Pensions like it's 1999: Good Start

If there was one moment that foreshadowed California's long, sad descent from multibillion-dollar surpluses to deficits as far as the eye can see, it was that day in 1999 when the Senate approved legislation to increase pensions for state workers and opened the door for even bigger retirement checks for local employees.

The discussion on the floor of the Senate took less than one minute, and it was tragically myopic, focusing not on how the bill would affect employees generally or on what it would cost the taxpayers but on the goodies the measure would grant to the Legislature's own security force.

The few lawmakers who cared were told that the bill, SB 400, would essentially be free. The bigger benefits, the experts said, would be paid for by a surplus in the retirement fund. With that assurance, the bill passed on a vote of 39-0 and was sent to Gov. Gray Davis, who promptly signed it.

Now Gov. Arnold Schwarzenegger is asking the Legislature to return pension formulas for newly hired state workers to where they were before that bill was enacted. The governor's proposal, because it cannot apply to current workers, won't help balance next year's budget. But it is still a good idea.

As California goes through the financial mess, just think what's been created with pensions - the vote on SB 400 in 1999 basically increased pension payments, based on an excess of funds in the pension reserve - but market crashes wiped out that excess, plus. Now, how stupid are the reps for thinking that this was a free deal, so it passed 39-0?

Also, the private sector has virtually eliminated guaranteed pensions but CA governent and probably Federal Government continue to offer guaranteed pensions - 100%. What's up with that? In addition, State workers are probably well taken care of on the health insurance side at retirement. Can we afford this?

We are so screwed at so many levels in America.

The problem with the idea of pensions and healthcare for retired workers is that the money isn’t budgeted and paid for at the time the services were rendered- even though its years or decades before this deferred compensation is actually received.

Pensions and healthcare are a huge part of the compensation that the people bargained for when they agreed to work.

Politicians screw up by delaying these payments so the whole costs of the pensions and healthcare fall on their successors. The idea of actually paying as you go would mean tax increases or budget cuts elsewhere that they are uncomfortable at making. Its just easier to pass the buck and let the next governor/legislature deal with it.

[I]n 1999 . . . the Senate approved legislation to increase pensions for state workers

I bet that the best and brightest Bee brains complained that it was not enough, that government workers lagged way behind the greedy private sector and the private sector needed to pay their "fair share."

Thank God I’m a federal employee with a federal pension and lifetime health care. States have to balance their budgets, so they have to raise taxes and/or cut benefits for their employees. The federal government can just print more money.

The idea that pension benefits cannot be changed for existing state workers is ridiculous. Pension benefits are just compensation. If an employee’s salary can be reduced, so can his pension benefits.

Here is a clearer to think about pension benefits. Employers contribute to these benefits based on actuarial computations. To continue the current level of benefits, employer contributions must be increased substantially. Continuing current pension levels is actually a large increase in compensation. Public employees across the country are demanding large increases in compensation during a severe economic downturn. Public employees are disguising their calls for increased compensation by insisting that they just want the status quo. The status quo requires a large increase in employer costs. Thus, public employees are demanding large increases in compensation.

State legislatures across the country must declare fiscal emergencies in their pension plans. Benefit levels must be reduced for existing employees as well as new employees. Benefit levels must be reduced to be consistent with existing employer contributions (in many cases 15% or more).

Of course you’re right, but I was thinking more of pension plans like that here in the City of Pittsburgh.

The Pittsburgh government has more retired workers than they do active ones- and unfunded liabilities of more than $400 million. The deal was already struck, and the police work, garbage collection and paper shuffling already done.

For future work that’s performed- whether by new or existing employees, a new bargain can certainly be struck and should in many circumstances. But the problem that governments have is that they don’t make the employer contributions when the work is done.

The benefits for retirees should be reduced also. Many private pension plans have gone bankrupt. When the PBGC takes over a plan, the benefits are substantially reduced for retirees and the plan is terminated for existing employees. State and local governments will be forced into bankruptcy over their pension plans. Higher taxes and regulations at the federal, state, and local levels are crushing economic activity leading to less tax revenues, not more tax revenues. A day of reckoning is coming.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.