Posted on 06/06/2008 1:16:34 PM PDT by shrinkermd
Vallejo, Calif., took the extreme step of filing for bankruptcy to get out of generous obligations to public employees. Other cities and states are watching
The jig is up. For years, politicians have been playing what amounts to a multi-trillion-dollar shell game with state and local pensions. They've doled out lush retiree benefits to their heavily unionized workforces, knowing that they could shove the cost for those benefits onto future generations of taxpayers.
But a recent financial bombshell dropped by a San Francisco suburb shows why that shell game is now starting to unravel in a nasty way. And it's a cautionary tale that you can't afford to ignore.
...But the real nail in Vallejo's coffin was the city's labor costs. Under the current labor agreement, the average police officer walking the beat in Vallejo will be paid $122,000 this year before overtime, according to city documents. An average sergeant will make $151,000; a captain, $231,000. The average firefighter, meanwhile, will bring in $130,000 before overtime.
...So a Vallejo police sergeant making $150,000 a year can now retire at age 50 and receive an annual pension of $135,000, increased each year for inflation. To put that amount in context, you would need to amass a retirement nest egg equal to about $3.5 million to produce a similar retirement income on your own.
...But that no longer seems to hold true. According to the federal Bureau of Labor Statistics, the hourly salary (before benefits) of public-sector professionals (including teachers and lawyers) was $31.51 in December 2007, virtually identical to the $31.75 for private-sector professionals. Public-sector service employees (including many blue-collar jobs) averaged $16.72 an hour in salary, compared to $9.87 for private-sector employees.
(Excerpt) Read more at money.cnn.com ...
Notwithstanding this failure, count on the overwhelming majority of public employees to vote RAT.
Pensions are ridiculous, top-heavy payments that must collapse of their own weight.
My teacher wife’s pension is considerably larger than my pension(s) at twice her salary.
Sounds like cities should raise taxes to “invest” in their employees’ future. Watch your wallets on this one. This is the mother of all underfundings. Liberal mayors and councilmen paying their liberal friends for public sector job programs. Did you know your city work force was a job program? In Atlanta, they “couldn’t bear to lay off workers because those people NEEDED their jobs”. I guess taxpayers don’t NEED their money.
Pensioners getting screwed is just a taste of when Social Security and Welfare checks become unredeemable.
Holy hell will break loose on that day.
Cut salaries, end pensions — and introduce the real world to our “civil servants”...
Let them save their own money in a 401k or IRA as the government and private industry has told the “rest” of us to do......
While we’re at it — END “Civil Service” Unions.....
there is no way to actually pay for the many promises made.
That IS the liberal dimwitted way of doing things then why not TAX the $hit out of the middle class to pay for them. Liberals are too stupid for this life.
bump
Medicare is going to fail first. Future benefits will consist entirely of a coupon for $1.00 off a bottle of chewable Vitamin C tablets and a booklet from the Surgeon General entitled "Ten Tips for the Positive-Minded Octogenarian". ;)
But, not before they bring down taxpayers with ruinous tax increases necessary to support the gold plated pension plans, which are relics of the 1950s when people did not live 20 or 30 years, or more, on a pension, after having worked as little as 20 or 25.
Vallejo, Calif., took the extreme step of filing for bankruptcy to get out of generous obligations to public employees. Other cities and states are watching
The jig is up. For years, politicians have been playing what amounts to a multi-trillion-dollar shell game with state and local pensions. They’ve doled out lush retiree benefits to their heavily unionized workforces, knowing that they could shove the cost for those benefits onto future generations of taxpayers.
CAN ANYBODY SAY SOCIAL SECURITY AND MEDICARE ??
PROBALLY THE LARGEST “LEGAL” SHELL GAME PLAYED ANYWHERE IN THE WORLD.
“...So a Vallejo police sergeant making $150,000 a year can now retire at age 50 and receive an annual pension of $135,000, increased each year for inflation. To put that amount in context, you would need to amass a retirement nest egg equal to about $3.5 million to produce a similar retirement income on your own.”
The coupon rate of the 10 year treasury is now 3.875%. This is often used as the bench mark for a conservative return.
This makes Social Security and Medicare look like piggy bank problems.
The jig is up for you!
