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Public Pension Crisis: Two options remain -- Implosion or Reform

Neomalthusian said:
A pension is a pension. It's funded by contributions from plan participants. Plans whose past participants refused to contribute sufficiently to fund the benefits are the ones that typically have major funding problems today.



Unless plan participants (which includes employee contributes matched by taxpayers) put enough money into the plans, then the benefits "intended to offset the low wage" was a scam. You got scammed, and you participated in scamming yourself by not deferring enough of your pay into the plan.



Unfunded pension liabilities amount to theft, unless benefits are cut commensurately with any general tax bailouts needed to address the funding crisis.



Shoring up the pension requires a grand bargain, i.e. a tax bailout coupled with benefit cuts. Another possibility would be an age-based tax or contribution (i.e. the older you are, the more you pay). There is a reason older people need to feel a significant share of the pain. That reason is that they were the ones who got too much of a tax break by underfunding the pensions decades ago.
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A pension is deferred wages, and not delivering on the agreement is wage theft. I understand that you support breach of contract and wage theft, and I look forward to reminding you of that every time you make the mistake of quoting me.

Fund the pension and honor the commitment. At the very least, don't sabotage a solvent pension like they are trying to do in my state.
 
iliveonramen said:
The fact is, a lot of government jobs pay less than private sector. The benefits are what typically offset the pay cut.
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Nonsense. Public employee pay is generally higher (except for those at the very top) than priavte pay (for the same eductional level) as well as receiving more in benefits

CBO broke out data into different categories of educational attainment. Federal employees with bachelor’s degrees as their highest level of education earned an average of 5 percent more in wages than their private sector counterparts, 52 percent more in benefits and 21 percent more in total compensation.

Federal workers with a high school diploma or less earned a 34 percent more in wages than those in the private sector, 93 percent more in benefits and 53 percent more in total compensation.

However, federal employees with a professional or doctorate degree earned 24 percent less in wages than their colleagues in the private sector, while the cost of benefits was about the same. Added together, total compensation for these workers with advanced degrees was about 18 percent less than those in the private sector.
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https://m.govexec.com/pay-benefits/...ompensation-gap-has-widened-cbo-finds/137324/
 
ttwtt78640 said:
Nonsense. Public employee pay is generally higher (except for those at the very top) than priavte pay (for the same eductional level) as well as receiving more in benefits



https://m.govexec.com/pay-benefits/...ompensation-gap-has-widened-cbo-finds/137324/
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Compensation is very different than a salary. While working through my masters I had a government job. When I looked up my compensation it said my total compensation was twice my salary. When I graduated and made twice my salary...it was pretty obvious.

Compensation includes everything and puts a dollar sign on it. If you are a family with a kid that needs to see specialist you are using that health insurance to the max and getting that compensation amount. If you are a single guy that works out and doesn't really see the doctor except for a yearly check up....that big health insurance number means nothing to you. Same with things like life insurance, dental etc.


Also, the way they account the pension needs to be looked at as well. Are they counting how much your employer puts in for the pension or the entire benefit of the pension assuming you work 30 years with the government? Those are two entirely different things.
 
iliveonramen said:
Compensation is very different than a salary. While working through my masters I had a government job. When I looked up my compensation it said my total compensation was twice my salary. When I graduated and made twice my salary...it was pretty obvious.

Compensation includes everything and puts a dollar sign on it. If you are a family with a kid that needs to see specialist you are using that health insurance to the max and getting that compensation amount. If you are a single guy that works out and doesn't really see the doctor except for a yearly check up....that big health insurance number means nothing to you. Same with things like life insurance, dental etc.


Also, the way they account the pension needs to be looked at as well. Are they counting how much your employer puts in for the pension or the entire benefit of the pension assuming you work 30 years with the government? Those are two entirely different things.
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Read that quote (in post #28) slowly and carefully - it specifies that wages are (generally) higher in the public sector. Your initial argument was that public wages were lower and only benefits made public compensation higher.
 
ttwtt78640 said:
Read that quote (in post #28) slowly and carefully - it specifies that wages are (generally) higher in the public sector. Your initial argument was that public wages were lower and only benefits made public compensation higher.
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I read the salary breakdown and it's just too broad. I have an uncle that was a federal prison guard. No college education but worked decades working long hours in a dangerous circumstance. In this comparison, his much higher than other non-college educated people would be captured. He made much more than someone high school educated person working at McDonalds. Is that wrong? Was he overpaid? There's a lot of low wage retail jobs included in non-college educated. I'm not saying every non-college educated person in federal government is a prison guard, but putting both of them in the same bucket to compare salaries is pretty useless.
 
