 2,329 local pension systems and retiree healthcare benefits, whose deficits are growing thanks to generous public employee deals, feckless fiscal management, and overly optimistic investment assumptions.
Taxpayers in Central Falls, R.I. — which is now using bankruptcy to deal with $80 million in pension deficits — have seen the consequences of fiscal incompetence. So have residents in dusty Vallejo, Calif. (which is emerging from its own bankruptcy) and Benton Harbor, Mich., whose government is now under the control of a state-appointed emergency manager. (The American Spectator discusses more about Benton Harbor’s fate and that of other Michigan towns in its September issue.) And even more taxpayers are finding their cities heading toward similarly dire straits.
Residents in rugged Baltimore find themselves on the hock for at least $940 million in deficits for its three pension plans; the real tab may be as much as $3.7 billion, according to estimates by University of Rochester professor Robert Novy-Marx and Joshua Rauh of Northwestern University in a study on municipal pensions released earlier this year. With pension costs increasing by 23 percent between 2008 and 2010 — and facing a $155 million budget shortfall last year — Baltimore officials enacted a series of modest reforms, including increasing the number of years police officers must work before they can retire from 20 to 25. But the city’s public-sector unions, looking to keep the generous benefits (including annuities equal to 60 percent of final salary), are suing to overturn the moves. And the cuts only forestall the inevitable.
Facing even tougher odds is San Diego, which is still struggling with a decade-long pension scandal involving the city’s move to divert its share of pension contributions to finance a stadium for its Major League Baseball franchise. The combination of overly generous benefits — some 487 city employees collect annuities of more than $100,000 a year — and investments losses have nearly doubled the pension deficit to $2.7 billion. The city paid $229 million in annuity costs this past fiscal year, marking a 48 percent increase over 2009-2010. Those costs accounted for 8.3 percent of the city’s budget versus 5.2 in the 2004-2005 fiscal year. San Diego officials are now pushing for a ballot initiative next year to close the pensions to new employees — and finding themselves in a fierce battle with the city’s public sector unions.
Meanwhile in Chicago, deficits for the city’s five pensions have increased by 30 percent between 2005 and 2009; the teachers’ pension deficit increased by 48 percent during that period alone. New mayor (and President Barack Obama’s former chief of staff) Rahm Emanuel now has to wrangle with $15 billion in pension deficits that his predecessor, Richard M. Daley, ignored for nearly all of his two decades in office, all the while battling the city’s public-sector union leaders. Those leaders have already won such sweet deals as the ability to buy service credits that they can use to boost their annuity payouts; six union officials now stand to earn an additional $12 million in annuities during their retirement after putting down just $1 million for the privilege.
Municipal pensions are likely underfunded to the tune of $574 billion, according to Novy-Marx and Rauh; this includes a whopping $53 billion pension deficit for both the city and the county of Los Angeles, and an even bigger $122 billion for New York City. Given that the current assets aren’t enough to cover all the future costs, cities will eventually have to dip further into their budgets to cover payouts, crowding out spending on public safety, parks, and other activities. Novy-Marx and Rauh estimate that Boston would have to devote 27 percent of projected revenues to covering pension benefits once assets are depleted in 2019; for Philadelphia, whose assets could likely run out in the next four years, it would be 19 percent.
But those numbers are only half the story. Cities, suburbs and school districts are just finally starting to account for billions more in retiree healthcare costs and “Other Postemployment Benefits,” for which they usually have no reserves. In Rhode Island, municipal governments have $2 billion in unfunded retiree benefits obligations, according to a state senate report released earlier this year. Taxpayers in Pittsburgh face a $489 million retirement tab (which doesn’t include their share of the $906 million in retiree burdens for Allegheny County and its transit authority).
The very same feckless dealmaking between politicians, school districts and public sector unions that have led to the massive state pension insolvencies are also driving the fiscal crises at the local level. Starting in the 1980s, municipalities sweetened payouts through the creation of so-called deferred retirement option programs, or DROPs, in which a government employee forgoes raises and incremental pension contributions in his final years of employment in exchange for a lump-sum payment upon retirement. This resulted in curious situations in which city workers could collect multimillion dollar checks upon retirement — and still collect six-figure sums. Practices such as “double-dipping,” or allowing teachers and other public sector employees to collect annuities and still work for school districts and local governments, have also contributed to the problem. In Chicago, 54 police officers are collecting $2.5 million in annuities and picking up another $2 million in full-time salaries.
Meanwhile, state and local government assessments of their stocks and other investments have been overly optimistic given the historic volatility of the stock market. Local governments took advantage of those inflated assumptions to help boost payments to civil servants while still avoiding paying out those costs directly from budgets. But financial meltdown, along with current economic malaise in which even Fortune 500 companies are socking away cash in low-interest savings accounts, is now forcing municipal governments to admit that the promises weren’t even worth the paper on which they were written.
The costs of this Ponzi-scheming aren’t borne by local taxpayers alone. State governments, reckoning with their own pension bungling, have to step in to help. Pennsylvania taxpayers shelled out $200 million in local pension relief in 2009 alone; last year, they doled out $5.7 million just to offset Erie County’s local pension deficits. Michigan’s own state government is taking more direct action. It has seized control of five local governments (including Detroit’s stupendously failing school district) over the past two years and could take over 107 more.
States are also bearing local costs through their teachers’ pension systems. And this is where things often get worse, because it allows for two of the biggest players in state politics, the NEA and the American Federation of Teachers, to protect the deals that have made teaching the most lucrative profession in the public sector.