Once the public employee unions have to live under the same economic rules as everyone else, we might actually see an America with shared interests again rather than a balkanized collection of quarreling interest groups.
Most government sponsored pension funds are extremely limited in their investment options through regulation.
Low yeild, low risk equals safety of principal. In today’s
market, a 3.8% money market return would be on the high end.
Typical politicians — instead of sucking it up and either paying the cost of labor or figuring out how to make do with less, they promise lavish pensions and leave the problem of how to pay for it for somebody else after they’re long retired or dead.
It's not nuclear physics, it's common sense. Some day you run out of suckers.
There's a saying in the oil business which states that the "cure for cheap oil is cheap oil". That is, demand will eventually cause prices to rise.
Likewise, the cure for socialism is more socialism; it is simply an unsustainable proposition. Let RAT employees drive government bodies into bankruptcy - they will never live to see these exorbitant benefits.
This will all end as it must. The unions have lost their power for all intents and purposes and what happened in Vallejo will spread far and wide as a wake up call to the unions as well as the towns and cities across the nation
That would solve the SS/Medicaid/Medicare problems. Zero future liability.
Looks as if the jig is up.
The rate of return, compounded over the last 10 years, varies from 5.12% to 8.53%. There are also the “lifetime” funds that combine the five principle funds to vary the risk with the expected length of the investment.
Because the RATs will continue to promise to bail them out with Federal money to be extracted from those insensitive greed heads who work in the Private Sector.
“sounds like cities should raise taxes...”
Why bother? They know the US taxpayers will bail them out.
Are they freaking serious? $150K a year to be a policeman? Those salaries are triple the national averages! And 130k to be a fireman?
I grant you, these are important positions, but they’re just way overpaid there. These are relativel low-skilled positions that can easily be filled. Our police departments around here are brimming with applicants. Must be some very, very powerful unions to pull off that kind of salary.
San Diego may be next. It just came out that city employees currently will get 110% of their salary on retirement, and they’re bitching that it is not enough.
Mayor Sanders wants to put it up to public vote, and the unions are crying foul, and saying “how can you expect people to work 20-30 years for the city, hauling garbage or fixing streets if you don’t offer bennies like these.”
Id like to know of any private sector pension that pays over a 100% of the workers wage on retirement.
The key to the assumption is "risk free". The closest thing to "risk free" are Treasury bonds.
Scary article. Unfortunately, its probably spot on. All the more reason to stock up on the ammo and buy precious metals.
This type of irresponsibility on the part of true democracies is well known and predicted. For centuries, political thinkers have known that the great weakness of democracies is that they spend themselves into oblivion.
The 401k and other pension funds of the frugal make a tempting target for the improvident.
I grew up in a small town, with average homes costing well below the state median. Dept of public works employees are retiring with $80k+ pensions and nearly free health insurance for life. The town is going to have to declare bankruptcy in the near future once the long term employees of the baby boomer generation retire, UNLESS the US dollar devalues at a rate greater than the contracted official inflation/cost of living rate their pensions are tied to. That town is in less trouble than many other nearby towns.
So either the Fed cooks the books for now until the last of the Baby Boomers retire and let the US Dollar drastically lose purchasing power, or the township will be paying something like 2.5 times the current costs of retiree pensions and medical benefits, which will bankrupt the town. The devaluation worked well for Russia’s elite in 1998. I expect the US to attempt something similar.
“The key to the assumption is “risk free”. The closest thing to “risk free” are Treasury bonds.”
Any taxpayer funded job should not be allowed to unionize. If the “employer” Government is treating employee’s unfairly, they employee can vote the employer out of office... in theory.
of course they vote Rat...why shouldn’t they?....where else but in America can you work ANY govt job and get nearly your wage or more upon retirement...and we ain’t talking no 40 yrs....we’re talking 20 or 25 or 30......
Stay tuned! :-)
They've already figured out how to raid that henhouse.
What do you think 10-15% inflation does to one's portfolio?
This morning on National Politburo Radio, they had an author that spoke of how GM’s huge pensions are killing them, and they knew this was coming 30 years ago. The author’s solution? The Federal Gubmint should take over all pensions and health care.
Of course, National Politburo Radio enthusiastically agreed.
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