The public pension crisis is getting a lot of attention but unfortunately some of it is from those using it to push their predetermined agendas. For example, Steven Rosenfeld at AlterNet came out with an article this week regurgitating four of the falsehoods that have been making the rounds:
1. Courts, politicians and corporations are all working together to chip away at deferred wages: reducing pensions or eliminating promised healthcare, or both.
Yes they are working together but to cope with a situation that has arisen from decades of fiscal malfeasance. Don’t confuse people trying to solve a problem with those who engendered it just because they may look alike.
2. Said simply, they’re looting retirements and pushing people toward poverty.
Not all pensioners are being pushed into poverty. What about those politicians and their cronies who attach to themselves public pensions like another spoil of office? In New Jersey I doubt that former governors Brendan Byrne who gave us the income tax, or James Florio who gave us pension gimmicks and tax hikes, or Christie Whitman wh0 gave us contribution holidays and Pension Obligation Bonds will be on any bread lines were their ill-gotten pensions to be slashed. There are plenty of government retirees out there who did not work hard to ‘earn’ their pensions and the hard-workers are even (especially) aware of them.
3. A pension in the city [Detroit] averages $19,000.
Wrong! As of 6/30/12 the average payout from the General Retirement System was $19,213 but the average payout in the Police & Fire plan was $30,607 and the overall average payout was $23,935 though the $19,000 amount has been picked up by those who see that as a better number to publicize for their purposes.
4. The same retirement industry that dismantled pensions would love to dismantle that program and have a crack at the assets.
Nonsensical beyond words. If there is a retirement industry out there that wants a “crack at the assets” then there is nothing they would want more than to have had politicians be responsible and put in that $4 trillion that public pensions have been shortchanged over the years so they could invest it.
Burypensions Blog 
Posted by skip3house on December 11, 2013 at 5:48 pm
I doubt math favors any political view.
Posted by bpaterson on December 11, 2013 at 6:15 pm
#4 is indeed non-sensical which brings their whole argument into question since they obviously do not even know how pensions get invested. They already are invested in the “pension industry” and have oversight by the “pension industry professionals” on many of the types govt pension. So youre right JB1, the pension industry would have been clamoring throughout the years that the pensions be fully funded so they could have gotten their hands on ALL the money.
To Steve Rosenfeld: Agendas are like you-know-what, everyone has one…and you are a you-know-what for muddying the waters of the true problem.
Posted by brookyn91941 on December 11, 2013 at 7:06 pm
I don’t know who Steve Rosenfeld is nor do I care, but I don’t appreciate you’re smearing this as liberal propaganda. Sure there are both liberals and conservatives at fault. Having been a pension consultant (from the investment side) for 30 plus years, both sides never dealt with the issue in a responsible manner. I still advise several public pension plans. The investment objectives were never realistic nor were the benefits. The actuarial industry also shares in blame. Nobody ever feels that long periods of underperforming markets are possible. While I feel for many public employees that signed on to deal they thought were guaranteed. Now we are starting to see, using Detroit as an example, that those guarantees are in question.
Politicians always take the easy way. Over the years they traded future benefits for current cash. Now we are in the future. GM did that 30 years ago, and we know what that outcome was. Many public defined benefit plans are grossly underfunded , as you have pointed out many times. I think there are many more Detroits’ out there, possibly even our fair state. The benefits promised were ludicrous, maybe some sanity will emerge? Being cynical, I doubt it.
Posted by Tough Love on December 11, 2013 at 10:23 pm
Quoting Falsehood #1:
1. Courts, politicians and corporations are all working together to chip away at deferred wages: reducing pensions or eliminating promised healthcare, or both.
Your response:
Yes they are working together but to cope with a situation that has arisen from decades of fiscal malfeasance. Don’t confuse people trying to solve a problem with those who engendered it just because they may look alike.
Here’s a response I feel is more direct:
Yes they are, but such reductions are eminently necessary and justifiable because these extraordinarily & unnecessarily generous and unsustainable pensions promises were only granted because of the collusion between the Public Sector Unions and our self-interested elected officials, trading campaign contributions and election support for favorable votes on pay, pensions, and benefits.
Posted by skip3house on December 11, 2013 at 10:36 pm
Come up with a system to ‘back tax’ for services used years ago with no sufficient pension/medical funding?