In California, school districts have helped boost annuity payouts to teachers and administrators through the practice of spiking, or offering double-digit pay raises. This is one reason why the state’s Teachers Retirement System faces a $56 billion deficit. But fixing this problem has proven to be difficult. A proposal to end such pay raises was approved by the state senate but the NEA’s Golden State affiliate, along with CalSTRS, has stalled passage of the law in the assembly.
It will take some fierce battles — like the kinds we saw earlier this year in statehouses in New Jersey and Wisconsin — just to begin solving this fiscal mess.
About the Author
RiShawn Biddle the editor of Dropout Nation , is co-author of A Byte at the Apple: Rethinking Education Data for the Post-NCLB Era. He can be followed at Twitter.com/dropoutnation.
Letter to the Editor View all comments (74) | Leave a comment
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Bill Hussein O'Stalin| 9.1.11 @ 7:00AM
It's a real scam all right and it's going to get to the point that pensions will not be paid in many areas.
The town of Pritchard, Alabama may be the parakeet in the coal mine. The town stopped paying pensions because the pensions were too generous and there is no more money.
Since the town stopped paying the pensions 11 retirees have passed away, several others have declared bankruptcy and 150 others are simply struggling to get by as the fruits of their life long efforts have slipped away.
Montgomery County, Maryland endured a controversy several years ago when it was revealed high ranking police officials retired on 100% disabilities which are tax free at the federal and state levels, and obtained jobs as police chief at local departments. It was then revealed that 90 employees of the department were retiring on some form of tax free disability. In nearby Fairfax County there were no disability retirements that year.
If there is any area ripe for immediate tax reform it's public pension tax free status for disability pensions.
There may be a way out and that's under Title 9 which allows bankruptcy for municipalities. The law is currently being reviewed and a change would allow cities and counties to declare bankruptcy and discharge their pension debt.
It would be a tragedy in some ways as millions of pensioners see their checks stop. But it may be the only solution as the benefits promised were too high and there is no way to pay them.
Mike D.| 9.1.11 @ 7:43AM
And the politicians who set the whole thing up are long gone of course. Set themselves up a nice political career based on getting votes from these municipal workers in exchange for these unsustainable benefits. But then that was the whole idea, being long gone when the brown 25 hit the fan.
Terry C.| 9.1.11 @ 8:23PM
Isn't that how the Democrat party works?
loulou| 9.1.11 @ 10:49AM
"It would be a tragedy in some ways as millions of pensioners see their checks stop."
Where's the tragedy? The public sector parasites knew very well that they were fleecing the taxpayer. The claw back should be applied to the current jackpot winning retirees.
Bob From District 9| 9.1.11 @ 3:14PM
Unless you are saying 100% of public sector employees were in on it, your comment is merely spewing BS.
Pecos Pete| 9.1.11 @ 7:41AM
Bankruptcy is one solution. Another solution is to write checks that bounce.
Probably the solution will be to inflate the dollar which will allow for payment of excessive future pensions while at the same time killing off current retirees because they can't buy food and will starve to death.
Bob From District 9| 9.1.11 @ 3:16PM
"while at the same time killing off current retirees because they can't buy food and will starve to death."
That is the right wing plan for all working class retirees.
Quartermaster| 9.1.11 @ 5:59PM
Must have been the left wing plan Actually. A small amount of thought, something teh left does not major in, would have told the moonbats they were creating the problem we have now. The only thing that is surprising is that people like you are surprised. It's been predicted for 40 years, and the problem is just beginning.
POST American| 9.1.11 @ 8:06AM
---There it is again, that beloved capstone
CON-cept ---'SSSS--US---stain-a-bill--IT--he'
(remember kiddies, since Plato's Repubic,
we are the ITs).
Of course Global monopoly mercantilism,
child and slave labor, to say nothing of
CON--Sumer--ism and the plastics and
porno 'culture' it spawned ----were purose
made to last forever. ---RRRight.
Doing a little actuarial homework we find,
mathematically speaking, what is diabolically
sustainable ---is psychopathic compound USURY
fraud.
IN FACT, if you'd made a loan for 1%
interest a few centuries back, you'd own the world
several times over by now. CHECK IT OUT.
The Mosaic , 'something out of nothing' , God mocking, creation denying ABOMINATION that is USURY. You gotta' love it.
And if you don't ----Bye Bye.
----Now kiddies, get off your butts n' make
yourselves 'USE---FULL'.
MOS was 71331| 9.1.11 @ 1:29PM
Could someone explain POST American's entry to me? I can't tell whether he's for or against these unfunded pensions or maybe just indifferent.
Mike Hawk| 9.1.11 @ 2:05PM
Explianing Post A's drivel isn't possible except to say he somehow escapes wherever he is normally secured before his meds are administered. He somehow gets access to a keyboard and puts his stuff up. We keep pleading for his keepers to restrain him, but it goes for naught, as he seems to be clever enough to get loose with annoying frequency. Best just ignore him. Trying to understand the postings will drive you nuts too.
Dan Mathewson| 9.1.11 @ 5:33PM
I agree. Though it is amusing, in a wierd way, reading his stuff. Like believing in the existence of a tunnel between a lake in British Columbia and Asia.
Terry C.| 9.1.11 @ 8:29PM
This gave me a headache!!
MikeBee| 9.1.11 @ 8:17AM
The problem, really, is twofold:
1) The Baby Boomer generation did not replace themselves in numbers. Had they done so, the pension and insurance schemes would have been able to continue for another generation, instead of coming crashing down.
