PrintJanuary 6, 2011
Reevaluating Pension Entitlements in the Public Sector
Unfunded state and city pension liability has been isolated by many analysts as the next big crisis on the horizon. But it looms in relative silence, largely because Americans simply do not want to talk about it.
Let's be honest: it's not exactly dinner table conversation. Many Americans have family and friends who work in public jobs, and many of them expect a considerable pension that could be compromised if the system is altered. So the issue is far too personal for public pensioners to embrace any logic that suggests that the system is flawed, while non-pensioners usually want to avoid friction about a sensitive subject.
But despite our reluctance to talk about it, there is absolutely no question that lavish public pensions are a crippling problem for our country.
First, consider that broken and indebted pension funds across the country are quite regularly granting $45K or more annually for fifty- to fifty-five-year-old "retirees" in lifetime pension payments, a payout that would rival or exceed a million-dollar annuity settlement for any private-sector employee. In some glaring cases, retirees much younger receive higher payouts. Take Glenn Goss, the Florida police officer who retired at 42 earning $65K in pension payments, which, with his projected life expectancy, makes him a $2-million liability to Florida taxpayers. Or perhaps take John McLaughlin, New York firefighter who at 48 retired with an $86K pension, which he collects tax-free on respiratory disability despite being a marathon runner.
Of course, public pensioners I've spoken with find these examples to be irritating singularities rather than an indication of any widespread problem, and certainly not a reason to change anything about their expected benefits. So let's look at it a bit more holistically.
According to a Heartland report, New York now pays more in pensions and benefits for firefighters than it does in salaries to firefighters. California spends more on pensions than it does on its state university system. Illinois' state pension fund has an unfunded liability equal to one-third of the state's gross domestic product. And even more broadly, consider that in the past few years, collectively, all states have "spent half a trillion dollars more than they collected in taxes," leaving a "trillion dollar hole in their pension funds."
The problem is hardly isolated. But to the public sector and its often corrupt union representation, the logic that lavish pension systems equate to fiscal cancer doesn't matter. These pensions must be paid as designed, because the public sector deserves them. And if that means taxpayers have to pay a little more, then so be it.
"We deserve it!" seems to have become the public sector's battle cry. Governor Chris Christie of New Jersey saw this firsthand when he confronted the state's far-too-powerful teachers' union. He has laid out a plan to rectify New Jersey's ten-billion-dollar deficit by scaling back income and pension obligations for public employees. To this, one teacher stood up and scolded him: "You're not compensating me for my education, and you're not compensating me for my experience."
This one comment highlights the incongruity between the realities of the private and public sectors. We must ask ourselves, what is it about working for the government and having powerful union backing that gives someone the "right" to be compensated for education and experience at the level to which this teacher apparently feels entitled? After all, there are quite a few educated and experienced workers in the private sector who have suffered far worse than being asked to absorb a pay cut to ensure the solvency of the company that pays them. Many wish they'd been given such a generous offer, as they were laid off in vast numbers with no pension to fall back on, finding themselves in dire straits.
You see, where the private sector can be crushed by adverse financial realities like bad markets and bottom lines, the public sector has generally been given its benefits through thick and thin, ready to hold taxpayers liable if the pension funds can't make ends meet. Taxpayers have this liability as a result of many cycles of union thugs strong-arming legislators into guaranteeing lavish income and pension increases during times of economic prosperity. Couple this with a bad economy and the mass retirement of baby boomers in the public sector, and you have the reason why the coffers that taxpayers have been fattening are dry.
Can we blame taxpayers for being less than excited about all of this? They certainly cannot like the prospect of having to pay more to uphold the unsustainable pensions that have been promised to public employees in the past. After all, consider the private sector's perspective. While millions of private-sector retirees have been forced to work longer or retire leaner to offset losses to their own retirement funds, crippled pension funds (also paid for by these very taxpayers) have continued distributing money as if they had no problems at all. Then, to make matters worse, public-sector union employees, like this teacher in New Jersey, are screaming from across the country that any decrease in their retirement or income would be the worst of injustices.
If we do not reevaluate our ideas of the public sector's entitlement to such benefits, we will likely witness a snowball effect that could devastate our economy. More tax revenue will be needed to pay out pensions as designed, only to have more and more retirees expect collection of these unsustainable benefits as years pass. Add to the equation that life expectancies that have risen since state and city pension levels were scribed into law, and you have a recipe for perpetual tax increases in efforts to keep public treasuries afloat. But simply taxing more would be about as effective as the captain of a sinking ship calling for more hands to bail water without ever seeking to repair the breach in the hull. Therefore, the battered taxpayers of America should demand that any severely unfunded city or state pension systems adjust the distribution of retirement benefits before they ever consider tax increases as a solution.
It is true that the government employs our treasured educators, heroes, and guardians. America honors and respects them, and our taxpayers provide for their livelihoods and retirements. But for the good of our entire nation, it is time for America to curtail the unions' immense power and demand that the public sector join the realm of fiscal reality, where financial stability, wealth, and retirement income are dependent upon adaptability and performance, rather than entitlement and a reliance on an endless fountain of taxpayer revenue.
William Sullivan blogs at politicalpalaverblog.blogspot.com.