iliveonramen said:
I read the salary breakdown and it's just too broad. I have an uncle that was a federal prison guard. No college education but worked decades working long hours in a dangerous circumstance. In this comparison, his much higher than other non-college educated people would be captured. He made much more than someone high school educated person working at McDonalds. Is that wrong? Was he overpaid? There's a lot of low wage retail jobs included in non-college educated. I'm not saying every non-college educated person in federal government is a prison guard, but putting both of them in the same bucket to compare salaries is pretty useless.
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Of course, there will be anecdotal exceptions and some public sector jobs simply have no private equivalent. One place that this disparity is most obvious is with the Davis-Bacon Act designation of 'scale' wages (by occuation and county?) that are required to be paid for work on government contract jobs. These wages are often (yet, again, not always) considerably higher than the local 'norms' as evidenced by looking at help wanted ads.

Another perk of many public sector jobs is that they are effectively jobs for life and have (virtually) automatic time in service pay raises/promotions. I'm not saying that this is totally wrong but it is, none the less, a feature permitting an average (or slightly below) public worker to advance in pay grade as rapidly as an above average worker could. Whether this encourages slacking is debatable, but it certainly does not discourage it.

It is far less work for a public employee's supervisor to evaluate them as being within the average range (by simply checking a box?) than to do a lot (often taking days) of extra paperwork to justify them to be far above, or far below, average. Far above might mean a merit pay increase or bonus while far below takes preparing a detailed 'improvement plan' (also requiring added paperwork to document compliance with it) or a 'special request' for additional training sometimes coming from the same department personnel budget that could otherwise be used for their own raise/bonus.
 
ttwtt78640 said:
Of course, there will be anecdotal exceptions and some public sector jobs simply have no private equivalent. One place that this disparity is most obvious is with the Davis-Bacon Act designation of 'scale' wages (by occuation and county?) that are required to be paid for work on government contract jobs. These wages are often (yet, again, not always) considerably higher than the local 'norms' as evidenced by looking at help wanted ads.

Another perk of many public sector jobs is that they are effectively jobs for life and have (virtually) automatic time in service pay raises/promotions. I'm not saying that this is totally wrong but it is, none the less, a feature permitting an average (or slightly below) public worker to advance in pay grade as rapidly as an above average worker could. Whether this encourages slacking is debatable, but it certainly does not discourage it.

It is far less work for a public employee's supervisor to evaluate them as being within the average range (by simply checking a box?) than to do a lot (often taking days) of extra paperwork to justify them to be far above, or far below, average. Far above might mean a merit pay increase or bonus while far below takes preparing a detailed 'improvement plan' (also requiring added paperwork to document compliance with it) or a 'special request' for additional training sometimes coming from the same department personnel budget that could otherwise be used for their own raise/bonus.
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I agree with what your saying. I think anyone that has ever worked in government has seen those things in play. I also think that a lot of times government employees become lightening rods that politicians use to take the focus off of real issues that are facing the US work force. From my experience....the better qualified you are the less you make in govt compared to the private sector while people that are less qualified make more in govt than they would in the private sector. I think that needs to be kept in mind when making changes to govt benefits.
 
ttwtt78640 said:
Meet it how? SS is a 'pay as you go' system that had previously built up a surplus (the 'trust me' fund) which is fast being depleted. Once the 'trust me' fund is gone then FICA revenues will no longer support SS benefit obligations (promises?) meaning that either FICA taxes must be raised, SS benefits cut or a combination of both.
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Yes - FICA contributions can be raised. That is one solution.

Another is for the shortfall to be made up by general revenues as they are legitimate and real obligations of the government that must be met to honor its debts. And our government has more than enough money to be able to do that.
 
Neomalthusian said:
[h=1]The end of the road for America’s public pensions crisis?[/h]

State and local pensions are badly underfunded. There are usually two types of thought processes concerning public pensions. One is the entitled "I earned my pension, fund it!" mentality, which is basically head-in-the-sand denialism like we saw on full display in Detroit. The other is the one that recognizes that you can't fix a disaster by doing more of the thing that caused the disaster.

I start this thread based on a digression in another one.