2) Politicians through the years have seen fit to spend all available City,County,State, Federal monies, rather than setting some aside and fulfilling the promises that they have made to employees. Pension funds have remained unfunded for too many years (in many cases, 30 years or more), while the monies that could have provided funding (keeping the promises) were spent recklessly on hiring more friends, paying off favorite contractors, etc.
LSinAZ| 9.1.11 @ 10:19AM
MikeBee, you seem to fault the Baby Boomer's who chose not to breed, and mathematically I agree that the Ponzi scheme would be extended by breeding, but the motivations for not breeding should also be examined.
Children today are a liability, not an asset.
Parents are handcuffed and oppressed by many laws, such as tax and child protections.
Unless a single parent is Very well compensated, it takes two workers to afford even one child. The stay at home mom, for most families, is financially out of reach. The cost of day care is exorbitant, and often takes up a goodly percentage of one parents income just for this purpose. Add in health care, food, clothes, bedrooms for all, soccer, etc... and you can see the financial factors that must be in play.
Child protective services can remove a child upon a simple assertion by someone that abuse is present. This is one area where you are automatically considered guilty. The burden of proof of innocence is upon the parents. This sets up a legal and emotional battle that takes a huge toll upon the family.
I have witnessed instances where a child was angry at her mom for being restrictive, and constantly threatened her mom with calling CPS. Handing this legal weapon to a child is off the charts stupid IMHO.
Now a simply spanking can let slip the dogs of CPS.
This country is simply not parent friendly, and I believe this is why you see people making the rational choice not to procreate, just as I did.
loulou| 9.1.11 @ 10:51AM
Illegal aliens and welfare recipients find this country to be very parent friendly.
LSinAZ| 9.1.11 @ 2:36PM
Loulou, you are right on the money with this comment. It is sad IMO.
Bob From District 9| 9.1.11 @ 3:33PM
As someone who is firmly and vehemently anti-illegal immigrant, may I say your comment betrays a very high degree of prejudice.
Buck Ofama| 9.1.11 @ 3:00PM
>This country is simply not parent friendly...
Thanks to the pissing, whining, hand-wringing liberal back-assward "progressive" assh0les.
Bob From District 9| 9.1.11 @ 3:32PM
"Children today are a liability, not an asset."
This part you got right, but not for the reasons you think. The anti-family system is built around holding down the earnings of working class families.
Don't believe it? Check the average hourly wages since the end of WWII. They peaked in the mid '70s, and have not matched those wages since.
Peak wages in the 1970s? Yep. That is the explanation for much of our current economic crises, and is the result of deliberate government (esp Federal Reserve) actions.
"Parents are handcuffed and oppressed by many laws, such as tax and child protections."
Unless you are in favor of child abuse, that is false.
"Unless a single parent is Very well compensated, it takes two workers to afford even one child. The stay at home mom, for most families, is financially out of reach. The cost of day care is exorbitant, and often takes up a goodly percentage of one parents income just for this purpose. Add in health care, food, clothes, bedrooms for all, soccer, etc... and you can see the financial factors that must be in play."
This part is right. As a former single parent I can attest to that. I had an excellent income, and it was hard for me. Imagine how hard it is for single mothers working at much lower wages.
"Child protective services can remove a child upon a simple assertion by someone that abuse is present."
I don't know where you live, but it's certainly not true anywhere I am familiar with. It's, in fact, hard to take a child without significant evidence. And the parent, if poor, gets lawyers provided for her, or him.
As an adoptive parent I went through the govt system and learned a lot about it. I have done work for some of the people involved with treatment of people in the criminal justice system, and know all of the therapists at the local agency that handles that. I can tell you even criminals often don't lose their children. Not even when they should.
...
I have witnessed instances where a child was angry at her mom for being restrictive, and constantly threatened her mom with calling CPS. Handing this legal weapon to a child is off the charts stupid IMHO.
Call her bluff. When I was a single parent I did, one of my kids got the idea that would work, so I told her she had a choice, live by my rules or I would take her to CPS and tell them you wanted to be placed in a home. She backed down quickly.
"Now a simply spanking can let slip the dogs of CPS."
Like I said, I don't know where you live, but CPS has had PSAs on TV saying spanking is legal, but differentiating between reasonable discipline and abuse. Compare that to the father who threw a kid off a boat because he thought the child needed to be punished. It's been on the news recently.
"This country is simply not parent friendly, and I believe this is why you see people making the rational choice not to procreate, just as I did."
Now you got it right again. But the parent unfriendliness is due to the desire to keep the incomes of working people down. Keep the working class hungry so they will do as they are told.
A family friendly country doesn't have the wealth gap this country has.
LSinAZ| 9.1.11 @ 11:21PM
BobfromD9, I disagree with you.
"Parents are handcuffed and oppressed by many laws, such as tax and child protections."
Unless you are in favor of child abuse, that is false."
Here are just a few horror storied that a rudimentary google search turned up....or maybe they are all lying.
http://www.associatedcontent.c.....tml?cat=25 ""I have also learned first hand that if someone makes a false call and makes the story outrageous enough that there will be no investigation and your kids will be taken on the spot, and the social worker doesn't have to be professional about it.""
http://www.theclaytontribune.c.....news03.txt
Stories of overzealous Department of Family and Children Services employees prowling for referrals and using people's children as tools of extortion were true, according to the Georgia Department of Human Resources investigative report…..The report alleges improprieties against the four employees terminated by DFCS since the investigation began in December, and the transfer of a fifth to another office. Findings substantiated by DHR investigators include children removed from homes without just cause, excessive drug screening, lack of proper supervision and a culture of violations that were permitted in a day-to-day environment.""
