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The coming public pension queen?
Submitted by Soren Dayton on Wed, 03/04/2009 - 18:03
I have written a little about a potent political issues involving public pension funds. Bloomberg has a story about the Chicago Transportation Authority pension fund, which was facing a huge budget shortfall:
“We’ve identified the problem and a solution,” said CTA Chairman Carole Brown on April 16, 2007. The agency decided to raise money from a bond sale.
A year later, it asked Illinois Auditor General William Holland to research its plan. The state hired an actuary, did a study and, on July 17, concluded that the sale of bonds would most likely result in a loss of taxpayers’ money.
So what happened? They proceeded with the bond issue anyways, against the advice of the state auditor, who turned out to be right:
Thirteen days after that, the CTA ignored the warning and issued $1.9 billion in bonds. Before the year ended, the pension fund was paying out more to bondholders than it was earning on its new influx of money. Instead of closing its funding gap, the CTA was falling further behind.
But the thing is that when public employee pensions lose bets with their money, the taxpayers pay the bills:
In the CTA deal, the fund borrowed $1.9 billion by promising to pay bondholders a 6.8 percent return. The proceeds of the bond sale, held in a money market fund, earned 2 percent -- 70 percent less than what the fund was paying for the loan.
The public gets nothing from pension bonds -- other than a chance to at least temporarily avoid paying for higher pension fund contributions. Pension bonds portend the possibility of steep tax increases.
This is exactly the objection that so many, including public employee unions on the left, have to provisions of TARP and other bailout proposals.
Most Americans who are fortunate enough to even have a credible retirement plan are looking at their 401(k)s and seeing 40% losses. The public employee unions are looking at their losses and reminding the government that they are owed a guaranteed rate of return. In Oregon it is 8%, which is a fantasy-land number only reached during booms and never sustainable. But the public employee unions turn around and force tax increases on the rest of us.
This is an enemy who is easy to imagine and attack. This is someone who is taking away from your nest-egg to fatten their own because they didn't win their bets. They live off your tax dollars at their jobs. Then they live off your tax dollars in their retirement.
Just watch. In 10 years, there will be a new phrase in American politics. The public pension queen.
(4 votes)
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Comments
And they are soon to be joined by the UAW
The public unions are a good target, since they enjoy benefits that few American workers receive in the Dreaded Private Sector.
Consider also, though, the ruckus we ought to raise when the UAW gets their bailout through GM. Obama made it clear he intends to help GM... and if he does so without forcing them to renegotiate their benefits and contracts and restructure their business, the taxpayer will be subsidizing union workers to enjoy higher wages and benefits than most of us.
oh? how much do you make?
I know it's not $70 an hour, but do you make $20? UAW works overtime, and deserves compensation for that. You'll get the same benefits that UAW does, and you can THANK GM for that!
ain't ya gonna bitch about the free market? sucks when your corporations start dropping like flies, and in desperation start to try and get what every other beloved automaker gets -- universal health care.
Good angle
For all his anti-union diatribes, I have yet to see Warner Todd Huston write about how the AFT jacks up property taxes by its ourageous teacher's salaries when these idiots only work 8 mos out of the year. How much does it really cost to teach a kid to be unable to read?.
Or how the AFT supported Prop 8 in California.
Put the two together and you've got-- your tax dollars, courtesy of the AFT, went to support Prop 8.
if you want to decrease the
if you want to decrease the money paid out with property taxes, maybe you should demolish some roads. they cost more in upkeep than kids do. or maybe you can have the kids clean their own damn toilets, and remove a few more poor people from your elite society.
Even if you demolish roads it
Even if you demolish roads it will not matter. Tax will be paid and no one can stop. I have been writing nursing research paper where I found that millions of children in the world doesnt get enough food to live a normal life.
--------------------------------------
Term papers for sale
Teachers earn their money
...and more.
Unions have been the backbone of this country's strength and the path to the middle class for millions of Americans for generations.
