Who needs a pension when dogfood will do?
Filed under: Retire, Recession
The reward for working 35 years at a modestly paying job in the public sector has long been security and the promise of a pension that nearly equaled and occasionally exceeded what a worker was receiving when he accepted his gold watch. And in most cases, these pension promises were indexed for inflation so they'd grow as the worker aged.These pension liabilities don't have to be accounted for like they are in the corporate world. No putting on the balance sheet what actuaries believe the municipalities, school boards, etc., will need to meet these pension obligations so that taxpayers can understand what they've committed to and workers can judge the odds that they'll get what they're owed.
No. It's all very loosey-goosey, even as more and more people live longer and longer and the pension obligations get bigger and bigger.
Then came last year's meltdown. With public pension funds in the toilet and tax revenues declining because of unemployment and falling real estate values, how long will it take to catch up if the economy recovers soon, asked the Washington Post. The answer from one teacher's pension official in Ohio, whose fund lost 31% of its value: "Infinity."
The typical public pension fund will have less than half the money it needs by 2025, predicts Kim Nicholl, the national director of PricewaterhouseCoopers' public-sector-,retirement practice.
"Time bombs" is what the billionaire investment genius Warren Buffett has called them.
The International Monetary Fund says the same problem exists in industrialized countries all over the world and advocates a combination of raising taxes and lowering the payout to remedy the issue.
I don't know what the answer is, but that I can tell you, raising property taxes here in my Detroit-area neighborhood in order to make sure that the mayor gets every penny of his pension is going to be a really tough sell.
Actually, I think the Montana Public Employees' Retirement Board has a heck of a solution and one that will probably be widely adopted. When their actuary told them that there wasn't going to be enough money to pay pensions, they advertised for a new actuary – one who wouldn't call for unpopular solutions.
Scott Miller, attorney for the Montana Public Employees Board, when questioned about this head-in-the-sand approach by the Wall Street Journal, said: "The point is we aren't interested in bringing in an actuary to pressure the board. ..."
Point taken. Fiscal responsibility is over rated. Why can't all us taxpayers and our public servants just be happy eating dog food together?
Reader Comments (Page 1 of 1)
10-13-2009 @ 1:40PM
John said...
Why do bloggers like you constantly deride the hard working teachers, janitors, policemen, firefighters, office workers ect. These people worked hard and faithfully for benefits that were negotiated over years. They are not asking for something they are not entitled to, or something they have not earned..we are Not not talking about your snide remarks about your elected mauor the elected mayor.
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10-13-2009 @ 2:04PM
reidgator said...
John, the author is not "deriding" municipal employees. She is "deriding" the attitudes displayed by various decision makers associated with municipal emplyees. They are ignoring some realities! Perhaps YOU are too?? Millions of citizens have lost THEIR jobs in the past few years. Why should teachers and police and firefighters be any different? Actually, they do not have to give up jobs, but, a salary decrease might be appropriate. The private sector is hurting, so why should the public sector not share the pain! Aren't the municipal employees being greedy by demanding what the private sector does not have? Yes - you endured lower salaries, but, you did so for job security and low stress...
10-13-2009 @ 2:42PM
John said...
Sorry for the typos. Just got a new box of fingers!
Salary and benefits for public employees (and many private) are NEGOTIATED, so to ask them to take a pay cut in the middle of a contract is unreasonable. I work in both the Private AND public sectors (I feel the pain by having to work two jobs) so I have a somewhat unique perspective. I took a pay cut at my Private sector job-- I have no contract there so am at the whim of the employer. I do however have a contract with my PRIVATE sector employer. That is the point of a contract, so the rules can not be changed mid-stream--otherwise, everytime a new elected official took over, the public jobs holders would be at their mercy... You are right, I accepted the lower paying (public) job for security-- it is a benefit that I have negotiated and EARNED. Many opted to work for higher salaries--opting for the money over the security-- that was their benefit--which they have already reaped.
if you are talking apples to apples here, you wuld need to ask the private sector employee to GIVE BACK money already earned, beccause that is in essence what you are asking the public employee to do.--give back something they have already earned (and paid for interms of lower salary)
And if you believe for a second that public employees have less stress--you are DREAMING!
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