You may want to rethink your position on this.
Patrick| 9.2.11 @ 5:57AM
BfD9 is beyond such pedestrian arts as "thinking".
Lullabys, Legends and Lies| 9.1.11 @ 8:34AM
Could you break this down a bit more for me, even though I'm pretty sure I know the answer to this. Of the top 10 States facing these bloated pension liabilities, how many of them are controlled by the Democrats? My guess is it's going to be 10 out of 10!! Am I wrong here? Is there a Republican controlled State that's made such stupid deals in the past with these sick selfish Unions, that they're in the top 10? If so, what the hell were they thinking?
Every single Cop I've ever known, who's retired, has retired on some sort of disability. Most of them are collecting almost as much as they were while they were on the job, and amazingly, with their terrible disability that "forced" them to retire, most of them have gone on to get another job since retiring. I guess they got bored being retire in their 40's, huh? I thought you had a bad back Buddy? A back that's so bad that you had to retire on disability, and yet here you are playing Golf again? Hmmm? It makes you wonder how back their bad back really is? Here's a fact, most everybody has a bad back, it's just part of the aging process!!
The Cops and Firefighters that are doing this to their Neighbors (AKA: the Taxpayer) are former Heroes, now blood sucking Zeros!! It's disgusting the way that we're being taken to the cleaners by our fellow Americans, retiring in their 40's, collecting 80-100% of their full pay, for the rest of their lives (maybe 60 years?), and then crying when we point out that we can't do this anymore. We're broke, and you broke us!! Maybe it wouldn't be so bad, if in their retirement, with their bad back and all, that they made an occasion arrest for us every now and then. Come on now, throw us a bone here!!
Public Unions "must" be outlawed!! And so should the Democratic Party!!
Bob From District 9| 9.1.11 @ 3:48PM
"Could you break this down a bit more for me, even though I'm pretty sure I know the answer to this. Of the top 10 States facing these bloated pension liabilities, how many of them are controlled by the Democrats? My guess is"
What top ten states facing what pension liabilities?
Wisconsin? Nope, pension fund so close to 100% funded you are talking fractions of a percent.
Ohio? Nope, pensions are 87.7% funded, and are funded by contributions to a separate agency, the Public Employees Retirement System. The only liability the state may face is the money ripped off by republican Tom Noe when he got control of $50million in PERS money through former Republican Gov Robert Taft, or the half billion dollars lost to Lehman Brothers former employer of our Republican Governor John Kasich. Funny how that happens.
Deal with reality, the pension crises is a result of the Bush/Republican financial crises brought on by the collapse of an unregulated half a quadrillion derivatives market. The same unregulated market the republicans are fighting to keep unregulated.
The Big E| 9.1.11 @ 5:47PM
So, what are the top ten states facing pension liabilities? You named two which you claimed aren't facing liabilities (and without providing any stats to back you up). By my count, that leaves 48 more (55 if follow the President's reasoning, which apparently you do.)
So, since you dodged the question without providing an answer while indulging in the delusion that you have a clue what you're talking about, why don't the rest of us deal in a few facts.
Courtesy of Forbes, here are the ten States with the most unfunded pension debt per capita in 2010 (which I felt was the fair way to measure it, since States with the largest populations would likely have the largest total unfunded pension debt).
1. Rhode Island $20.271
2. Ohio $19,110
3. Alaska $18,797
4. Connecticut $17.622
5. Illinois $17,230
6. New Jersey $16,838
7. Wisconsin $16,418
8. Colorado $15.548
9. Hawaii $15,526
10. New Mexico $14,614
That's right, every man, woman and child in the State of Rhode Island owes the state over $20,000 just to pay the unfunded portion of the pensions of a fraction of the State's citizens.
So, since we looked at the ten worst, let's be fair and look at the 10 best in this regard:
10. Indiana $7,418
9. Utah $7,272
8. Vermont $7,082
7. West Virginia $7,054
6. Delaware $6,872
5. Florida $6,389
4. North Carolina $6,300
3. North Dakota $6,080
2. Tennessee $5,229
1. Nebraska $4,878
Now, here's an interesting point about these two lists - not a single state - NOT ONE on the "ten worst" list is a "Right to Work State," but SIX on the "ten best" list are (Utah, Florida, North Carolina, North Dakota, Tennessee, and Nebraska), including the entire top five.
I'll let others figure out which party has controlled which legislatures and which Governor's mansions for how long, but I think one conclusion to be drawn from this exercise is clear - where Unions dominate, unfunded pension debt follows.
Lullabys, Legends and Lies| 9.1.11 @ 9:08PM
Thanks Big E!! From just off the top of my head, it looks like 6 of the 10 worst are, and have been "solid" Democratic States, 2 more have been leaning Blue for awhile, and then you have Alaska and Ohio that have been back and forth in the past, but mostly Republican now. It is very interesting though, that the best States are Right To Work States. I wonder why that is? Bob from District 9 on Mars, do you have the answer for that?