So-called " Right-to-Work" (a cynical lie, if there ever was one) states are usually Red states which means a race to the bottom of the US barrel in every statisitc of quality of life: In Education, opportunity, jobs, median salaries, health care, and many other measures. " Right-to-work" states are also usually net tax dollar USERS rather than contributors, which means that better-paid Union members actually have to send their tax dollars to help these states pay their bills.
Sure Unions have their problems. Sure there are abuses. That doesn;t mean they should all be scrapped, and we should let America's corporations, with their worship of bonuses and humongous Executive-suite perks and salaries, tell people how much they are worth.
Were it not for unions, we would all still be working 60-hour 6-day work weeks, with no benefits, no healthcare, no vacations, no sick leave, no pension plans, no seniority or a united voice to bargain with the Corporations.
Because that's EXACTLY where America's Corporations took their workers before there were unions.
Keep busting on Unions, Conservatives. It makes it very clear to regular Americans whose side you're on.
They are far too dangerous to
They are far too dangerous to leave to civil service unions and their pet politicians to "negotiate". Better to give the employee a 401K-style plan, with immediate vesting so they can quit or be fired without threats to their retirement. Arkadaş Sure, it means that the employee may blow it in the stock market, but the pension fund can do the same thing.
Also, getting rid of civil service pensions may go a film izle long way to getting rid of the lifer, time-server mentality that persists in much of the bureaucracy.
Our government structures are left over from the early 20th century, and haven't changed since Roosevelt, while business structures have moved on. Little wonder that bureaucrats haven't a clue about business...
I get it. Because you aren't
I get it. Because you aren't in a union with defined benefits, those who are are stealing from you. Get out the pitch forks.
It's funny. I read the whole article and I came away with the conclusion that the state have been underfunding these things for years. I don't fault the people getting a pension. I fault the state for not running a better program.
Given the state of the ecomony I glad the unions were able to secure something for their members. As far as taxes go, I don't mind. My money's been going to a bloated Defense Industry for years.
But I do love the Right though. The Working Man is the salt of the earth, until he's in a union. Then he's a no-good bum, sucking away my tax dollars until his kid goes to war then that kid's a hero until he come back wounded and needs help, then that kid is forgotten untl the next time they need a body for a parade.
How does this help us win elections?--Rush sure as hell ain't!
Just curious. . . .
Huh?
For Rush to matter in terms of winning elections, the GOP would have to listen to him in the first place.
Yeah, who the heck are public
Yeah, who the heck are public employees if not the "enemy who is easy to ... attack."
It's not like those worthless bums pick up our trash, keep our water safe, police our streets, fight our fires, ensure buildings are built safely, or anything else that benefits anyone ... off with their heads! Those firefighters who ran into and died in the Towers? Just another worthless bunch of freeloading enemies!
This seems to be a common GOP approach. Rather than identifying the specific problem in a system and taking steps to address it e.g., better oversight of management of the retirement funds, you light the torches to march on the 'enemy' of the day. Real tough guys.
I assume you'd do away with public employees for these services and privatize them. So can you at least provide links to documentation that every government service can be provided at lower cost and with comparable effectiveness by the private sector? Or is it simpler ... are you just suggesting that your enemy be paid slave wages and given not a dime toward retirement? Or, will you be brave and tell us how we can and should do without all of these things unless we're wealthy enough to hire our own police force, fire fighters, etc.
It seems to me that the real 'enemy', if there is one, are incompetent elected officials who agree to these contracts and then fail to hold people accountable. But no, it's not the elected officials who are supposed to be managing these functions who are the enemy ... it's Tom the Trashcollecter. Because, of course, there could be some GOP officials on the city council that ratified these contracts or failed to monitor them, and they certainly aren't the enemy!
I'm truly curious ... when you see a policeman on the street or the meter reader for city water services, or a building inspector, do you actually look at those people and see an enemy in the commonly-understood meaning of that word? Not a member of your community, or a person doing the job they were hired to do, at the pay and benefits they were offered, as all employees are? Do you really see them as someone on the order of a terrorist or a murderer?