Posted by Tough Love on December 12, 2013 at 2:29 am
Sure, but only AFTER we get all current retirees (and the survivor beneficiaries and heirs) to return (with interest) the significant incremental portion of the pensions derived from such Union/Politician collusion.
Posted by skip3house on December 12, 2013 at 9:33 am
Kind of like blaming the illegal immigrants, when we certainly had the means to block their entry. Just as they are here, the pensions/medical have been paid to the present time in spite of 8th grade arithmetic logic.
As practical, go after the groups who received the big tax breaks for ‘under-taxing’ back then, for services rendered then.
Posted by Tough Love on December 12, 2013 at 2:08 pm
If we look at the TOTAL taxpayer-funding over the years, I’ll bet that together with investment earnings and the employee contributions that have been made, a pension COMPARABLE to that granted the typical Private Sector worker (as a % of cash pay) would be fully funded today.
The fact that their grossly EXCESSIVE pension promises are materially underfunded should be THEIR problem, NOT the Taxpayers problem to deal with.
Greed HAS consequences.
Posted by bpaterson on December 18, 2013 at 4:49 pm
while the govt employees satisfied their end of the bargain for the work performed, the taxpayers satisfied their end of the bargain for paying for that work’s cost. The taxpayers are indemnified in this as tough love says, it is the people that are the govt, right? So where did all this money in obligations go?
BTW the people while they paid their obligations annually through the tax structure also complained heavily while they did it, and we all recognized that NJ was and is the highest taxes state in the nation. Is anyone saying that we were supposed to be paying even higher taxes? That’s ludicrous, and if so this broken and future forecasted bankrupt system would have been stopped long time ago. Again the questions: where did all this money go? was there a collusion in making this money disappear behind the taxpayers backs? who was colluding with this money while the highest taxed state’s taxpayers paid their debts annually?
I have noted this before, Corzine was onto something, and as a taxpayer i am empathetic to the govt workers plight so as a compromise: sell the turnpike, place whatever monies into the pensions and health benefits funds for them to distribute amongst themselves, and call it a day. All parties take some pain.
Posted by Tough Love on December 19, 2013 at 2:24 am
bpaterson,
Considering the Union/politician self-interested COLLUSION in granting such grossly excessive, unnecessary, and unjustified pensions, selling the NJ Turnpike (or any other asset that rightfully belongs to ALL of NJ’s citizens, and NOT just Public Sector workers) would be grossly unfair to NJ’s Taxpayers.
The TPK is an asset, little different than cash,and considering the collusion that caused this mess, the Public Sector UNIONS/workers deserve the TPK no more than they deserve more of our cash….which is ZERO.
Posted by Javagold on December 12, 2013 at 12:36 pm
a bird in the hand, is worth two in the bush….
I will gladly pay you Tuesday, for a hamburger today….
If you don’t hold it, you don’t own it…..
Posted by Irv Cohen on December 16, 2013 at 2:06 pm
The concern about underfunded pubic retirement funds has been blown way out of proportion. There essentially is no problem for 99% of these public funds. For the funds to run out you would need to layoff 100% of the current employees and start paying them their earned pension fundsalong with the past retirees. Than the funds would be underfunded since in about 25 years the funds would run out, or longer, depending on investment earnings.
What needs to be looked at is the law passed by Congress; more than 25 years ago that required private and public entities fund their retirement funds at 100%. This law was needed since certain private companies who had financial problems raided their retirement funds and went bankrupt which left no funds available for their retirees.
Most public entities, including School Districts, are funded at over 70%.
Because of the above law more public funds are being forced to go into the pension funds rather than pay for much needed services for the poor and students.
It is highly unlikely than any public entity or School District willlay off100% of their employees. The law needs to be refined that recognizes different requirements for public and private entities.
Posted by Tough Love on December 16, 2013 at 9:19 pm
Quoting…”There essentially is no problem for 99% of these public funds.”
You’re delirious.
Quoting…”For the funds to run out you would need to layoff 100% of the current employees and start paying them their earned pension funds along with the past retirees. ”
You’re COMPLETELY clueless.
