Public Pensions are Eating Tax Payers alive...

[soccerluvof4]

Will be interesting down the line how Pensions and Student Loans will be addressed.  Big issues coming IMHO.

http://www.bostonglobe.com/opinion/2014/03/22/public-pensions-are-eating-taxpayers-alive/TcWFHYnvzCZMe4nUEZdD3J/story.html?s_campaign=sm_tw 

[Beridian]

Very interesting article.  What I take away from the public sector pension crisis is the peril we face when we ignore what our politicians are doing in office.  What this situation essentially comes down to is that politicians who may have only been in office a few years granted generous pension benefits that would last a lifetime.  Most voters were oblivious.

If there is a positive element to this crisis, it is that attention will be called to what our politicians are agreeing to behind closed doors.  I say the same thing about the affordable health care act, say what you will about the effectiveness of the act, but at least now people are more aware of the health care crisis and are becoming educated.  Sad thing is that many communities are getting pummeled as the voter progresses in their education.

[dude]

One major problem with many of the state and municipal pension systems is that those governments did NOT fund those pensions systems like they were supposed to, with current dollars.  But yes, many are simply too generous.  Employees should not be able to boost their retirement income well beyond their base salary by working a ton of OT for the last three years of their career.  That makes no sense.  Or see the recent case in CT where a 67-year old friend of the governor has been nominated for a judgeship, said judgeship subject to a provision of the statutes that rewards any judge retiring at age 70 with 2/3 of their salary as a lifetime pension.  So this judge, making $150,000 for only three years of being on the bench, will get a $100,000 pension for life.  That is beyond ridiculous.  Note -- I am a FERS employee; I am grateful for what I think is a nice pension benefit, but it is nowhere near what these state and muni employees are getting (I'll get @ 34% of base salary for my career), and it is fully funded (and expected to run surpluses through 2094 or so).

Also, read this to get another view of what's going on with these public pension systems:

http://www.rollingstone.com/politics/news/looting-the-pension-funds-20130926

[MrFancypants]

Don't make promises you can't keep.

If you make promises, and support the politicians who do, be prepared to make sacrifices to ensure those promises are kept.

[Another Reader]

Public pensions were largely considered overfunded during the run up of the late 1990's.  That encouraged the expansion of benefits.  Pension funding calculations vary over time.  This year they are underfunded.  Next year, the actuarial and rate of return assumptions may change, and they may suddenly be overfunded again. 

Politicians are always looking for money.  They have been working on this source for a while now. 

[CommonCents]

Don't make promises you can't keep.

+1

From a personal perspective, let me say I'm a public employee, and that these benefits are not as cushy as they seem.  I took this job, rather than one that would pay me 70%+ more, before any bonus, because of the benefits.  (I could in a biglaw firm earn 300-400% more, but the hours aren't comparable.)  I won't get social security (despite having paid into it for 10 years) or will only get a very reduced sum from what I'd have been entitled to if I never took this job.  And, my pension isn't indexed to inflation.  I'm going to be pretty pissed if the govt suddenly renegs on their promises to me after I've worked here for a while. 

Yes, some are cushy (though my state, MA, is cited as lower).  They should perhaps considering cut benefits in those states to new employees.  But the issue is likely past underfunding.  And if you cut benefits so benefits+salary, are significantly below private sector, you'll get the workers you're paying for.

[smedleyb]

And here I thought the one trillion dollar a year military budget was the problem.

[MrFancypants]

And here I thought the one trillion dollar a year military budget was the problem.

The problem with the trillion dollar a year military budget is insanity like keeping tank factories open after the Army declares that they have more than enough tanks, or not consolidating capabilities and closing installations as the manning used to run those bases is reduced, or not letting the Navy retire super expensive ships that are no longer necessary, or etc. etc. etc.

Our problems with the military budget basically all boil down to legislators not wanting to go back to their district to report that thousands of military industry jobs were lost.

[Gin1984]

And here I thought the one trillion dollar a year military budget was the problem.

The problem with the trillion dollar a year military budget is insanity like keeping tank factories open after the Army declares that they have more than enough tanks, or not consolidating capabilities and closing installations as the manning used to run those bases is reduced, or not letting the Navy retire super expensive ships that are no longer necessary, or etc. etc. etc.

Our problems with the military budget basically all boil down to legislators not wanting to go back to their district to report that thousands of military industry jobs were lost.

Even if the entire military spending was stopped, it would not balance the budget.  We need to look at EVERYTHING and find ways to cut that hurt the american people the least.  Unfortunately, that would take time and cooperation.  That won't happen in today's political climate.

[NewStachian]

"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."

There is no single problem. But, one of the major problems is the American people vote on what gets them the most amount of benefits. This, in turn, incentivizes congress to get votes by getting as much as possible for their constituency. Personally, I am a gov't contractor and military reservist. I fully support and would vote for budget reductions that would lead to lower pay, loss of job, or lowered/eliminated benefits for myself. That's what's great about being Mustachian and not needing those paychecks. For those hooked on consumer spending, as we all are well aware, they require those benefits.

However, I also don't think it's my job to voluntarily reduce my own benefits. First, that's not acting in my own best interest, and second, it would mask the problem. Here is a trivial example: at work we have a shared drive that frequently gets full. When it does, an email goes out asking people to delete things. Those who are good employees delete most of their files. This is a short-term fix and before you know it, the drive is full again. Now, the good employees have nothing on the drive and the bad employees have used up all the resources. That's a very basic example, but shows that policies need to be put in place to make sure the system is healthy and operational. If you rely on benevolence, you will get a disproportionate distribution and a broken system.

It sucks to say, but the politicians are really setup for failure in this situation. To not get fired from their job, they need to please the people (us) who are overwhelmingly saying "my life is hard and i can't get by myself because I am a consumption addict". Any politician who says "No, we are over-consuming and need to spend less" looks great until the voters see that they're getting less and say "wwhooaaa, you can't reduce MY benefits." and he/she gets voted out.

No matter how you slice it, it comes down to our country needing an educated, responsible voter base. If anyone has any ideas on how to make this happen PLEASE let me know lol.

[TheDude]

Even if the entire military spending was stopped, it would not balance the budget.  We need to look at EVERYTHING and find ways to cut that hurt the american people the least.  Unfortunately, that would take time and cooperation.  That won't happen in today's political climate.

I don't disagree that we should look at the entire budge but being that the 2013 deficit was about 680 billion and we spent about 681 billion on defense it would indeed balance the budget.

The study that article links to is interesting. The average for CO is 1.2mil. That's pretty crazy. My wife is part of the state pension plan. There is a reasonable chance she takes out closer to 2mil (at todays dollars).