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Monday, February 22, 2010

Paying the piper on public pensions

Here's a story that will be happening more and more across the land. In the fat years communities negotiated generous benefits and pension plans for their public employees. Now that the lean years have arrived and public officials are looking at ugly budgets, it is those contracts with public employees that are creating such a major problem.

In Fairfax, Virginia it is the teacher pensions that are destroying the county's budgets. They have to cut budgets and raise taxes in order to keep paying out those pensions. Here is the warning from the Fairfax County Taxpayers Association.
"The FCTA asked why the school board is urging the supervisors to raise taxes by $81.9M although only $9M is needed to pay for next year's expected increase in student enrollment.

"The school superintendent acknowledged that the reason is the increased cost in employee benefits, especially pensions. According to the schools' proposed FY2011 budget, employee benefits costs are increasing by $98M, of which $71M is for pensions and another $15M is for retiree medical benefits.

"The school board has been less than straightforward with the community about this. During her opening remarks at the forum, school board chairman Kathy Smith talked about cuts to band and sports, and bigger class sizes, but never acknowledged that the cuts were being made to pay for increased benefits costs. School board members urged the audience to ask the supervisors to raise taxes. If taxes are not raised, then the board will cut band and sports and increase class size to make the pension payments.

"The problem is that while unionized county employees have pensions, most private-sector taxpayers do not. Is it fair to raise taxes to fully fund county pensions when taxpayers rely on 401Ks and those have lost value?
Taxpayers need to understand where their money is going to. If we're going to be making cuts in the school budgets, then the teacher pensions need to take a cut also. It's not a nice thing to have to go back on promised money to retired teachers, but if a county doesn't have the money for its schools, everyone has to suffer a little. If I lived in Fairfax, I wouldn't support a tax increase until I'd heard that salaries and benefits were being cut for public employees.

Mark Tapscott continues his reporting on how promised public pensions are paralyzing local and state budgets with this story about how much California's public employees can earn from their generous pensions. It's just amazing to read of public employees retiring on six-figure pensions.
Maybe there really is a pot of gold at the end of the rainbow, at least if you are one of the nearly 10,000 retired California public sector employees pulling down tax-paid pensions of $100,000 or more.

A total of 6,133 of the members of the "$100,000 Pension Club" are covered by the infamous CALpers system that critics often cite as among the most politicized and mis-managed public retirement programs in the country. You can see all of the names of the individuals in the club and their monthly and annual stipends here.

Be prepared for a shock, though, because you may not believe the numbers you find. The top 10 CALpers retirees include Bruce Malkenhorst whose $499,674 annual pension puts him on top of the list. Then there's Joaquin Fuster at $296,555, in second, and Donald Gerth in third with $278,054.

Then there is CalSTRS for retired public school teachers, which features 3,090 pensioners drawing $100,000 or more. Topping that list is James Enochs, drawing an annual stipend of $285,460, followed by James Smith at $262,796 and Susan Rainey at $256,048. You can see all of the names of all 3,090 CalSTRS members in the $100,000 Pension Club" here.
California's Democratic politicians negotiated this deal with the devil. They used taxpayer money to promise these super generous benefits to public employees and, in turn, the public employee unions worked hard to elect those very same politicians who were paying them off so nicely with public money. Quite a nice deal, except that, in the process they have bankrupted their state.

Tapscott links to this post from Doug Ross on "Bloodcurdling Tales of Horror: How the Teacher Unions are Destroying California's Economy." And the tales truly are bloodcurdling. Ross reports on how, even if you're convicted and go to jail, you can still get your super pension.
Retired Capistrano Unified School District Superintendent James A. Fleming could face jail if convicted on a felony indictment over the use of school resources to track his political enemies. But conviction won't stop Fleming from receiving his pension funds: $141,000 a year from California and $64,000 from his 27-year stint in Florida.
As long as politicians can participate in this unholy union with public employee unions, taxpayers will continue to face massive cuts in their budgets without realizing how much of the money is going to Cadillac benefits plans with teachers unions. The Pew Center on the States reports on how this is going on across the country.
$1 trillion. That’s the gap at the end of fiscal year 2008 between the $2.35 trillion states had set aside to pay for employees’ retirement benefits and the $3.35 trillion price tag of those promises.

Why does it matter? Because every dollar spent to reduce the unfunded retirement liability cannot be used for education, public safety and other needs. Ultimately, taxpayers could face higher taxes or cuts in essential public services.
Taxpayers need to wake up and realize that there must be an end to this unholy alliance between the politicians who use taxpayer money to pay off political support from the public unions.


Bachbone said...

The [liberal] Detroit Free Press (Feb. 18, 2010) noted that Michigan's Public Employee Retirement System is underfunded by some $50 billion, but found solace in the fact that others were in worse shape. (We used to call that whistling past the graveyard.)

To make matters worse, Michigan's budget is $1.5 billion out of balance (after two years of smoke and mirrors plus using stimulus funds to balance it), and the Democrat governor and both parties are trying to coax early retirement from state workers to help balance it, which will throw more retirees into that already black-hole retirement system. After years of drunken nights out and next day hangovers, this is a hair of the dog solution.

Centennial College said...

The current political discussions are deeply dishonest and misleading and the people will be very confused and angry when this fiscal time bomb blows up in a few years[2011] when the first baby boomers hit 65 and Medicare with their 78 million claims for health care with no funds allocated to pay the claims.

benefits management