This pension problem is happening in mostly Democrat dominated states. These
are states that are also declining in birth rate. Like Europe, they are not
having enough children to, in many cases, replace their population. This means
there aren't or won't be enough younger, working adults to pay for
pensions. Declining populations in Europe are doing this at an increasing rate
as well. THAT is the real threat to pensions.The pensions
themselves are not the problem. It's not having children that is causing
the problem. Utah is not facing this problem and already did legislatively
whatever might have been necessary. We do not need to mess with it more in THIS
state. Other states, especially those with declining child population
definitely have a problem that won't be easy to solve, just as Europe is
In my opinion, government has no greater obligation than the obligation to its
people. The employees of our government, rather that being spit on, denigrated
and the last to get paid, should be praised, supported, and the first to get
paid over all other obligations of the government. All
indebtedness, bonds, and scams of local, state and even federal government comes
after the obligations to the people and the people who serve the people. If that spoils our credit rating, good. Government should operate on
its income and not borrow from the future.
There is a fundamental flaw in the system, where the only apparent place to
invest is in the Stock Market. I shudder to think of what will happen if Social
Security is privatized. Just how many more Trillions will be dumped on the
market that is overvalued now. In my opinion the market shares far exceed the
real value of the companies.This is just another bubble that will destroy
the States and mom and dad. The ones most interested are those who sell, and
those already in the market and will sell at the end of the bow wave.
Having children so that there's somebody to pay our pensions seems to me
the height of selfishness. Better to starve than to bring even more people into
this vale of tears.
Another way for the state to offer a pension is to give a defined hourly pension
contribution. The public employees union and the state negotiate an hourly
pension contribution. Every hour an employee works he or she gets credits toward
a yearly pension credit. The union would administrate the pension and would
decide how many service credits it would take to retire with a full pension.Under this scenario the state has no liability past contributing the
hourly contribution and if the union pension under performs then either pension
benefits would have to go down or employees would have to contribute money to
The first solution is to have the government pension plans follow the same rule
private companies have to follow. The government pensions are only required to
fund their pensions at 50%, private companies are required to fund their
pensions at 80%. The long-term rate of return needs to be realist, because this
is the key input to calculate the pension obligations. Companies in the private
sector have been using return rate of around 5% when the government agencies
were using 7% to 8%. A difference of even 1 percent is huge. Finally all
government agencies have to switch accounting firms and actuarial firms; and if
they using internal actuaries they move it private firms. The accounting firms
audit results of public pension funds need to be peer reviewed by another
accounting firm annually and by the Public Company Accounting Oversite Board.
This will insure that public pensions aren't using a discount rate that is
completly out of line.
The last paragraph is not accurate. It states that taxpayers will have to pick
up the burden. It has always been the case that employees have been paying the
costs through reduced salaries. If higher contribution rates are necessary,
employees will have to pay them instead of receiving salary increases or other
benefits such as insurance benefits. This has been the case in Utah. I
can't speak for other states.
The problem is that government promised something that it couldn't deliver.
It used facts and figures that only worked if everything ran perfectly.
Government knows that things don't run perfectly. Government knows that
they can't promise retirement funds unless they collect ALL the money
necessary when the employee is working.No honest person would allow
the government to increase his taxes to make up for malfeasance. No honest
person would let government lies be the reason for tax increases.Why
should the public be made to pay for government pensions? Would government
workers pay "taxes" to repay for the pensions of non-government
workers?Unfortunately, people are going to be hurt; but, increasing
the "hurt" by taxing the public for problems that are solely the fault
of the government will not solve the problem. Solve the problem by forcing
government to abide by the same standards that are required in the private
sector. Let the government take sufficient funds from the paychecks of those
who desire retirement to cover the cost of that retirement. Nothing
is free, especially things promised by government. Someone has to pay. Let the
recipient of the benefit pay.
Mike:The elected leaders came up with these pension plans, elected
leaders in legitimate elections. I worked for three decades under the promise
that my pension would be honored as arranged. For the government not to honor
this, to me, would be malfeasance. Perhaps, it would have been better for the
government not to have made this deal and paid me a higher salary, but we both
went into this agreement. I have worked faithfully at my job doing the best I
could to serve my students and the community. Other state government employees
down the line from teachers to fire fighters to police officers to others in
government have done the same thing. Those who come into the field now, the
deal is different and both parties know that going in. Pensions have been
restructured for teachers for example in the last few years and this should also
be known, we don't have the same arrangements or plans of other states.
But I think there should be honor between the government, and those who worked
for it, and promises need to be fulfilled. If not, how can one trust any aspect
As usual in this country, crises are the result of failure to plan for the long
term. Our focus on the short term, at the expense of the long term, ends up
costing us dearly. There have been very informative books and articles available
for up to two decades, one of them the book Pensions in Crisis: Why the System
is Failing America and How You Can protect Your Future, by Karen Ferguson and
Kate Blackwell (N.Y.: Arcade, 1995). Why haven't these made a difference
and helped in averting the coming crisis? Higher Education has
for more than half a century had a highly successful retirement "system"
called Teachers Insurance and Annuity Association (TIAA) and companion College
Retirement Equities Fund (CREF). Teachers and their employers each put up half
into individual accounts on a monthly basis. It's privatized, successful
and, maybe most important, employee portable from job to job, state to state.
