How do we persuade others that pension funding matters, when our parents and grandparents were just fine with pay-as-you-go? Published by Jane the Actuary View all posts by Jane the Actuary
14 thoughts on “Forbes post, “Public Pension Funding Crisis: Why Should Today’s Workers And Retirees Pay The Price?””
Jane, not all states approach the underfunding in police and fire departments the same way. Colorado addressed the issue in 1978. Coloradoâs Fire, Police Pension Association is over 97% funded as of January 1, 2019. Contributions are made by both the member and employer. Currently, employers contribute 8% of pensionable pay and the employees contribute 11%. By 2022, the employees will be contributing 12%.
Excellent article. I have been writing on this topic for years, but from the perspective of NJ where I served on two commissions study the problem. The essence of the issue is simple. Politicians want union support so they agree to generous benefits which are unaffordable. Then they refuse to fund adequately or tell the public the truth about what taxes are needed. As you say, now, who should pay? We all know the answer; taxpayers directly or through cuts in other services. On average public employees have a total compensation package in excess of that for the citizens footing the bill. Why?
As a member of NJ pension, I can assure you numerous steps have been taken to reduce pension payouts and benefits to newer generations if state workers. This is evidenced by the multiple tiers of requirements aligned to the increasingly diminishing benefits. For example, no State contributions are made to retirement health insurance for pensions with less than 25 years of service. Can you tell me of any reductions or changes made to Police, Firemen or Teachers pension benefits? Or to address the double dipping of police, firefighters and teachers (because of early and ‘disability ‘ retirements), when these groups simply transfer themselves to new additional pension entitlements? Or address the egregiously inflated pensions based on overtime payments? You need to know that the average state worker is not being overpaid (not a few NJ teachers, firefighters and police make $100k+!). The title of your article is not only inflammatory but downright misleading. Grow up, get the facts – that’s what journalism is about.
It’s not misleading at all. Even after changes by NJ the pensions and retiree medical far exceed the private sector, where virtually no one has a pension. And there are about 1,000 teacher in NJ who earn $100,000
It’s clear your ‘pick and choose’ rationale cannot pass the red face test. Conveniently, your statement refers to medical & pension benefits ‘that far exceed the private sector ‘. What about the salaries, which are approximately half that of private industry? What about annual bonuses – they are non-existent to the average state worker? By the way, did you get the day after Thanksgiving off? My state office closed down one hour earlier. What about your holiday party? My local town offices were closed (without notice) for THREE HOURS on a Friday for their ‘staff event’. Did your office pay for your holiday festivities and were you excused from work – 2, 3 hours, a half day? Just so you know, our office potluck was organized by state workers and held during our lunch hour. Your sanctimonious assertion that your arguments were not misleading – borders on fraudulent misrepresentation, and seeks to play upon misguided notions of who should pay. You should know, I have a pension from a former (private) employer where I earned many times what I make as a state worker – and I paid ZERO into this pension plan.
Is there a good reason for publicly funded pensions for police, fire, and elected/appointed government? 401k would be just fine. Not MY responsibility to fund a $100,000 a year pension for a fireman, etc. Just phase out as of a date, purchase annuities from the lowest cost bidder!
Some promises can’t be kept. Contract law offers certain defenses such as impossibility of performance. Unions (give the devils their due) had the foresight to declare that pensions were “contract rights” then courts interpreted the phrase to forbid reductions during the workers’ tenures. Bankruptcy is the best way out, but in places like Illinois the union-elected governor and legislators won’t give consent. I don’t think that unions have the power to negotiate for retired members and there is little incentive for individual retired employees to negotiate. The tax rivers are running dry and the aquifers are emptying. Like climate change and gun control, public employee pensions are difficult or impossible to solve in a democracy that is only moderately corrupt. Voters are likely to favor their self-interests and preserve their expectations — and it’s hard to say that pension expectations are without foundation. Moreover, there is no evident collectable wrong-doer. I think actuaries are highly culpable for not blowing the whistle on discount rates, etc. but their engagement letters with liability limitations will likely hold up. Bankrupting an actuarial firm is not likely to restore much to any pension fund. Similarly culpable are CPAs, lawyers and other “guardians” who have bent over on command to maintain their own revenue streams. And what venal politician has resources to pay a judgment for mal-administration? NO, I don’t have a solution that doesn’t require cutting benefits and YES some peoples’ legitimate expectations will not be met. Lawyers will prosper but probably to a lesser extent than consulting firms. It won’t be fixed in 1000 days and probably not during the next decade. Those already retired will continue to feast at the banquet table until the money is gone from the trusts. Pay-Go will be the only choice and that will be chaotic as all the entitled people fight over limited resources. But do keep trying.
I’m a public employee in California and expect to get a good pension but not astronomical. Politicians bend backward for police and firefighter unions who get the highest pensions.
The police and firefighters will be needed to control disruptions and riots when teachers’ and others’ pension funds run out of money — the first pensions, historically, were paid to soldiers. In all national pension systems, the army gets taken care of before everyone else. The systems are going broke and bankruptcy is likely but they’ll find some way to pay for public safety (including the retirees).
Ironic because in France lately, police have been clashing violently with firefighters and other workers over …pension reform.