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February 3, 2009
The looming problem of Public Sector Pensions
Forbes magazine has a very insightful article on the absurd riches enjoyed by public sector workers- the ranks of which will clearly explode under President Obama and a Democratic Congress.
The article’s focus in on very generous “gilt-edged” pensions that public sector employees enjoy upon (usually very early) retirement. These pensions are often based on the last days of employment-when the government’s custom is to artificially boost the employee's regular salary so the worker enjoys outsized benefits for life. The article clears up some common misconceptions :
In public-sector America things just get better and better. The common presumption is that public servants forgo high wages in exchange for safe jobs and benefits. The reality is they get all three. State and local government workers get paid an average of $25.30 an hour, which is 33% higher than the private sector's $19, according to Bureau of Labor Statistics data. Throw in pensions and other benefits and the gap widens to 42%.
The article also delves into the fact that pensions don’t reflect reality-in more ways than one.
Cops and firemen initially were granted early retirement because their work was physically demanding and they tended to die young. These days they live as long as everyone else, but early retirement lives on for an ever expanding pool of public workers. So do liberal disability rules. Nevada law 617.457 decrees that heart disease among uniformed safety workers is job-related. The medical reality, says the American Heart Association, is that a fireman gets heart disease from diet, lack of exercise or genes, not from dashing into burning buildings. Still, veteran Las Vegas firemen hobbled by heart disease can collect an inflation-protected $40,000 a year for life on top of their pension. That applies even if they're healthy enough to work in another occupation.
At least, they can sleep at night-regardless of the stock or job market. But don’t we hear the teachers’ unions complain about low pay for teachers?
Steven Beatty is the kind of social studies teacher you hope your kid gets. The Bridgewater, N.J. high school instructor has a solid command of history, took grad school courses on his own time and clearly loves teaching. But Beatty isn't in it just for the students. At 38 he earns $80,000 a year, nearly double New Jersey's average, and pays only 5.3% of that toward his pension. He can retire at 60 with full benefits and, should he so desire, continue teaching part-time.
Don’t we hear a lot about greed these days? Well, one sector seems to engage in scams to boost their already generous benefits:
All this would be infuriating enough if public employees were merely retiring with pensions that paid out a reasonable percentage of their working wages. Instead, they have found legions of ways to boost payments well beyond those levels. In New York, Philadelphia and several other cities police officers rack up huge amounts of overtime in their last two or three years on the job to goose the base pay used to calculate lifetime pension benefits.
There are more scams outline in this superb article that should be placed in every taxpayer’s mailbox.
One former public sector employee who is disgusted with his state of affairs says the prevailing attitude seems to be :
"It's just taxpayers' money, so nobody cares."
But the problem is manifold. Unfunded and ridiculous pension benefits will have to be met somehow-that will be us, our children, and grandchildren. It gets worse:
They're creating a nasty social problem as well. America, in case you hadn't noticed, is dividing into two nations. The 22.5-million-strong public sector (that includes retirees) is growing ever larger, and enjoying ever greater wages and benefits often guaranteed by state constitutions.