Usually it takes a national government to spend itself into a debt measured in the trillions. Yet it comes as little surprise that the same profligacy that pervades the corridors of federal power infects this country’s 87,000 state, county and municipal governments and school districts. By 2013, the amount of retirement money promised to employees of these public entities will exceed cash on hand by more than a trillion dollars.
That’s according to the Center for Retirement Research at Boston College, which earlier this month released a troubling analysis of 126 state and local pension plans. The center’s researchers found in the wake of the stock market collapse that measures of pension program solvency hit a 15-year low with no signs of improvement on the horizon. This means taxpayers will be left picking up the tab.
The reason pension plans are headed toward financial disaster is simple. Ever-expanding public-sector unions have flexed their political muscle and larded up with lavish benefits to be be paid out decades from now. In a properly run,private-sector business, future retirement benefits are paid for using present-day contributions. This is not the case when lawmakers have the power to boost public-employee benefit packages while using accounting gimmicks to conceal and pass on the debt to future generations.
California’s public-employee retirement system stands in the most perilous condition, facing a half-trillion in unfunded liabilities. That’s not surprising when you consider a California highway patrol officer can retire at age 50 and collect up to 90 percent of his salary for the rest of his life. According to the agency’s website, a typical officer’s pay will reach $109,147 after just five years on duty - an amount that can rise significantly with overtime benefits. That means a fit and healthy 50-year-old “retiree” who began work at age 20 would receive $98,232 a year from taxpayers for the rest of his life, and nothing prevents him from taking another government job to collect two paychecks. This form of double-dipping is rampant.
While most private-sector firms have trimmed their work force during the recession to achieve more efficient and profitable operations, public agencies have expanded. State and local governments employ about 15 million individuals, a figure that has jumped up 40 percent from 1992. By 2016, the number of state and local bureaucrats is projected to reach 20 million. Too many of these people are being promised far too much money, leaving state and local systems as bankrupt as Social Security, Medicare and other multitrillion-dollar federal entitlements.
To his credit, California Gov. Arnold Schwarzenegger considers addressing his state’s “pension bubble” to be one of his top priorities. On Wednesday, he introduced legislation that would raise the full retirement age for new police hires to 57 and reduce the benefit paid in our example to $88,409. It also would reclassify billboard and milk inspectors as “miscellaneous” employees, instead of “safety” workers entitled to bigger handouts.
Despite the modest nature of the proposed changes, it’s unclear whether California lawmakers have the backbone needed to pass the measure over the objection of the all-powerful union voting bloc. The rest of voters across the nation, the ones who will be paying for this mess, need to wake up and encourage legislators to reform public pensions before it’s too late.
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