Tuesday, October 26, 2010

Solve the budget crisis: End (most) public pensions

I had a pension 30 years ago. I had it for two or three years and then the law changed. I don't know exactly why; I've never been a pension lawyer. As I recall it, though, the partners in my firm couldn't put what they wanted in their pension accounts without putting substantially more in each of their employees' pension accounts. So the pensions were all scrapped. I am pretty sure that they cashed us out when they killed the pensions: That chunk of change (sadly) remains the largest single piece of my retirement savings.

We can talk about my poor retirement planning some other time.

Today, though, I want to talk about pensions. I don't have one. I don't know anyone in the private sector who has one. My wife was enrolled in a pension plan when she started to teach full-time for the Archdiocese of Chicago -- but that plan was scrapped a couple of years later. They still take money out of my wife's check, but it gets invested in money markets and things like that, subject to the perils of market fluctuation.

The only people I know who do have pensions are public sector employees. Bureaucrats, public school teachers, bus drivers, garbagemen, cops, firemen....

Public pensions are a sweet deal:
For most public sector employees, at least here in Illinois, one need only put in 30 years and reach the age of 50 to pull a full pension -- a large percentage of your highest pay anytime in the four years preceding your retirement. Many school superintendents, for example, get huge one-time bonus payments on the eve of their retirements -- thereby greatly enhancing their pensions. My friend Steve, who pulled his pension earlier this year, was able to stitch stints with the City of Chicago and Cook County to reach his 30 years. And he was 'forced' to retire in that his boss cut his pay four years ago -- making it vital that Steve pull his pension this year or take a significant 'hit' in his pension payouts. A lot of the conversation among my contemporaries, when I was coaching at Bluejay Park, concerned pension issues. We were all turning 50. Most of the coaches had City jobs, or County jobs.

But I didn't. And I have no pension.

They've just changed judicial pensions in Illinois and a steady exodus from the bench has apparently begun as jurists pull their pensions. There is still a pension in place, but it is a thin and pallid thing, from what I'm told, over what there was before. But however wispy a weed it may seem to those on the inside, it is a California redwood to one such as me who has no pension at all.

Anyway, pensions are a sweet deal for those who have them.

But there is a teeny, tiny problem: The entities that are legally committed to paying these pensions -- state, county and municipal governments -- are broke. Unfunded or underfunded pension liabilities are frequently cited as the biggest single reason why local governments are in such bad shape.

Thus, I make a modest proposal -- here in the relative safety of an anonymous blog, where I am less likely to be torn from my office by a torch-bearing mob of AFSCME activists and strung up from the nearest lamppost: End most public pensions.

We have obligations to those who have, in good faith, done their 30 years and pulled their pensions. Honor those obligations.

But for everyone else... just stop. No more contributions. If the folks with the sharp pencils say we can afford it, maybe we can reach back and continue funding pensions for those with 20... or 25 years' service already. Maybe. But for everyone else, we stop, just as pensions were stopped for me, my wife, and those of you (if you ever had one) who have worked only in the private sector. Public employees would get their proportionate share of the pension they'd earned before the switch, just like I got cashed out -- and my wife got a promise of (if I recall correctly) about $17 a month when she turns 65.

I would make two exceptions: Police and fire. Not judges. Not legislators. Not public defenders or state's attorneys. Not attorneys general. Not employees of the Clerk of the Circuit Court or the Bureau of Electricity or the Department of Aging. Not even for teachers. Only for police and fire. And only because these are analogous to military units -- men and women who put their lives on the line on every shift. The guy who stamps papers with a red stamp or a blue stamp depending on whether all the rules were followed is not in the same position -- even if the occasional paper cut hurts like the dickens.

This does not mean, I quickly add, that I would not happily accept a pension if, by some miracle, I ever did wind up on the bench. That's not hypocrisy; that's common sense. But we are in a budget crisis. I could save from a judge's salary if I had to. And so could all the other judges. Moreover, what one person does will not rescue the public pension system from ruin; I am suggesting a virtual abolition of public pensions to save the pensions of current retirees and rescue governments from their own generosity.

The public sector might even be able to afford some sort of continuing contribution, like the Archdiocese is making in the case of my Long Suffering Spouse -- as long as these are not guaranteed benefits. The 11% contribution that a lot of public employees make to their pensions now could be diverted to that sort of program. Of course, this would put public employees at the mercy of the markets, too.

Just like the rest of us.

Is this unreasonable? Am I being mean-spirited or reactionary? What do you think?


Dave said...

You are being realistic. Government entities down here are facing the reality that they haven't funded their pension obligations. From what I've seen and read, it seems a given that your solution is going to be applied to younger government workers for better or worse.

Anonymous said...

Why make pension exemptions to police and fire? You mention risk, "putting their lives on the line" but these public union jobs dont even make the top ten hazardous occupations list.
Besides, public safety pensions make up over 70% of municipal pension obligations, so if you're going to make a cut, it makes sense to start with the greatest abusers of pension entitlements, police and fire.

You're the reason real pension reform wont occur when you whore out your preferences to fire fighters and such.

because, when you state that governments are bankrupt, dont have the money, but then go ahead and make exceptions, no one takes you seriously.

Anonymous said...

The pensions that are in trouble have simply been mismanaged. That does not mean there is anything intrinsically wrong with a pension for public employees. All who you mention, not just fireman, perform an invaluable service to the public. And, the considerable amount that both I and my employer pay into my pension monthly, I will be lucky to get it all back in the form of a pension before I die.