Eventually we will be cutting benefits in a lot more pensions. This will pick up significantly when Generations Y and Z wake up and realize what's been going on.
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When jobs are cut, pension participation goes down and high contributions are difficult to pay out. What you are witnessing is a pernicious campaign to put an end to the American pension system.

Our kids and grand kids are going to be in for a very very rough ride.
 
haymarket said:
Yes - FICA contributions can be raised. That is one solution.

Another is for the shortfall to be made up by general revenues as they are legitimate and real obligations of the government that must be met to honor its debts. And our government has more than enough money to be able to do that.
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I see that you have faith that our federal government will use general revenue (i.e. raise taxation on "the rich" rather than resort to endless borrowing or money printing) to meet its legitimate obligations. When do you suppose that idea might start to take hold?
 
ttwtt78640 said:
I see that you have faith that our federal government will use general revenue (i.e. raise taxation on "the rich" rather than resort to endless borrowing or money printing) to meet its legitimate obligations. When do you suppose that idea might start to take hold?
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It makes perfect sense since for many years we did the opposite and took money from SS and used it for other governmental expenses so the precedent has already been well established that the two can be co-mingled and there is not a wall between the two.

Before we as a people take on any new debts, we must honor our existing ones. To do anything else is a betrayal of what it means to be an American and a person of honor who meets their obligations.
 
Neomalthusian said:
[h=1]The end of the road for America’s public pensions crisis?[/h]

State and local pensions are badly underfunded. There are usually two types of thought processes concerning public pensions. One is the entitled "I earned my pension, fund it!" mentality, which is basically head-in-the-sand denialism like we saw on full display in Detroit. The other is the one that recognizes that you can't fix a disaster by doing more of the thing that caused the disaster.

I start this thread based on a digression in another o
Eventually we will be cutting benefits in a lot more pensions. This will pick up significantly when Generations Y and Z wake up and realize what's been going on.
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There are basically two ways to create a retirement plan: defined benefits and defined contribution. The defined benefits path tells the worker "when you retire we will pay you x number or dollars for the rest of your life. The defined contribution says "contribute x dollars for your working life and it will be invested to provide the most possible when you retire. Defined benefits have been deadly for private and public entities - companies and municipal entities have had to declare bankruptcy to survive. The biggest example of this plan is Social Security which is on its last legs.

Defined contribution, on the other hand, offers no guarantees as to the amount of the benefits, which is discomforting to some but offers the possibility of larger benefits. For example I took my latest SS "statement" and used it to run through a program that calculated what my benefit would have been if invested in a fund that matched the performance of the DJIA over the length of my working career. End result: I could withdrawal approximately 2 1/2 times the amount SS "promised" me for 25 years and still leave my heirs between a half and three-quarters of a million dollars. Your mileage may vary.
 
haymarket said:
It makes perfect sense since for many years we did the opposite and took money from SS and used it for other governmental expenses so the precedent has already been well established that the two can be co-mingled and there is not a wall between the two.

Before we as a people take on any new debts, we must honor our existing ones. To do anything else is a betrayal of what it means to be an American and a person of honor who meets their obligations.
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That is BS - that surplus (the 'trust me' fund) was borrowed (and spent), as was required by law. Where money was borrowed from, does not make that borrowed money interest free or with no need to repay it. Essentially what you are saying is that once we could tax "too much" (under FICA) and now we can (must?) tax "not enough" (under FICA) and still (pretend to?) have a 'pay as you go' social safety net.

If you take (give yourself?) a loan that does not mean that you have more net worth or that you can borrow more money to repay your past debts endlessly.
 
Bullseye said:
There are basically two ways to create a retirement plan: defined benefits and defined contribution. The defined benefits path tells the worker "when you retire we will pay you x number or dollars for the rest of your life.
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With public pensions, that was a lie (bolded emphasis mine). There was no real "we" with regard to who will pay pensioners what in retirement. If you substitute "someone else" for "we," then it's accurate. Whatever public sector manager/director theoretically made that promise on behalf of taxpayers, that person was also very likely a pensioner of the same system. Pensions were people promising themselves things at others' expense.

jet57 said:
When jobs are cut, pension participation goes down and high contributions are difficult to pay out. What you are witnessing is a pernicious campaign to put an end to the American pension system.
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There is no "campaign." Pensions don't fail because of "campaigns to make them fail." They fail because they're a failed idea.

Our kids and grand kids are going to be in for a very very rough ride.
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They're in for the rough ride because of the unfunded liabilities you're pinning on them. Help them out by acknowledging the need for pension benefit cuts to be part of the equation.
 