LMajito| 9.1.11 @ 8:42AM
Well let's see...voters give the nod to politicians because they're promising heaven n' earth for free...now we 'find' that the politicians were lying and actually filling their pockets with filthy lucre...but nobody cared because their politician was 'bringing back the bacon'...
i say to the pensioners that look the other way while some fraudulent deal was being cooked in a smoke filled back room, well daddios you make a deal with the devil you get some evil crap...
they're all in this together...the voters who thought they're getting everything for nothing and the schemers that wanted the power to show up at the floor of the house and think they're somebody...
maybe it should be a good time to rebuild the nation with some integrity and hope the voters learn that usury and greed is not the way to a bright future...
but one can always wish and hope...
tsd| 9.1.11 @ 8:44AM
The local idiot politicians made these deals with sleazy union negotiators who outsmarted them. Most of the giveaways were done by incompetent morons on school boards who thought it was all for better education for the kids. As I have said for years, anyone smart enough to do a good on a school board would be smart enough not to run for the office. I was on the local school board for 2 terms and could do nothing with the liberal majority who where addicted to wasting huge sums of money and giving away our kids future to the unions. It seems it must get so bad that enough people understand the issues and care enough to run the morons out and turn things around.
Bob From District 9| 9.1.11 @ 3:52PM
"The local idiot politicians made these deals with sleazy union negotiators who outsmarted them"
So, you are saying your republican politicians are stupid. Ok, I can accept that.
"I was on the local school board for 2 terms and could do nothing with the liberal majority who where addicted to wasting huge sums of money and giving away our kids future to the unions."
So, move somewhere there is a conservative majority. I live in a heavily republican area, there are such places, you know.
Quartermaster| 9.1.11 @ 6:16PM
If you live in Ohio, you live in a divided state, not a heavily Republican state. Many Republicans were seriously disappointed in Taft because he was really a liberal. Strickland, who followed Taft because the independents were disgusted with the Republicans, was even worse than Taft or Voinovich. In fact, in Ohio the Republicans are actually Democrats in all but name.
Ohio may not be in the trouble that California or Illinois are in, but she isn't very far behind as both parties have made sure the business climate in the state is very unhealthy. handing the state over to militant unions has a tendency result in that, and the companies that have left behind teh shuttered plants are all the evidence you need to show you where that stupidity leads.
The major problem is, no one in Ohio has really started listening yet. What Kasich and the General Assembly has done is just scratch the surface. More pain is coming and you can control it to a degree by acting with forethought and vision. Ohio, however, suffers a shortage of both, and so the remedy will forced down your throat as soon as reality ties you to the gurney.
And, yes, I used to live in Ohio and am well aware of the political and economic climate in Ohio. I wish I could go back, but is probably not in the cards.
Dan Hirsch| 9.1.11 @ 9:54AM
RiShawn:
Nice article. You might have given a little more attention to the total liability numbers for the pensions rather than just focusing on the pension fund deficits. Especially if you put it in per capita terms, i.e. each taxpayer in Erie County is on the hook for $X,XXX; each retiree is to receive $YYY,YYYY. This is a little more difficult, but it clearly shows the incredible, unavoidable generosity of the taxpayers to these former employees.
It might also make the government pensioners more reasonable in responding to "adjustments" to their pensions to preserve them. Or not.
Anyone ever hear of a union voting to share the pain of revenue cuts to save the jobs of a few of their brethren? You'll find cases between the hens' teeth and the frogs' hair...
Thanks,
Don't tread on me.
Bob From District 9| 9.1.11 @ 3:53PM
"Don't tread on me."
Why not?
David W| 9.1.11 @ 9:59AM
My retirement is basically 90% self-funded (or hopefully will be if I am able to retire (with democrats and RINOs screwing up the economy I'm not sure). However I am sure that what I have scrimped and saved for 25+ years will be taken away and given to someone who depended upon someone else.
NOTE: I apparently had a pension at one company, but payments to it were stopped.
Bob From District 9| 9.1.11 @ 3:55PM
100% of the growth in the debt to GDP ratio from 1946 to 2009 came under three anti-tax Republican presidents, Reagan/Bush I/Bush II.
old white guy| 9.1.11 @ 11:14AM
the reality is that when there is no more money there will be no pension. there must be somone in charge of something that can see beyond today. there is no fix for a ponzi scheme except bankruptcy.
Bob From District 9| 9.1.11 @ 3:57PM
The fix is to reduce real unemployment from the over 15% it is now to less than 5%. That alone will fix most of our economic problems.
Note I said "real unemployment".
JayDick| 9.1.11 @ 11:57AM
Retirees in some of these plans will not get what they expected if anything. You would think that employees would see by now that 401k-style plans are more secure than promised benefits that may not materialize. Of course, these plans are better for the employers too, both public and private, because they pay once then forget it.
Bob From District 9| 9.1.11 @ 4:01PM
Every public sector plan I know of is invested in the private sector markets, just like your 401K. Wisconsin's is, Ohio's is. Both are well funded.
Your 401K lost half it's projected value on your investments in the stock market in 2000. Actually, more, much more.
My private sector defined benefit pension plan is in better shape than your 401K as of right now.
Of course, if the Tea Party has it's way we will all lose everything in the coming depression.
JayDick| 9.1.11 @ 4:52PM
But, you don't own your private sector pension plan and don't control it. Though it looks good now, who knows how it will look when you expect to get payouts. And what happens if you change jobs, as most people do regularly these days?
As for stock market losses, there are alternatives to the stock market and, in any event the time horizon should be much longer. Stocks have done very well over long periods. A 401k can be invested in lots of different things, including government bonds if you want to be very conservative.