States and the federal government are out of the mix, and employees can
contribute as much as they wish beyond half. Why can't ALL
employees in the U.S. have similar "systems" and be free of the threat
to their retirement now the case?
Part of the problem is in the second paragraph “public pension fund
investment portfolios fell far below their guaranteed rates of return, which
generally were at about 8 percent.” If you were betting on a return of
8%, your problem started there. That is not a realistic rate of return in lower
inflationary periods. Not for a safe and diverse portfolio.Remember
that the taxpayers are the real employer. Through their elected
representatives, promises were made to the employees. Expecting employees to
bail out the employer is odd to say the least.Self-directed 401(k)
style plans may be the way to go. But they have proven insufficient. Look up
Ted Benna 401k. The idea was great but fees tend to eat them alive. Also, the
folks in control of the investments (the employees) are simply not
professionals. They make mistakes.Ultimately, assuming similar
investments and fees – a dollar in a 401K and a dollar in a pension will
yield the same down the road. The problem is that both employers and employees
make the mistake of putting in too little. The only difference is who pays the
piper for their foolishness.
Coach P.I have empathy for you and your predicament, but I
don't think that your circumstance should involve me or my neighbors or any
other person who did not work for the government. My neighbor lost
his retirement when the business he worked for was bought by another company.
He lost over $500,000 that he was counting on for his retirement. He sacrificed
by taking a much lower salary than other people in his company so that
retirement would not be a burden for him or his family. Do you want to
contribute to his retirement? My brother-in-law lost his retirement
when the quasi-public company he worked for made major changes. Do you want to
contribute to his retirement?What makes any government employee
special? We've all lost money. We've all had our dreams destroyed.
We've all had to deal with broken promises. I have no
retirement. My money was "invested" in my eight children. I helped take
care of parents when they needed help. Maybe my children will do the same.
Maybe not. In any case, I will never ask you to pay for my retirement.
Why must taxpayers guarantee pension returns of public employees? Being in
business for myself, my pension returns equal my contributions + market returns.
There is no guarantee. Why do the elite public employees have such a protected
pension system? Can't these high and mighty people live like the rest of
A few things that have been completely ignored. First, as Coach P stated, many,
many public employees get paid well below market value. Why do they do that?
For the safety of good insurance and good retirement. The deal was struck, the
employer (the State) offers much lower salaries with good benefits. Many people
here might say, fine lets make these things private. I'll just say this,
if you think you can get an attorney to do work for the state from private
practice, and charge the State less than 50$ an hour, good luck. Second, why in
the world are we taking the word of a State auditor who not only is NOT a
financial guy, he isn't even an AUDITOR. All of the actuaries, financial
guys, everyone with experience, knowledge and credentials involved disagrees
with this state audit report.
Mike:That's a great story but bottom line, that is NOT the deal
that was struck. That wasn't the contract that was signed. We either
believe in the rule of law or we don't. I have read too many of your posts
over the years to know that you are a believer in the rule of law. Or is that
only when it's convenient? What happened to your friends and relative I
believe is sad and wrong. Two wrongs don't make a right. You worked in
private enterprise as did a lot of people. It is up to you/them to negotiate
their own salaries and benefits. If one side breaks the promise legal action
could be an option. I am not taking anything from anybody that wasn't
agreed upon by the ELECTED leaders of the people. Your issue is with them.
Maybe they should have paid higher salaries but they chose this path. When I
choose to retire, I expect to be paid according to this agreement, nothing less.
We can honor the promise made to government employees and current retirees, but
at the very least we need to draw a line in the sand and put future government
workers on a defined contribution plan. We should honor the promise made to
older workers, while adjusting the system so that the government will be solvent
in the years to come.
Mark 1:I am fine with that though I would like to see their salaries
increased. But again, if both parties know the rules (agreement) then there are
no issues. To me there is an issue with changing the rules decades down the
line which was actually proposed a few years back.And by way, Utah
has taken those steps, at least with school teachers and I suspect with other
governmental employees as well. I think it will be hard to attract and maintain
quality school teachers, because as I said previous, salaries are comparably low
and certainly stagnant. But again, that is the agreement that has been made by
the new hires and the state/local governments. Also, one last
comment directed at Mike Richards: I don't think it was wrong or stupid
that teachers (and other state employees) planned their golden years around
their pensions. Did I expect years later that my government would consider
folding up like a cheap folding chair? No, we expect our government, which is
supposed to be the best government created by man, to live up to its
Well here's whats happened the last 30 years. The distribution of wealth
has become increasingly top-heavy to the point that the top 10% own 60% of the
economy. Wage rates have been stagnant. Pension plans have been destroyed
across the board. And older workers are being told to work until they
(literally) die. How much of this abuse will the American people accept until
they dump capitalism in its present form? The next crisis (and there will be
one) may be the last straw.
RE: Mike Richards - "What makes any government employee special? We've
all lost money. We've all had our dreams destroyed. We've all had to
deal with broken promises. " And why? Because this is the way capitalism
works - it concentrates wealth at the top, breaking "promises" to the
bottom. What's the cure Mike? Socialism of some type.
Why not phase out state run pension plans and put all government employees into
the Social Security system? It will make Social Security more stable because of
a constituent increase and more funding, and will take pressure off of the