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haymarket said:
Do you have any hard evidence to present that states will not be able to pay pensions in the future?
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Several municipalities have gone bankrupt. Others have been evaluated as "under-funded" based on current obligations. And as I mentioned above Social Security is the poster child for this problem
 
holbritter said:
You cannot lump all public pensions into one. Most states have their own system, and it dependent on that particular state how well it does. Not all public pensions are doing badly or are underfunded. Some actually are pretty self funded and are doing well.
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Can you name a few?
 
Helix said:
i am vested in a public pension that i accepted as deferred salary. i worked for a much lower wage than my education and skills should have warranted, and the pension was one of the benefits intended to offset that low wage. changing the terms now amounts to wage theft. it's the same thing as if Neomalthusian's employer from 1999 sent him a letter stating that his wage back then was unsustainable and demanding that he pay the difference. my state consistently runs surpluses, and is about to come into a lot of money from internet sales taxes. shore up the ****ing pension.
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I wish you the best with that. But make alternative plans. Look at the experiences of Vallejo and Stockton California as cautionary tales
 
haymarket said:
I understand the theory. But can you or anyone else show the the actual numbers where states will not be able to make good on their pensions?
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It's really not a case of not being able to make good today, it's a matter of being able to contnue to make good into the future.
 
JohnfrmClevelan said:
One thing that states and cities have going for them is that they are immortal. They will always have a revenue stream, so it's just a matter of balancing the two better.

Federal pensions and benefits are not a problem. The Feds can't run out of money. The Feds should be a much larger part of the pension system, because they can simply add money when it is needed, paying for benefits in real time. Putting pension responsibilities on states and cities is almost as much of a problem for the economy as private sector benefits (which are also just saved income) are.

Pensions and other defined benefits are becoming extinct in the private sector (unless you are at the top), probably for good reason. The temptation to raid the coffers for immediate gratification is just too great, and there is not nearly enough oversight, or rules, on this. (I once represented a steelworker who was 0-for-7 on pensions, because every company he worked for raided the pension funds before they went under.) If you were lucky, your pension plan was "converted" to a 401K by the employer, usually at a loss.

It is all deferred compensation. If your employer can afford to contribute to a retirement plan, they can afford to pay you more in the present instead. For that reason, savings plans are a drag on present income, so they are a drag on aggregate demand. Saving for retirement is obviously a good thing for individuals, but it's a bad thing in the aggregate, if it is paid for by the private sector, to the extent that pension funds are not plowed back into real investment (investment in production, not money-farming).

The main problem with "saving for retirement" as a country is that the safest savings are simply dollars; but dollars saved out of income are a drag on the economy (lost aggregate demand). Since it is the economy that ultimately pays for everything, it would be best to maximize production (and therefore income), and simply distribute that income in a more equitable fashion, including taking care of retired workers. But that would take a lot more government involvement, and this is America, where, for no good reason, people put more trust in companies than they do in their government. (Present government excepted, of course, since Trump is an idiot, and he isn't interested in the welfare of Americans.)
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Well, yeah, sort of. Government entities can fund or defund whatever they have the gonads to do. Fully fund pensions and skimp on education and public protection - who can argue with that? Or maybe just let infrastructure to degrade further and just put up "bump" signs everywhere.
 
ttwtt78640 said:
Meet it how? SS is a 'pay as you go' system that had previously built up a surplus (the 'trust me' fund) which is fast being depleted. Once the 'trust me' fund is gone then FICA revenues will no longer support SS benefit obligations (promises?) meaning that either FICA taxes must be raised, SS benefits cut or a combination of both.
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I believe I read that the trust fund is just being dipped into this year, it's not "rapidly" being depleted.

Anyhow, as others have said, there are lot's of ways to fix this without cutting benefits. We just have to do it, and the sooner the better.
 
haymarket said:
Why would it require any reduction in benefits. I have never seen any stats which say the government will not have the funds to cover the projected shortfall. Have you?
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I have seen exactly that for the last several years. The annual statements from the Social Security Trustees have been warning of exactly that for years. In fact, last year was the first year that income from FICA wasn't enough to meet current obligations. For the next few years interest from the bonds in the "trust fund" is projected to augment current revenue enough to maintain current benefit levels. But in the near future it's projected that the bonds are going to have to be redeemed to continue the same levels. But eventually those will be gone as well and benefits will be limited to whatever current revenue can support. This all is projected to occur within a very few years.
 
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