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Don't blame teachers and cops who pull down fat retirement checks for huge and growing unfunded...

Don't blame teachers and cops who pull down fat retirement checks for huge and growing unfunded pension liabilities; blame the political process that encourages governments to defer and understate costs, Ed Glaeser says. We need a compensation system "where costs are obvious and where governments pay... at the time the work is done." Otherwise, the whole country could wind up like New York or California.
Comments (22)
  • So when the unions vote to strike after they are offered wage and benefit increases that outpace inflation, even though they know they are already earning more than private sector employees at a comparable position, are we just suppose to say "Oh, it's not your fault, you greedy, fat little union degenerate, it's the political process, it's the stystem's fault.

     

    Unicorns, leprichans and money that grows on trees - we are living in a fairy tale world.

     

    25 May 2010, 06:39 PM Reply Like
  • The unions definitely bear some responsibility, but state legislators (or city councils or county supervisors) are also supposed to say NO when the cost/benefit doesn't fit.

     

    Just like in the private sector.
    If an employee walks into his boss' office and threatens to quit if his wage or benefit demands are not met, the boss should rationally assess whether this employee's contribution is sufficient to warrant the additional costs that would be associated with the increased wage or benefit - how it will affect P and L. If yes, the wage is increased. If not, the request is denied. Sometimes people are demoted to a lower salary if their contribution has declined. That is rarely seen in the public sector unless someone willingly wants fewer hours.

     

    But there are some differences too. Corporations can deduct certain benefits (or percentages of) like health insurance from their taxes due. Public entities like fire departments and public schools are not taxed on an income statement. Their employees pay personal incomes taxes, but the entities do not.

     

    There are dislocations and inefficiencies all over the place and our increasing debt burdens - governments, households, and shuffling to the future in the hopes that someone else will someday make the difficult unpopular decisions - hasn't solved a single problem so far.
    25 May 2010, 07:46 PM Reply Like
  • Okay, I won't be upset when public sector workers give their buddies artificial "battlefield promotions" right before they retire, so that they can enjoy a higher salary base for their pension calculations.
    25 May 2010, 07:06 PM Reply Like
  • And, how about those who retire at 55 and live in retirement more years than worked on the public dole?
    25 May 2010, 07:24 PM Reply Like
  • Part of the problem is accounting standards for governments are not the same as for publicly traded companies. They have GASB instead of FASB.

     

    Governments don't issue profit and loss financials, nor do they account for pensions as strictly as businesses, as I recall they have more time to somehow make up the deficit before they have to admit how underfunded the pensions are.

     

    The easiest thing for politicians to do is go along with the pension demands and pretend everything is OK. After all, they will be out of office before the taxpayers learn what the problem is.

     

    Residents of a city or town should have information as good as shareholders of a company, and as easily available, something along the lines of the SEC website. There are serious potential losses involved. Specifically, retiree pension benefits will be paid by property taxes. As I type this, in the back of my mind I know that the public employees of my town actually own a good part of my house, since they can collect rent on it. Anyone who is going to buy the house is going to consider the taxes in his calculations of what he should be willing to pay.

     

    You could argue that part of the problem with housing values is the obligations to retired government workers that are going to be paid by taxing the owner of the house. My son lives in Pennsylvania and anecdotally there are towns there where decent quality houses sell very cheap because the property taxes are just too high to make it economically feasible.
    25 May 2010, 07:42 PM Reply Like
  • Wall St. and government expect the public to overlook their mistakes and misdeeds which would get anyone not politically connected, fired or jailed. Monumental mistakes and problems that are costing the country it's future.
    25 May 2010, 08:25 PM Reply Like
  • Seen this movie it was called " Grease" I mean Greece! and it ends badly
    25 May 2010, 08:35 PM Reply Like
  • "Otherwise, the whole country could wind up like New York or California."

     

    Did I miss something or is the US's monthly budget deficit not larger than those states? The only difference is that they can't print the money to cover; did I miss something?

     

    No, I'm not advocating a return to a state banking system! Although, come to think of it, depending on the basis of the money they might print...
    25 May 2010, 09:32 PM Reply Like
  • Aside of the tremendous debt our children, grandchildren, and great grandchildren are inheriting from the last two generations, one needs to factor in our unfunded liabilities, aka social security and medicare which absolutely dwarf our current debt obligations. Going to be like California or New York? Yeah, you wish it was that easy.
    25 May 2010, 09:38 PM Reply Like
  • From data I have seen, teachers are unnecessarily getting dragged along with the cops and the firefighters. For most part, teachers are getting paid a less, are in a less enviable position (who want to educate those spoilt and uneducatable kids? They have moved down from respected teachers to baby sitters etc.), their pensions are different from those of cops and fire fighters and retire with much less money. It is the cops and the firefighters having their own unions, power over elected officials and keep the jobs within few ethnic groups (In Cincinnati where the Afro-Americans are a majority, the whites control the police department, make it difficult for the minorities to join and continue,fight for special rules to live outside the city etc.). And the media and the public are to blame for this mess because their work got so much idolized through TV shows etc. Our soldiers also get killed (perhaps in higher numbers) in the line of duty; but do we pay them as much we do to the cops and the firefighters?
    25 May 2010, 09:42 PM Reply Like
  • It depends on what state you live in.

     

    Some states pay the teachers like cops plus allow for better step increases (cops make up for it with OT).

     

    The big problem with teachers is not so much the grunts on the front lines teaching, it's the bloated bureaucracies where there are layers of non-teaching positions that pay much better than the classroom and every time the teachers ask for money, these bureaucrats get bumped up as well.

     

    Here in CT, there are towns with less than 35k people, 7000 kids, spending upwards of 75 to 85 million PER YEAR on the education budgets.

     

    It's unsustainable.