A well managed 401k would begin moving from stocks to more predictable investments several years before expected retirement, maybe 10 or so. People who say they can't retire because of the stock market haven't managed their 401k properly.
Bill S| 9.1.11 @ 1:20PM
A lot of cities, counties, and states will eventually just stop paying. That's already happened in a few places around the country.
Old Soldier| 9.1.11 @ 1:27PM
There is no neat solution to the problem with current retirees. It would be easy to stop the bleeding, however.
Move every public employee with less than 10 years in to a 403b retirement plan and put their cash-value in the accounts. Never hire another employee with a defined-benefit pension plan.
The private sector figured it out decades ago.
LSinAZ| 9.1.11 @ 2:38PM
Old Soldier, great post. You are exactly right.
Bob From District 9| 9.1.11 @ 4:05PM
"Never hire another employee with a defined-benefit pension plan.
The private sector figured it out decades ago."
And private sector retirees have been suffering for it ever since.
Remember, if your pension plan is based on the stock market appreciating 10%/yr, which they were back in the 90's, then, with no appreciation at all on average investments in existence in 2000, over 7 years they lost half their projected value. Over 14 years they lose 75-80% of their projected value. IOW, if you planed to retire by 2014, you are in big trouble if you are depending on average stock gains for your retirement.
Old Soldier| 9.1.11 @ 4:13PM
So put it under your mattress or don't retire, I don't care - as long as I'm not footing the bill for your permanent vacation.
Stefan Stackhouse| 9.1.11 @ 2:20PM
Reading articles like this, one is left with the impression that it is like this everywhere. It is not. There actually are some jurisdictions that did things right and have fully funded their pension obligations all along. North Carolina is one state where this has been done, and there are a few others.
The problem has been with those jurisdictions where promises were made (to buy votes) but then not funded (which would have required raising taxes). The politicians who did this should be named and shamed, what they did was inexcusable.
Another problem is with pension systems where the employee is not required to make a contribution out of their own paycheck. This practice is by no means standard; in the three public pension systems I have participated in, all required matching employee and employer contributions. Thus, where this is the practice, we are talking about pensions that are at least 50% employee money. If one assumes that the other 50% is employee compensation that they otherwise would have received in their paycheck, then it really is the employee's money that is being invested in the pension system. If the contribution rates and benefits are computed by competent actuaries, and the funds invested by competent investment managers, then the taxpayers shouldn't be on the hook for any shortfall. If the employer contributions were never made, however, under the assumption that they would be caught up "later", that is a problem. It is one thing to cut back on promised pension benefits if the employees never did contribute anything. If money was taken out of their paychecks, however, then that is a more complicated situation. At what point does righting a fiscal mess become theft, plain and simple?
Bob From District 9| 9.1.11 @ 4:06PM
DAMN!
Somebody else around here can think!
And is willing to.
Quartermaster| 9.1.11 @ 6:20PM
There are serious questions about North Carolina's plan. I was covered by it for two years and got out of NC employment. It may look good publically, but from what I could make out, they've played some serious games with it.
Buck Ofama| 9.1.11 @ 3:03PM
>Thus, where this is the practice, we are talking about pensions that are at least 50% employee money.
True in theory, but companies will still figure out ways to fvck the employees out of their own savings. Example: Nortel Networks.
Bob From District 9| 9.1.11 @ 4:07PM
IOW, the private sector screws their employees big time.
Thanks.
Rich D.| 9.1.11 @ 4:36PM
Bob, if this is going to be your full-time occupation now that you've retired, why don't you start a blog?
Quartermaster| 9.1.11 @ 6:20PM
It's probably more fun being a troll.
PattyMor| 9.1.11 @ 3:26PM
This problem is exactly why people need to be responsible for their own retirement and health care. Why would you want to put your retirement pay and benefits in the hands of politicans. We already know the pols. can't be trusted.
But the law of economics is catching up with these promise the moon, but fund very little pols. When the money runs out, the retirement benefits WILL be cut at all levels. There simply isn't enough money to keep paying. This true for medicare, medicaid, and social security. And, it won't matter that the seniors get mad about benefit cuts. We are bankrupt as a nation. We sold our freedom for programs that have gone bust. If not, inflation will eat us alive.
Bob From District 9| 9.1.11 @ 6:32PM
"This problem is exactly why people need to be responsible for their own retirement and health care. Why would you want to put your retirement pay and benefits in the hands of politicans. We already know the pols. can't be trusted."
Explain how someone living on less than $40K/yr can support a family and fund a retirement that will provide a decent living standard and medical care.
If you can't then everything you said is BS.
Private sector retirements have been wiped out left and right. The private sector is less to be trusted than the politicians. Just keep medicare and social security as the third rail of politics and they will survive, and so will the recipients.
"But the law of economics is catching up with these promise the moon, but fund very little pols. When the money runs out, the retirement benefits WILL be cut at all levels. There simply isn't enough money to keep paying."
Wrong on all counts. There is enough money, but we are sending it to China. When we return to producing what we consume we will turn it around. If we don't then this country will become a third world colony of China.
McJobs will just put this country into the third world.
" This true for medicare, medicaid, and social security. And, it won't matter that the seniors get mad about benefit cuts. "
If the seniors get mad about benefit cuts maybe they will finally vote out the snake oil salesmen who tell them they need to cut and cut and call that reform. Social Security and Medicare have exactly zero to do with the Bush double recession, and the current meltdown. They have their own tax base and they provide support for the elderly that helps reduce the effects of the recession.
