Public Employees, Pensions and Promises

As Congress and the Obama administration continue to duel over big issues like the budget, federal deficit, health care, Social Security and so on, consider this: Will the promises officials — elected or not — make today really mean anything in the years ahead?

If you work — or have worked — in the private sector you know that most promises about pay, benefits, pensions and even future employment made by management today (or yesterday) can, and most likely will, change at some point, generally not in your favor. It happens all the time. And it happens even to those represented by unions. If you doubt this, consider what has happened to retiree medical plans during the past decade.

Next up: public employees.

And here comes another big fish to be tossed into the skillet. States — set aside for the purpose of this rant the federal government and programs like Medicare and Social Security — have over-promised in terms of pensions and benefits — and now that the bills are coming due, there is plenty of pressure on elected officials to renege. For public employees — teachers, firefighters, police officers and such — welcome to the world of big business.

Here’s from WaPo, “States face $1.26 trillion shortfall in funds to pay retiree benefits“:

The state funds that pay pension and health-care benefits to retired teachers, corrections officers and millions of other public workers faced a cumulative shortfall of at least $1.26 trillion at the end of fiscal 2009, according to a new report.

The study, to be released Tuesday by the Pew Center on the States, found that the pension and health-care funding gap increased by 26 percent over the previous year. Pew officials said the growing shortfall was driven by inadequate state contributions, an aging population and market losses that accompanied the recession.

Although investment markets have recovered substantially since the period covered by the report, its authors warn that states still face an increasing burden from retiree costs that are beginning to crowd out critical services.

“In many states, the bill for public-sector retirement benefits already threatens strained budgets and is competing for resources with other critical needs, including education, infrastructure and health care,” said Susan Urahn, managing director of the Pew Center on the States.

Oh, mama.

Gee. I guess something is going to have to be done. Let’s see what the NYT has to say, “Public Pensions, Once Off Limits, Face Budget Cuts“:

When an arbitrator ruled this month that Detroit could reduce the pensions being earned by its police sergeants and lieutenants, it put the struggling city at the forefront of a growing national debate over whether the pensions of current public workers can or should be reduced.

Conventional wisdom and the laws and constitutions of many states have long held that the pensions being earned by current government workers are untouchable. But as the fiscal crisis has lingered, officials in strapped states from California to Illinois have begun to take a second look, to see whether there might be loopholes allowing them to cut the pension benefits of current employees. Now the move in Detroit — made possible, lawyers said, because Michigan’s constitutional protections are weaker — could spur other places to try to follow suit.

“These things do tend to be herd-oriented,” said Sylvester J. Schieber, an economist and consultant who studies pensions.

The mayors of some hard-hit cities have said that the high costs of pensions have forced them to lay off workers: Oakland, Calif., laid off one-tenth of its police force last year after failing to win concessions on pension costs.

Elsewhere there is pension envy: some private sector workers, who have learned the hard way that their companies can freeze or reduce their pensions, resent that the pensions of public workers enjoy stronger legal protections. But government workers, many of whom were recruited with the promise of good benefits and pensions, say that it would be unfair — and in many cases, very likely illegal — to change the rules in the middle of the game.

OK. I understand that something has to be done — and soon. We can’t continue to borrow to pay for obligations today and far in the future. And we can’t continue to promise what we can’t deliver. That’s what happened to many of the countries in Western Europe — and now they are sucking the economic tailpipe.

And it also points to the fact that our nation no longer has enough good-paying and secure jobs that enable people to live comfortably today let alone plan for the future.

Here’s Eugene Robinson opining in WaPo, “The word most politicians ignore: Jobs“:

What is it about the word “jobs” that our nation’s leaders fail to understand? How has the most painful economic crisis in decades somehow escaped their notice? Why do they ignore the issues that Americans care most desperately about?

Listening to the debate in Washington, you’d think the nation was absorbed by the compelling saga of deficit reduction. You’d get the impression that in households across America, parents put their children to bed and then stay up half the night sifting through piles of think-tank reports on the kitchen table, trying to calculate whether there will be enough in the Social Security trust fund to pay benefits beyond 2037.

And you’d be wrong. Those parents are looking at a pile of bills on the kitchen table, trying to decide which ones have to be paid now and which can slide. The question isn’t how to manage health care or retirement costs two decades from now. It’s how the family can make it to the end of the month.

And part of the problem involves trust and the credibility, or not, of elected officials and managers in business, education and so on.

We all know it’s easy to promise something today. But what we are discovering  is that it is much harder to keep the promises when the bills come due somewhere down the road.


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