     

    Beware of the Education Industrial Complex.
    25 May 2010, 10:15 PM Reply Like
  • I think that is fine to not blame the teachers and firemen for their unfair, immoral, yet legal pensions. Stupid and unsustainable is legal.

     

    I hope they don't blame the taxpayers when the taxpayer demands that their unfair pensions are corrected. If not, lets just bankrupt the whole shebang and they get nothing...

     

    It is insane for someone to think that their pension is "safe" just because the contract said so. Ask Enron employees. Madoff investors. Argentinans after bank holiday and currency devaluation.... Nothing is sacred.

     

    Defined benefit needs to be defined contribution....
    25 May 2010, 10:11 PM Reply Like
  • realitybiter:etc Yes, that is my point. You don't club the administrators into the teachers count as most do. Call them as it is. I have seen the same at the U of Cincinnati. Hundreds of VP and all the perks (big office,secretary etc.) that goes with it. That goes in most areas (too many administrators and too few doing the real work) for which the country is paying a big price (in terms of reduced efficiency). And for those who lament the defined pension plans, how come you did not become a teacher when you thought they were paid a lot, the big defined benefit plans etc?
    26 May 2010, 06:02 AM Reply Like
  • The same reason I wouldn't open a massage parlour. In my country of Canada, it is legal to operate a massage parlour, but I think it is morally wrong, so even though I could do it, I won't.

     

    I don't believe in government, I think they operate on the same premise as the mafia. They are a cancer on society. I would never work for government no matter what they paid, no matter what the benefits were. I would rather clean buses for minimum wage (which I have done when I was yonger) than earn $30, $40 or $50 an hour as a government employee. Some people might not understand this, but if you truly understand the devastating effects government has on people, my attitude makes alot of sense.
    26 May 2010, 06:49 AM Reply Like
  • "You don't club the teachers in with the administrators, as most do." Why not? Teachers as a group (as a union) have been satisfied enough with the bureaucratic farce the public school nightmare has become as long as their pay and benefits are fat and growing. Their priorities have been all too clear.
    26 May 2010, 08:37 AM Reply Like
  • Last time I check NY had a 105% pension coverage -- NY has problem just not with the pension pools.
    If you want to use (in)famous examples use Ill, Ca, NJ.
    25 May 2010, 10:40 PM Reply Like
  • Pew did a great piece a while back. On New York:

     

    "On the pensions side, New York officials say internal calculations show the system to be fully funded, but the state’s current accounting
    methods don’t generate a funding ratio, unlike more common methods used by other states."

     

    www.pewtrusts.org/uplo...

     

    This is a must read on the whole system nationwide:

     

    www.pewtrusts.org/news...
    25 May 2010, 11:37 PM Reply Like
  • agree 100% with realitybiter.

     

    I won't blame the teachers for their outsized pensions and health care and above average salaries...... and they won't blame me when we axe their pensions, tell them they have to work another 10 years and force them to pay 75% of the cost of their health care coverage.

     

    Same thing with cops and firefighters.... I won't blame them for rules that allow them to work for the private sector and get paid overtime and have it bump up their pensions...... and they won't blame me when the day comes that their pensions are cut 75% and nothing allowed over 50K.

     

    I respect most teachers, firefighters, and cops that I know..... but I no regard for their unions, and absolutely no regard for the fact they have been trading votes for money.

     

    All public sector wages, pensions, and health benefits are about to meet the buzzsaw!!
    25 May 2010, 10:45 PM Reply Like
  • I don't know if having police and firefighters pay 75% of their own healthcare coverage is realistic. Its not like their healthcare premiums are like the typical 9 to 5ver. They're in a high risk group due to their employment. Make them pay 75% and much higher salaries to fill out the ranks is critical, especially in high crime areas.
    26 May 2010, 12:10 PM Reply Like
  • All are responsible: Politicians, Unions, and voters who keep putting the fools back in office. When a political leaders stands up and says no to more freebies, the voters put them back out of office. Those who continue to give out nice benefits are re-elected. Every politician knows that from a voting standpoint it is easier to raise taxes than it is to cut benefits. Voters are never fond of new taxes but they seem to be willing to except them over reduced benefits. Unions don't help. I blame voters more than any other group because ultimately the voters should have stood for sound policy, but at the end the day, voters, like politicians, are only looking out for themselves and don't seem to care how it impact others or younger generations. Thank you baby boomers for the wonderful debt that you left me, my brother, sister and children. We look forward to a reduced standard of living because of all of you. Job Well Done.
    25 May 2010, 10:55 PM Reply Like
  • Yes, we can blame them. Teachers and public sector workers are as greedy and self centered as any wall street banker. At least the bankers do what their clients ask and make their own money. Oh yes, and if they don't deliver they actually get fired!

     

    There's a simple solution; fire all the teachers and offer to re-hire them back at a sustainable wage at which the budget balances. If not, don't rehire them, cut taxes and people can send their kids to private school, where they actually get an education.

     

    To the average taxpayer - learn how to minimize your taxes!! Whatever you pay will be wasted by definition by politicians and public sector employees. I don't blame voters so much, because actually you don't have much of a choice - democrats fell over themselves to invade Iraq with zero regards for the consequences, and y'all are stuck with the bill.
    25 May 2010, 11:12 PM Reply Like
  • Has anyone noticed that, despite the calculated liability shortfall, the State of California could sell less than 1% of its equity positions in the teacher's fund to cover its budget deficits?

     

    If you look carefully at the detailed asset side of most government entities, I suspect you will find that the moaning of budget shortfalls might be able to be addressed in the manner of us common folk as in selling to make ends meet; but what do I know as I'm sure there are more reasons than politicians can mouth for reasons not to do this.
    27 May 2010, 12:07 PM Reply Like
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