Medicaid is not part of the problem, it's part of the solution. That is unless your theory is the poor should die to reduce the deficit. The high cost of medical care is a major part of the problem, but that's the private sector portion. Remember, the most expensive national health care plan in the industrialized world is Switzerland, and their plan in this country would save our economy $1trillion a year. Not over ten years, each year.
"We are bankrupt as a nation. We sold our freedom for programs that have gone bust."
We sold our freedom for the Bush security mantra. We are bankrupt as a nation because the right thinks the very rich are the source of all prosperity, and the working class are peons who deserve nothing but a handful of rice.
" If not, inflation will eat us alive."
Not if we bring high paid jobs back to America, and if we control medical costs the way every other industrialized country in the world does.
cowgirl| 9.1.11 @ 3:26PM
I live in the Stupid State - aka California. We are in a financial mess of huge proportions. To make it even worse, the voters in California voted into the Governor's office the person, Jerry Moonbeam Brown, who actually caused the problems that California is having with pensions.
The state, city and county workers in California are going to get a very little return for their undying support for liberal politicians in order to get their huge salaries, benefits and pensions. California is in debt over $500 billion to the teachers' union and the prison guards' union. Of course the unions expect the taxpayer to cover it.
California is not the Federal Government - they cannot print more money when they run out. Furthermore California is not Cuba. Those of us sick and tired of the liberal crap in California are picking up our bags and moving to Texas. The home of Governor Rick Perry.
Bob From District 9| 9.1.11 @ 6:58PM
"I live in the Stupid State - aka California. We are in a financial mess of huge proportions."
"Those of us sick and tired of the liberal crap in California are picking up our bags and moving to Texas. The home of Governor Rick Perry."
Texas is tied for percentage of minimum wage workers with Mississippi. Texas has a significantly smaller population than California, yet even more food stamp recipients. California has a debt to GDP ratio of aprox 18.5%. Texas has one of 19.1%.
IOW, Texas is the next California.
Move to some place like Ohio. Half the population of Texas, half the number of food stamp recipients, half the number of unemployed, and a debt to GDP ratio of 14.5% and a debt per capita 1/3rd less than Texas. All numbers approximate and eyeball calculations, but not all that far off.
cowgirl| 9.2.11 @ 5:31PM
Texas is creating all the jobs - Ohio and California are not. No jobs, no tax revenue. I lived in Texas in the late 1980's during the oil dump. Still not has bad as California is now.
John on the Left Coast| 9.1.11 @ 3:28PM
Here in the liberal utopia of Calif, completely ruled by public sector unions, I cannot help but think that when push comes to shove the unions will get theirs first. They have become masters at thuggish scare tactics and will simply threaten to shut down teh (not so) golden state. And this will not be an empty threat. At the end of the day they will get theirs in full with interest and COLAs while the poor hapless taxpayer ( a minority in Calif) will get handed the bill.
cowgirl| 9.1.11 @ 3:29PM
One more thing I just found out - The doped-induced members of the Stupid State's legislature just passed a bill requiring worker's compensation coverage for babysitters.
What does this mean -more people leaving California for Texas. Less tax revenue for Jerry to cover those huge penions cost. Way to go Stupid State.
JeffB| 9.1.11 @ 3:39PM
I can verify first hand the situation in San Diego.
The libraries are open occasionally. There is constant threat of laying off police, fire and life guards. But the retirees are getting their gold plated pensions.
loulou| 9.1.11 @ 3:59PM
Apply the claw back to the lucky retirees.
Quartermaster| 9.1.11 @ 6:26PM
It won't last in California. When the money runs out, and it will, the checks will stop. The goose has had its throat cut and is bleeding out now.
George S| 9.1.11 @ 9:50PM
Who says pension costs are unsustainable? As long as property taxes are attached to public sector pensions, it will mean the pay day never stops. You, however, will have to continue to cough up their life blood --- even after you retire -- because they have you by deed and title. Foreclosure by action in REM: the gun to your head to make sure you get your retirement-age ass out of bed and find a way to pay your taxes.
Sgt Baker| 9.2.11 @ 1:32AM
So just curious how you all feel about military retirements?
POST American| 9.2.11 @ 4:16AM
-----------------BOTTOMLESS LINE------------------
Long in the works, along with TREASON and EUGENICS----
---------'SSSS--US---stain---Abel--IT--he'------------
Remember that --n' remember, we ARE the ITs!
Moe Blotz| 9.2.11 @ 6:07AM
If you control ingress/egress to your city,as in New York,just raise the tolls on big trucks. In the end the citizens still pay,because the trucking companies raise their rates to cover their costs.
BillW| 9.2.11 @ 6:31AM
Here's a thought, what, or whom ever is in Office Now. Pass a Tax on all those recieving said " overly generous benefits. " That's a Tax most would support, claw back what they gave out to win the Vote.
The only Pension I would not Tax, would be for severing in the Armed Services.....
sommers| 9.2.11 @ 12:52PM
Some of you must have heard of Theresa Guilarducci and her "Guanteed Retirement accounts" handled by social security.
All 401k's all IRA's (Roth's?) are to be seized and put into a government run account. There will be a 5% national income tax off gross pay that will go into this account. (social security 2 ?) This retirement fund will cover everyone in the country. You cannot opt out.
The reasoning is, "fairness".
marsyas| 9.2.11 @ 5:10PM
So? Not as bad as what Goldman Sachs and the Wall Street tricksters do.
