No Party Reining In Reckless Public Pensions

CNBC came out today with some great coverage of the public pension crisis that almost* got it right while USA Today made it political and got it all wrong.

Governor Christie did not win a landslide victory in New Jersey because he successfully overhauled public pensions (he didn’t).  His substantial victory came from being on every news/late night/radio/infomercial spot his people cold book him on while I think I remember seeing his opponent on Larry O’Donnell once.  It came from having a lot more money and political endorsements (even from Democrats and unions) who naturally flock to a perceived winner who would be in a far better position to return the favors.  The proof of this is that the Democrats continue to control the legislature in New Jersey though they were equally inept in governing over their terms.

The public pension crisis was not created by any one party and it will not be resolved by any one party.  It grew out of vested interests believing they could get something for nothing and having nobody with any incentive to tell the truth to decision-makers with no inclination to hear the truth.  That situation will only change with a systemic overhaul of our system of elections and governing.  It will not be any party.

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* The problem with CNBCs coverage was that it covered so much ground which included some pertinent issues (fuzzy math like asset smoothing and 8% interest assumptions) while repeating trite pieces of purported wisdom (80% being an acceptable funded ratio and making only part of the ARC as the primary problem) without examination.  The breadth of the story shows their eagerness for reporting it but the last two paragraphs show how an innumerate media fails to do it justice:

The most drastic reforms also leave jurisdictions at a marked disadvantage when they go to recruit the next generation of police, firefighters and teachers. Because cuts to public pension plans haven’t been offset with wage increases, they leave public workers making about 20 percent less than their counterparts in the private sector, according to a Center for Retirement Research study.

“So you now have two people with the same human capital—and the one in the private sector makes 20 percent more than the one in the public sector,” said Boston College’s Aubry. “The question is how are you going to attract and retain quality public sector employees with that disparity?”

If public workers do make “20 percent less than their counterparts in the private sector” it does not mean that the worker “in the private sector makes 20 percent more than the one in the public sector” as we here all know.

3 responses to this post.

  1. Posted by Tough Love on November 19, 2013 at 10:20 pm

    Two comments:

    (1)Quoting …”The public pension crisis was not created by any one party and it will not be resolved by any one party. It grew out of vested interests believing they could get something for nothing and having nobody with any incentive to tell the truth to decision-makers with no inclination to hear the truth. ”

    While I agree, to the end of the 2-nd sentence, the following should be added. ………..

    “and gobs of campaign contributions and elections support to lose if they rightfully looked out for Taxpayer-interests and upset their Public Sector Union benefactors”

    (2) I VERY seriously doubt that ANY Public Sector worker in NJ would switch from materially overcompensated (via the total of cash pay + pensions accruals + benefits) even if their DB pension was frozen and replaced by a DC plan with a taxpayer contribution comparable to what the typical Private Sector worker gets from his/her employer.

    Example: In most of NJ’s towns, the lowest level Patrolman with only 5-7 years on the job make $110- $130K in BASE pay + overtime + allowances + a pension & benefits a Private Sector worker would give an arm for. There isn’t a snowball’s chance in hell that more that a very few % of that group have marketable knowledge & skills that could get anywhere even remotely near that compensation package in the Private Sector.

    The enormity of the overcompensation, and the cowardice of our elected officials to anything about it is incredulous.

    Reply

  2. Posted by Anonymous on November 21, 2013 at 9:29 am

    TL, I am in sales and there are actually a large numbers of retired LEO in this group(cars, software, etc) who do fairly well. Perhaps a skill learned from 25 years of dealing with a diverse group of people, conflict resolution skills, etc. Or plain language- they know how to BS people. Lol. Also have seen a large amount in the insurance industry who do OK. But yes, they probably made more when they were working as a cop. Although most don’t work as long as some of us younger guys in sales. Prob cause they got the pension to rely on.

    Reply

  3. This unambiguous rule is one reason that public pensions are facing such hard times: In better days, some cities and counties decided to raise pension benefits as a way of attracting or retaining workers. They are now stuck with those decisions.

    Reply

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