I'm okay with hearing you truly do look at these people and see enemies. But if you don't, what's up with the militaristic language? It's a prevalent tone in GOP communication but it always strikes me as so much faux posturing and ridiculous overstatement that it's hard to take much that's said seriously.
Honestly
Cops and Firefighters (and the military at the Federal Level) are part of the legitimate functions of govt. All other public employees (and yes, that DOES include teachers and nurses) can go Blagojevich themselves.
It sounds as if you're
It sounds as if you're fortunate enough to have a reliable private water supply, dispose of your own refuse (or have private arrangements for disposal) and live in an area with private-sector building inspectors who would never be tempted to sign off on shoddy construction. You do indeed live in fortunate circumstances.
Unfortunately for me, I'm a city-dweller without access to a private groundwater source who is hostage to my city for water services. Well, I guess I need to admit I could do without city water if I had the inclination to lug several hundred gallons a month home for the store for my family's use. My city also seriously frowns on tossing my garbage onto my neighbor's property or burning it on my patio. At least you approve of police and fire services being handled by government, so I'm lucky there; if I set my patio on fire burning the garbage or the city feels inclined to cite me for doing so, there'd be no problem with public funding of the people to put out the fire and cite me into court.
Does this shed any light on why city-dwellers as a whole are probably less inclined to view the garbage collectors, city water workers or building inspectors as the enemy?
Teachers, I can go along with you there because I do see education as an area where competittion brings benefit. And you'd probably be hard-pressed to find even many Dems outside of those who benefit directly from teachers' unions who would disagree with you. But 50 competing water providers? Not so feasible.
Nurses? I don't have a problem with my county employing a few nurses to handle vaccinations -- I'd rather that than face the likelihood of nasties going around because some people can't afford to pay privately for them. Yeah, we could close down the county hospital and save that money, but we'd all just pay for it indirectly anyway; those without insurance would just show up at another hospital and the costs would get passed along in higher charges to insurance companies and paying patients. Yes, it truly sucks, but that's where we're at. I can't help but think we're better off paying for the county hospital than filtering the overhead through a hundred insurance companies.
Of course we could also look at seriously overhauling our health care system but I know you're not going to agree with that. I understand your ideological disagreement but what I can't understand is how we're ever going to get out from under the perversions in the current system short of ordering doctors to ignore their oath and be willing to let people suffer and die on the steps of the hospital after they're tossed out if they can't pay. Tough choices ahead.
Not all in the same boat
The police and firefighters have their own unions.
I believe the problem here is the AFSCME, the AFT, and the postal employees. These three offer very high wages (compare what a public school teacher makes against parochial school wages) and very generous benefits packages paired with a minimum of output and very little accountability (if any).
I, myself, am a member of a trade union with a defined benefit pension.
I don't get paid holidays or vacation (in most locals, a percentage of 4 - 10% is usually deducted from the gross wages and held in a savings account at a small local bank that has an agreement with the local as a vacation account). If there is a lapse in insurance coverage, I have to work 500 hours before my insurance is active. For any lapse in employment, I have to work 150 hours before the insurance becomes active.
Currently, $8.90/hr goes toward insurance, and $6.33/hr into the pension.
At 20 yrs, I can claim a pension with half benefits. At 25 yrs, it is 3/4 benefits. Full benefits at 30 yrs.
This is done because not everyone is going to make it to a full 30. Looking at the injury reports, I can see that my trade is usually #3 in injuries on any job site. The boilermakers usually have twice as many, and the ironworkers a little less than that.
Still, I can't think of any reason why the AFSCME, the AFT, or postal employees should receive even boilermakers' wages. When teachers start getting their legs broken on the job on a regular basis, maybe. When postal employees start losing a few fingers, maybe. Until then, these people are over-paid and under-worked.
most teachers are only paid eight months out of the year.
they do odd jobs the rest of the time (retail workers, painters, etc.)