POST American| 9.3.11 @ 2:38AM
---------------------FINAL WORD-----------------------
(Remembering that, since the time of the Plato,
we're the ITs)
------'SSSS----US--stain---a---BILL---IT---HE'-----
or is it
-------'SSSS--US--stain--Abel--IT--HE'?
SO, look beyond the bennies.
Keep you eyes on that 'benny violent' capstone.
KNOW their full, long term agenda
--AND, as ever, prayerfully search those scriptures!
-------------YOU HAVE BEEN WARNED------------
Tom Mix| 9.3.11 @ 6:01PM
Double digit pay raises in California? For teachers? Please send me some of what you're smoking! Yes, CalSTRS is in trouble, but that will be fixed by raising member contributions and maybe moving forward retirement dates. Ca STRS is mostly funded by the teachers themselves. The state is only on the hook for about 9 percent as its contribution. Not a recipe for disaster if the idiots running the state could get their houses in order. And perhaps if need be, CalSTRS can pick up the 9 percent if events dictate. So please get off the backs of California teachers. We take it in the pants as it is.
Shelsea| 9.19.11 @ 4:08PM
Great article! I believe that the one good thing the bad economy has brought to light is to expose to all Americans of what those of us who are already painfully aware, the lucrative scam/racket called the public sector or 'the system.' Unfortunately, and clearly overwhelmingly obvious, as well as what is happening in our larger cities, is equally devastating our small American villages/ local whose governments are run by the employees who desire dumb and/or crooked 'bosses' aka Mayor/trustees and work very hard at campaigning for just those individual and love to switch their 'bosses' like underwear as the fancy strikes and their interests prevail above all others. If anyone dare to run for office and win an election in these small towns actually possesses the intelligence, education, experience and that ''dreaded integrity" and have the gall to represent the taxpayers interests and benefits, they will be fighting the employees tooth and nail and will likely fall prey to their most underhanded tactics to oust those that 'cross' them! These leeches want it all! They are not satisfied with the fact that they are already represented by a union, but by a multitude of 'civil service' protections under state law...they want the Mayor/board's sole loyalties as well! Unfortunately, the typical 'representatives of the public/taxpayer' are just the sort they desire and taxes have risen in proportion to these backassward loyalties! And, this is occurring in most, though not all, smaller village/town municipal governments where so many of us overtaxed/broke and broken Americans live. And, just as outrageous is that the State who is supposedly has the authority to oversee our local governments certainly has done a poor job of it! Taxation is now synonymous with extortion and "racket" a word for 'the system' of most all of our governments...from the Federal on 'down.' I do not see this being rectified unless 1.) we amend our constitution(s) to mandate, at the least, qualifications for those elected officials (who oversee the entire operations and finance), instead of merely meeting the ''age and citizenship" requirements to lead our governments, instead become qualifications that equal or, ideally, exceed those of comparable positions in the private sector (i.e. CEO's, whose experience, education, track record is more than, let's say, merely that of a volunteer firefighter!) Elections are a crapshoot, particularly, in local villages around this nation, and more often than not, our elected officials are clearly unqualified! Currently, the property taxes in the village in which I reside and many others in good ole' New York State meet or exceed most mortgage payments!
or 2.) Since I doubt any 'radical' (?) amendments to our various constitutions such as mandating actual and desperately needed qualifications for elected and appointed office, other than what qualifications mere 'age and citizenship' provide, will ever be allowed to pass anywhere, the only other solution to, more 'ideally,' rectify this abomination is to BAN UNIONS IN THE PUBLIC SECTOR! It is an inherent conflict of interest (especially if your Mayor/board are comprised of current or former public sector employees) and there is a vast difference between unions of the private sector and that of the public...and it's called ACCOUNTABILITY! Without 'consequence,' there can be no accountability. And, this is what we have allowed our governments 'protection' from! There is no accountability as, because those former and current elected officials with special interests of their own, we are the convenient 'cash cow' to fund/pay the consequences for financial 'shortfalls' due to their 'mistakes,' mismanagement or deliberate actions! We entrust our governments with our most important protections and services, and unless both officials and public employees suffer consequence for their misdeeds for which the taxpayer, instead, suffers in the form of higher and higher taxes, further driving out private sector, this racket will continue! If we could, and that's a big 'if' considering most of those currently in office, BAN UNIONS IN THE PUBLIC SECTOR, our taxes will go down (or should), private sector businesses would start up, grow or move back and then, if they belong anywhere, the unions can stay/go back to the private sector.
If the public sector workforce is allowed to expand to the point where they are in the majority aka voter, America as we (once) knew it will be doomed! In the area/region I now reside, public sector/taxpayer funded jobs are 65-70% of the workforce; and as it rose in NY, so many, many companies have also left, along with the young people who used to enable our communities ability to not only renew and thrive, but also to continue to sustain and support its very existence!
Jose| 9.21.11 @ 6:46AM
That is the right wing plan for all working class retirees.
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HokenTaka| 12.9.11 @ 2:33PM
It is absolutely amazing how you right- wing fanatics can be so blinded by your outright hatred of Obama that you can actually dilute yourselves into thinking that everything he does is wrong and harmful to the country Dating Online
Mark Brueggeman| 5.12.12 @ 10:46PM
Fire all the Public workers. They are all socialist Kenyan born Democrats anyway. Only CEO's deserve a pension. We don't need well paid teachers, police, fire, etc. Besides, educated people tend not to support Tea Party types. So why have schools??