A cabal seems to have developed to counter the perception that there is a crisis in the funding of public pension plans and they fancy themselves as defending public employees. Nothing could be further from the truth.
Dean Baker, co-director of the Center for Economic and Policy Research and point-man for this movement, blogs that the “[Washington] Post made yet another effort to attack public sector employees today in an editorial (this one is on its editorial page) that criticized the rate of return assumptions used by public pension plans” and then goes on to quibble about the 20-year growth rate of the S&P, contending that it was 6.46% and not 5.69%, ignoring the fact that the majority of public plans (that we know about) don’t have a 20-year time horizon for long-term investments. These funds are paying out 10% (New Jersey) to 20% (Philadelphia) of their remaining assets annually to retirees and sponsoring governments are being allowed to low-ball contribution amounts (when they are not ignoring them entirely).
Were Mr. Baker et. al. truly concerned about public employees and the solvency of their pension funds they would be calling to infuse more money into the plans instead of seeking to justify the status quo. They have no such concern. Public employees are pawns to them and their main interest lies in protecting their benefactors. Just look at their roster:
- National Governors Association
- National Association of Counties
- Council of State Governments
- National Conference of State Legislatures
- National League of Cities
- United States Conference of Mayors
- International City/County Management Association
- National Association of State Budget Officers
- National Association of State Auditors Comptrollers & Treasurers
- Government Finance Officers Association
- National Association of State Retirement Administrators
These are all front groups for the feckless politicians who are truly attacking public employees.
Burypensions Blog 
Posted by Larry Littlefield on March 26, 2011 at 5:12 pm
You said it.
Of course, thanks to retroactive pension enhancements, public employees and retirees and the unions share the guilt. Their share of the guilt varies from place to place. In New York City, it is very, very high but in New Jersey less so.
Posted by Tough Love on March 27, 2011 at 12:38 pm
John, The excessively generous (vs comparable Private Sector employees) level of past and current benefits is the root cause of the problem … as adequately funding such generous benefits is very costly.
The focus needs to be on a significant decrease (50+%) in the rate of pension accrual for current employees….. and overriding any “opinions”, regs., or laws that block such reductions. It won’t address the current unfunded liability, but at least the hole will stop growing.
Posted by muni-man on March 27, 2011 at 5:21 pm
When the publics are pushing for actual tax increases to try to maintain their hegemony at the expense of the private sector TP, the situation starts becoming surreal – theatre of the absurd at its finest. The “We pay taxes too” mantra they sing is pure
BS since they know any state/local-related taxes they pay are nothing more than a benign form of transfer payment that eventually comes back into their pockets downstream in some form, after myriad launderings thru Trenton et.al. The inexorable vice of economics is now starting to squeeze them though. They will either have to accept big concessions in wages/pensions/benefits or there are simply gonna be a helluva lot less publics on payroll nationwide. Don’t care either way as long as taxes stay flat.
JB, the S-L says that Moody’s put UC on credit watch with negative implications. Don’t know it means that much, but maybe it’ll give them a financial wedgie of sorts.
Posted by Peter A. Quilici on March 27, 2011 at 7:52 pm
Consider the part state and local government employee pensions and other retirement benefits played in ongoing mortgage foreclosure crisis.
I’m from the school of thought that the federal government intentionally created the residential housing bubble. Decent paying jobs for the less skilled had migrated offshore, and the US needed a source of significant employment and economic activity that could not be outsourced. Housing was the perfect choice to maintain the middle class dream, at least temporarily. Think about it. There are just too many agencies in the federal system to allow creation of loans destined to failure (eg, liar loans, no money down loans to borrowers with little cash flow) and then package them up into bonds categorized as “investment grade.”
But why didn’t state authorities intervene? Because states like Illinois and New Jersey bleed their citizens via property taxes and other fees which increase with the price of property. While the game went on, the property assessments went up along with take on taxes assessed against the flippers. And the other taxes generated by the economic activity just rolled into the state and local treasuries.
And those fine folks at the government employee union halls wanted theirs. So more promises were made, while everybody with half a brain knew an accounting would arrive.
So rather than protect their less savvy citizens from a federal government plan to create jobs hatched in a dark part of fiscal hell, state and local government and their employees got theirs.
The now deceased writer for the Chicago Tribune created an unofficial motto for Chicago: Ubi est mea. That’s Latin for “Where’s mine.” I guess it has national application.
Posted by Tough Love on March 27, 2011 at 8:31 pm
This would all be manageable if Public Sector pension weren’t protected with a one-directional ratchet … what goes up can never go down.
The Private Sector has no such “protection” and neither should those in the Public Sector.
Posted by javagold on March 28, 2011 at 3:52 pm
correct !…if they lost every dollar left in the pension ponzi scam in the market, the taxpayers would STILL be on the hook !
Posted by Tough Love on March 28, 2011 at 4:52 pm
John seems to focus on the lack of funding, that being an abrogation of our elected officials responsibility. While very true, I look at the MAIN abrogation of their responsibilities as being the approval of these excessive pensions to begin with, and that TAXPAYERS shouldn’t be on the hook (via increased taxes) for any pensions which when combined with cash pay lead to total compensation in the Public Sector greater than that of the comparable Private sector worker.
With Cash pay roughly equal in the 2 Sectors, and Public Sector pension 2, 4, even 6 times greater, I’d bet EXISTING Plan assets could fund pension sufficient to produce equal total compensation.
If that’s accurate, I’m against taxpayers making up for existing funding shortfalls. Of course THAT reneges on accruals for PAST service, is VERY hard to take back, and raises other fairness issues.
My real PURPOSE of stating a rationale for not even funding these (for PAST service) … is to point out COMPLETELY absurd it is to allow FUTURE service accruals to continue at their grossly excessive rate.
Posted by "New Jersey Is A Freak" | Alabama News | Alabama Breaking News Headlines | Alabama News Directory on March 30, 2011 at 2:03 pm
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Posted by Wedge on April 1, 2011 at 6:30 pm
I read an article that said the state of NJ had forgone around 45 billion in pension contributions since Gov. Whitman. Remember an article in Time where she said if they did nothing else they’d have an extra 100 billion–that’s where the prop tax rebates came in.
The state won a court case in March 2010 in which it argued the fund was sound for 30 years AND while they had flexibility on the timing to pay pension contributions–they were owed.
Never has a judge ordered a pension be reduced, and it isn’t going to happen in NJ because the state has the means to bond this debt over many years, which is less harmful than reducing pensions. Where were all the people when Gov Whitman changed the plan snd stopped contributing–oh yeah, cashing their checks.