Fat pensions spell doom for many cities

http://money.cnn.com/2008/06/02/pf/retirement/vallejo.moneymag/index.htm?postversion=2008060305

Interesting article, but I'm not sure if she's meaning to slam cops, pensioners, all public employees, or whomever else...

I'll agree retroactive pension tinkering isn't exactly right, but she isn't focused...



Worse, a cop's job isn't easy. The figures they give seem reasonable, given that the cops' jobs include protecting other peoples' lives and all...

:shrug:

Look, we can have a lot of respect for what police officers do, and fire fighters, and teachers too.

But the money for their salaries and pensions is paid for by taxes. I don't want to sound all right-wing about this, but a police captain making 231,000 and retiring at age 50 with a 190,000/year pension is high. Since the person will live 30 years after retiring and work 30 years to get there, cost of salary and benefits must add up to around 400,000 /year for each year of service the city receives. That's crazy. That would mean 10 people making 40,000/year paying 100% of their incomes in taxes to support one police captain.

Police officer is an important job, and one requiring skill and commitment. But it doesn't require that much training. It seems to me it ought to pay something like 1.5 to 2x the average salary - basically a white collar salary, with a decent pension but one that doesn't start so early - say 50% if taken at age 50 and 70% if taken at age 60. You've got to think about what percentage of the city's wealth can reasonably for these things. Teacher salaries too - in wealthier districts, where you sign up fresh out of college, make 100k/year (really) after 12 years, coast for another 18 years and retire at 52 at 80% of your salary. Teachers should get a white collar salary too, but if the pension is so generous they retire at 52, then you get (since it's women who live a long time) 35 years of retirement pension for 30 years of work. How about retiring at 60? Older teachers are often better anyway.

I live in a state that's got big problems like this. You add up all the pensions and public service salaries, and it's sort of a set of taxes on future residents - today's teens and young adults - and they look at it and say "why should I pay that? I'm leaving to somewhere I can make a better start."

There are some places where it's the opposite, where people in public service are underpaid. But where I live, it's like they have gotten all sorts of games going. Teachers get a 3 year times 10k "longevity bonus" right before they retire so their pension calculates their final salary as being 10k higher (they use the last 3 years). Police, firefighters and teachers can take a few courses and get higher salaries based on education level when these courses are really just jokes that are solely there to give the pay boost. All the people in the system know these little games and take advantage of them. I want good people here, and I want it to be competitive, but people shouldn't be going into these lines of work to become rich and it shouldn't be like winning the jackpot.

You can compare this to CEO's and sports stars, and say "why shouldn't these hard working people make good money?" but you can also compare it to daycare providers, house painters, service-workers, and realize it's way out of whack.

I don't think this means we get any better service. It means it's really hard to get into these systems, and you have to use contacts to do it. It's more about political power. Sometimes it becomes a runaway thing.

It's good that there are unions, and it's good that they're getting something for their members. But there is a point where if you ask for too much, you really do kill the goose that lays the egg. Here, instead of high salaries giving companies an incentive to outsource (where government policy also affects it), the outsourcing equivalent is for young people to leave. There is a death spiral for cities and it's bad and we should want to avoid it.

What about the fact that all of these pensions were part of collective bargaining between labor and management?

Labor agreed to work for a certain salary. Would've liked more than what was accepted, but took it b/c management promised to pay pensions after retirement. And Labor fulfilled its promise by performing promised job duties for a certain amount of time. Management (speaking on behalf of taxpayers) has its own promise to fulfill. Pay the pensions promised. If it wants to stop promising pensions in the future, that's irrelevent to its past promises. It does impact the taxpayer hard but there are a plethora of legally binding contracts that need to be honored.

What was agreed should be paid. Management shouldn't screw labor, and just because business management screws labor doesn't mean public management should screw public labor. I'm glad there are still pensions for some (not me) and I want to see public service be treated fairly. But I do think - as described in this article - that what sometimes happens is these juicy deals get approved long after people have done the work not expecting such an above-market reward.

It happens because of bad political leaders, taking a short term benefit (no strike - and make no mistake, when you're getting very high salaries and threating to strike, it's about blackmail not about equalizing the game; or short term smaller raises in exchange for paying much more on the back end with more generous pensions, or early retirement packages that allow them to replace a current worker with someone whose enough cheaper to offset the increased pension, but just by a little bit and not in the long run). These kinds of things are how the city or state or federal officials destroy the future of their community. The voters themselves are partly to blame for not seeing the difference and just being glad to get a tax cut or a smaller increase or a balanced budget right now.

Yes, honor contracts. No, don't make huge promises that future non-beneficiaries are going to have to pay.

It adds to the 'whole picture' and, to me, didn't seem right-wing either.

And your final paragraph makes sense. Now if only the spiral can be stopped.

My pension is calculated at 2.25% of my best 12 months in the last five years times the number of years of service. Good amount. Marta will get 75% should she outlive me. My pension will never go up. So I have to be sure I can afford to retire with a longer life span. Whatever contract was in force at the time anybody in my bargaining unit retired, is what they are locked into for the rest of their lives.