What sort of accountability exists in your union?
I can kinda see what you're saying.
But the average teacher salary is: $51,009, which doesn't seem unreasonable to me.
Not even close
I've seen the pay scale from a job fair for teachers in St. Louis Fall '08.
Think of starting pay from $52k - $54k / yr for a first-year teacher.
And that's PER YEAR, meaning in those eight months in which classes are scheduled.
http://www.aft.org/salary/
you know, the one where they list private schools as well.
This is the same schick as why physicists get paid more than doctors -- doctors like teachers live out in the sticks, and though they may be high income earners out there, they don't make nearly what people do in the city.
This is a cost of living thing, as well as the cities being able to afford to pay more (and possibly giving teachers more students, dunno).
Average cost over America really shouldn't equal St. Louis pricing, wouldn't you think?
Don't see as it matters
The wages are too high.
The benefits are overly generous.
Their pay comes out of property taxes.
They are a drain on society.
And, for the record, No.
Compare the pay of teachers in the New Orleans area. Big major metropolitan city.
okay. I know, we can have teachers work for free
Just let the kids teach themselves! It'll all work out fine, it always does!
$40,000 is less than most industries make. On what grounds do you say that the wages are too high? If you'd rather have fewer teachers, by gaw make that point! Yeah, we can have 60 student classrooms, where every student learns by rote...
If you truly believe that teachers are a drain on society.... I pity you and your children.
Since you asked...
On what grounds do you say that the wages are too high?
On the grounds of what I had seen in those two years that I was a tax preparer.
A legitimate starting wage for a first-year teacher would be around $32,000.
Now, count it (just because you love teachers so much, even when they steal from the kids in their class).
That's $32,000 per year; so $16,000 per semester; so $5333.33 per six weeks; so $888.89 per week; so $22.22 per hour.
That's a fair wage.
At $50,000 a year for a FIRST-YEAR teacher, that's $34.72/hr. Unrealistically high, except for NY or LA.
I would, however (since you love averages), be open to the option of paying St. Louis teachers 2/3 the exact average of all workers in St. Louis (unless they opt to teach summer school, of course).
see? now we're getting somewhere!
I think we're seeing some artificial inflation, in that not all teachers can teach summer school, and they can't find anything near a good wage for a third of the year (nor, probably, health care, if it isn't provided by the district for the entire year).
I'll give you that 50k is unrealistic for a first year teacher. Why not just have the kids go to school the whole year, and keep the same wages? That'd make the whole thing a lot more fair.
(and I'd want to see an age distribution on "all workers in St. Louis" and want it to be based not per worker, but per hour (as many low income folks are part-time, and it seems unfair to count them MORE than the higher wage earners), but otherwise, it sounds about decent -- of course, we all know how things really work, and that there would be a sliding scale based on age or years-teaching, but in an ideal world!)
Isn't that the free market though?
I mean, I could be wrong, but aren't unions powerless unless a company agrees to their demands? And if the company DOES agree, then why hold it against the union?
Public sector defined-benefit pensions should be abolished
They are far too dangerous to leave to civil service unions and their pet politicians to "negotiate". Better to give the employee a 401K-style plan, with immediate vesting so they can quit or be fired without threats to their retirement. Sure, it means that the employee may blow it in the stock market, but the pension fund can do the same thing.
Also, getting rid of civil service pensions may go a long way to getting rid of the lifer, time-server mentality that persists in much of the bureaucracy.
Our government structures are left over from the early 20th century, and haven't changed since Roosevelt, while business structures have moved on. Little wonder that bureaucrats haven't a clue about business...
Those are all good
Those are all good suggestions and points. Your proposal would not require the demonization of your average garbage collector, just a rational argument that we can no longer afford extravagant contracts for any worker.
I don't know why the GOP mocks Rahmbo's thesis about not wasting a good crisis. I think he's absolutely right. Now is the time that every last employee, public and private, knows the ax could fall at any time. Now is the time that a pol with a spine, of any party, could convincingly advocate for cost-saving measures as a way to save jobs. Now is the time that it wouldn't require pitting 'us' against 'them' to win concessions-- we're all equally threatenened.
