PrintJuly 21, 2009
Taxpayers: Eat your hearts out, suckers
A looming problem has received far too little coverage from a liberal-dominated media: the power of public pensions to destroy our nation's finances and ransack our wallets.
For many years, government workers have enjoyed munificent benefits: relatively high salaries for lenient work demands; gold-plated retirement benefits that allow most of them to "retire" at a young age with very high pensions and generous health care benefits. Days off for holidays that few of us would even recognize.
All courtesy of us: the lowly taxpayer toiling away at jobs that may vanish at a moment's notice and that certainly don't guarantee the value of any retirement package. Not true for the ever-expanding ranks of government workers.
A recent Forbes magazine article highlights the absurd benefits that public sector workers enjoy on the job and off the job when they retire. The article, describing the leisurely life of retired government employees, could be lifted from the pages of Travel and Leisure magazine. The poster boy for the problem? A retired 42 year old policeman lollygagging on a beach, comfortable with his $2 million pension.
But there are more tales from across our land: a fireman who can be "retired" at 55, collect a pension and still collect a salary while keeping the job he "retired" from (don't ask about the logic-this is the government); a thirty eight year old teacher in New Jersey earning twice the state ‘s average income who works 10 months a year and barely contributes to a pension that will allow early retirement with quite the golden nest egg; California prison guards earning $300,000 a year.
In my own area, the superintendent of a small, suburban school district earns -- well, makes -- over $400,000 a year and has a slew of benefits to boot (medical care during his retirement, 100% comped for him and his family) . Remember that story when teachers' unions decry low salaries.
These anecdotal stories of staggering benefits received by the government worker elites are companied by reams of statistics that display the ticking time bomb of government salaries and golden parachutes. Forbes notes:
In public-sector America things just get better and better. The common presumption is that public servants forgo high wages in exchange for safe jobs and benefits. The reality is they get all three. State and local government workers get paid an average of $25.30 an hour, which is 33% higher than the private sector's $19, according to Bureau of Labor Statistics data. Throw in pensions and other benefits and the gap widens to 42%.Four in five public-sector workers have lifetime pensions, versus only one in five in the private sector.
Those pensions are guaranteed by state law, regardless of how pension investments fare, because you, the taxpayer, guarantee them with your tax dollars. It is the law, made by our legislators or incorporated in state constitutions.
The problem is national in scope and severity. Often public sector employees claim early retirement for disabilities -- and sometimes find loopholes to claim disabilities when none in fact exist -- and they are able to work in other jobs. Pensions are often boosted by goosing final years' salaries that are used to determine lifetime pension levels. The practice is called "spiking" and recently prompted criticism of a California fire chief who, three days before announcing his retirement (at the grand old age of 51, no less), had his salary suddenly increased so as to boost his annual pension to $241,000. The practice is unfair because employees or employers contribute to pensions based on salaries. When a salary is boosted around retirement, a shortfall is created between what a pension system has collected for an employee and what it must pay out for his lifetime.
Cooking the books to goose public pensions? What astute fiscal management! This problem is exacerbated by the fact that politicians use faulty and overly optimistic projections about future investment returns to justify high pension payouts. Politicians can run but they cannot hide for too long even if they rely on Stupid Debt Tricks to disguise the problems.
Remember the scandals over welfare queens and executive salaries? These are dwarfed by the ticking time bomb of inflated government salaries and crippling pension obligations for us to pay off in our taxes.
Already, communities are declaring bankruptcy, done in by skyrocketing public employee salaries and pension costs. We have only glimpsed the future and it is colored red-in more ways than one. As government revenues sink and government obligations rise, the red ink will spread across the nation; as will steps by Democrats to take our savings. We are only at Act One of this tragedy to come.
How bad is the problem?
This "Hidden Pension Fiasco" will cost us over one trillion dollars. Barack Obama and fellow traveling Democrats will hoist this problem on our shoulders via tax hikes yet to come. This trillion will be to benefit government workers, a key Democrat constituency, who know who butter their bread at our expense. Forbes:
"The tax hikes you face [to fully fund public pensions] will have a much more tangible impact on your financial life than anything a Social Security fix will entail," says Alicia Munnell, who runs Boston College's retirement center..
Government employees could care less about how well the investments backing their pensions fare, since they are guaranteed. Nor do they care who invests them. But we should. Pension funds are often turned over to politically connected firms, who may know the right people, but not the right way to invest. Our once and former car czar, Steven Rattner, is embroiled in what looks like a classic pay-to-play scandal involving politically connected investment boutiques being rewarded by politicians with deals to invest government pensions.
Money can be spread around by the pension fund managers to help politicians win campaigns. If their returns come up short, well, who cares? The taxpayers pay the price.
Why do government workers enjoy such sweet deals? They determine their own benefit packages, for one. But another fact plays a role: their powerful union, the American Federation of State, County, and Municipal Employees (AFSCME), which can devote its resources -- money, votes, volunteer labor during campaigns -- to help elect Democrats win elections. The quid pro quo is sweetheart contracts that reward union members, and punish us, for the rest of their lives.
This is disgraceful.
Our money should not fund dream retirement packages for government workers. Government workers should not lead lives insulated from the risks and travails most of the public must bear. Are politicians too in hock to public unions to care that we may go in hock to fulfill their absurd deals?
Who will stop them?
Some far-sighted people are responding to this crisis in the making. These include an activist group seeking to publicize the problem websites that publicize the problem; even apostates who feel they have unjustly benefited and are outraged at ways public employees milk taxpayers. .
Even a legendary auto union leader, Barry Bluestone, sees risks of taxpayer revulsion leading to taxpayer revolt. How fitting that his op-ed (A Future for Public Unions) ran in the Boston Globe, home of the original Tea Party. Bluestone warns that the future of public unions is in jeopardy should they follow the practices that helped wreck the American-owned auto industry. He looks back at how auto unions often:
... insisted on job classifications and work rules that undermined efficiency and compromised the industry's competitiveness.
He sees history repeating itself:
Will public-sector unions follow the same path? Nationwide, these unions represent over 35 percent of federal, state, and local employees, roughly the same as in 1980. Over the years, they have won improved wages and benefits for their members. Yet the leaders of many of these unions, particularly in Massachusetts, seem to be setting the stage for the same kind of deterioration we see in unions like the UAW.Teachers unions refuse to make changes in work practices that could help improve the chances of children succeeding in school. Police unions fight against lowering the cost of details at construction sites. The MBTA union and others representing transport workers lobby vociferously against reforming the state's transportation system. Municipal unions refuse to permit their local communities to join the Group Insurance Commission that would save their towns millions without compromising the quality of their members' medical care.As a result, between 2000 and 2008, the price of state and local public services has increased by 41 percent nationally compared with 27 percent in private services. Even in the face of the worst fiscal crisis in decades, many state and local union leaders refuse to consider a wage freeze that could help preserve more of their members' jobs.
Bluestone notes that citizens and ultimately their elected representatives, will object to tax increases to pay for bloated union contracts and poor public service. Bluestone does not address the public pension time bomb that will only make our problems worse.
Of course, the key point is the need to make our elected representatives themselves pay for the steps they have taken over the years to enrich public unions at our expense. That is the only type of payback they understand: our votes. They should not come as cheaply or carelessly as they have in the past. They have cost us too much already.
Ed Lasky is news editor of American Thinker.