My argument was with the OP's idea that the best way to pursue major changes is to 'imagine' workers as the enemy (strong word, that) -- while letting elected officials off the hook for agreeing to ridiciulous contracts in the first place and failing in their public duty to competently manage the retirement fund commitments.
True - But difficult
Many of my friends work in the private sector and are outraged as we see the unions secure large defined-benefit plans for their members. We all know plenty of retired teachers in their early fifties; I have plenty of them in my family.
But, when you read above you see the emotional cover that they can get. If you are against the outrageous pensions you are an insensitive brute out to destroy the middle class.
For the GOP to succeed they have to be able to explain the tremendous, bankrupting transfer of wealth that is going on and somehow pierce that shield of "you hate working people". If you think about it, "making work pay" should have been a GOP slogan. But, somehow the left has managed to convince a large number of people that they are truly looking out for the working guy.
A GOP attack on union leeches always seem to backfire despite the inherent logic of it. This emotional connection: "you don't care about the guy taking out the trash" seems to be politically potent. Also, remember, the unions are the best at GOTV, issue calling, etc. This is a classic game theory problem. They are a relatively small % of workers (10% or so) who have a very strong direct incentive to get their "rent". Their beneifts are borne by the other 90% of people who's loss is not as large as the union member's gain (on an individual basis).
Hence, we are fucked. This country will wind up like Boliva in the end.
yawn. i'm just waiting until you
start collecting the public dole, like the rest of the republicans.
then This land is your land, will make more sense to yinz.
GOP policy weakness writ small
Soren deserves our thanks for so clearly illustrating one of the fundamental weaknesses of the conservative movement at this moment in its history.
Americans in every walk of life are today faced with serious concerns about their retirement. Soren's answer is to find a way to pit one group of Americans with these worries against another group with these worries as if such a contretemps addresses the actual problems either group is facing.
Those of us who would seek a role for conservative principles in the future governance of this nation must reject this kind of thinking. We need to address the underlying problem with creative and effective conservative solutions. That's the only way we will win enough votes to govern. That is the only way we will deserve to govern. And, most importantly, it is the only way we will govern effectively.
Vote for the GOP, we'll make sure public sector workers have retirement packages as inadequate as private sector workers. 2010 here we come!!
Indeed. the GOP is in quite a
Indeed. the GOP is in quite a pickle.
It isn't just the GOP - it's the whole society
And the problem is ultimately due to a "good thing" - life expectencies have gotten longer and longer, to the point where people alive at 50 can expect to live to see 80+, and often 90+. The problem is defined-benefit pension arrangements were based on the idea that most people die before collecting the pension for very long - if at all.
A defined-benefit pension is a lifespan wager, just like an annuity. If the worker wins, he gets a nice long revenue stream. If the worker dies, his family gets nothing.
This gets particularly icky for governments because politicians have a powerful incentive to agree to anything to keep the union happy, but no incentive to balance the books until things look likely to fall apart on their watch. Detroit has much the same problem, but unlike Detroit, governments have a captive audience to farm for revenue (or so they think).
Add to this the process of "double-dipping", the ability to start collecting a pension before age 60 - meaning the pensioner may well draw the pension for longer than they actually worked in the job - and the ability to roll overtime into the "salary basis" used for the pension calculation and you've got a disaster.
People hate hearing it, but the only solution is that if you live longer, you have to expect to work longer - and you'll need to save lots of money. Society simply can't afford to have numerous people collecting pensions for 30+ years of their lives.
To all Conservative bloggers
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I am not really clear...
...on how the courts can force tax increases on to the people.
I am under the impression that when a state signs a contract, particularly a labor contract, it does so with the understanding by all parties that if the people fail to support a tax increase, the contract is null and void. This is simply one of the hazards in dealing with a state agency
ex animo
davidfarrar