Quoting…”What needs to be looked at is the law passed by Congress; more than 25 years ago that required private and public entities fund their retirement funds at 100%. ”
The law you are referring to (ERISA), never applied to Public Sector pensions
Posted by Big Pete on December 16, 2013 at 2:54 pm
You want to know how to keep a public pension strong? Keep the governments hands out of it! I live in the state of Wisconsin which has been designated as the #1 public pension in the country. When the pension fund was started the rules were set. The first rule was that the governor and legislature could NOT borrow from the state pension. This rule was broken once when a republican governor took pension money out for a state project. He was promply sued by the workers(both union and non-union). The results went to the state supreme court that backed the workers and the state was ordered to return the money with interest. What the court stated was —- THIS IS EMPLOYEE MONEY—– not the states. From what I’ve read most states are using this as a giant piggy bank to bank role state projects and IOU’s were left for the employees. Now that those IOU’s are coming due the states are looking for ways to back out of their obligations. In the history of our state the pension fund has never asked it’s taxpayers for one extra penny to sustain the present pension system.
Posted by burypensions on December 16, 2013 at 3:00 pm
It’s not necessarily the money stolen, it’s the money that should have been put in that wasn’t because everyone had an interest in believing in those phony contribution amounts. Wisconsin is no exception:
Posted by Augustus Roberson on December 16, 2013 at 5:08 pm
… For you and me to receive and equivalent payout in retirement we would have to put $80,000 into our RRSPs each year for 10 years.
Posted by MJ on December 16, 2013 at 7:18 pm
The problem doesn’t seem to be that the money wasn’t put in, the problem seems to be that the promises were so overly generous and unrealistic that the full contributions could not be put in because the money was never there to begin with even with the outrageous property taxes we pay in NJ…not to mention the corruption, idiots in office who don’t understand basic math and the publics who keep voting them into office on the hope of a promise.
Posted by Tough Love on December 16, 2013 at 9:21 pm
Bingo ………. YOU get the prize for correctness!
Posted by MJ on December 16, 2013 at 7:20 pm
Just read an article in the OC Patch about the 3rd or 4th life guard filing a law suit against the city. Guess what? Life guards get pensions too it seem. And the idiots wonder why there isn’t any money left for anything else. Did anyone else know that seasonal life guards in small shore communities get pensions?
Posted by Tough Love on December 16, 2013 at 9:50 pm
A MAJOR flaw in NJ’s pension rules (and similarly, in almost all PUBLIC Sector pensions) is the crediting of one year of service credit after earning a minimal amount of money in the year. In NJ i believe it used to be $2,500,but was recently increased to $7,500.
In the PRIVATE Sector,Plan Sponsors realize that “pensions” are VERY expensive to provide and should be reserved for substantially full-time employees …or at least certainly NOT for part-time employees. Private Sector Plan sponsors accomplice this by including Plan provisions (allowed by ERISA) that give zero service credit in a Plan-year until the employee has worker 1,000 hours in that year.
It is WAY too easy for VERY part-time Public Sector workers (including Town Councilpersons,Freeholders,etc.) to earn $7,500,but considerably harder to DOCUMENT 1,000hours of PAID service.
And of course like WAY too many decision in government, it’s like this because governments aren’t spending THEIR money (as are Corporations that sponsor pension Plans). They are spending Taxpayers’ money,and while doing so, making lots of friends and curing lots of favors……all on the Taxpayers’ Dime.
—————————————————–
And the above structure….the multi-year accruing of service credits based on minimal work…..often results in the well-connected (and what long-term Public Sector Councilman or Freeholder type isn’t?) getting a high-paying full time position for three years and then collecting a NJ pensions based on the high full-time income and NO LESS THAN IF THEY WERE A FULL-TIME EMPLOYEE IN ALL OF THEIR SERVICE YEARS.
If pension reform were for real. nonsense such as this would end and FUTURE Service-Year accruals would be based on the 1,000-hour rule, and NOT just for new employees, but for ALL CURRENT employees.
Posted by Tough Love on December 16, 2013 at 10:43 pm
Seems I forgot to mention something important. While the Public Sector worker in NJ gets a FULL YEAR of service credit once earning $7,500 in the year, the participants in most Private Sector Plans earn service credit uniformly over the Plan year (with typically about 2,000 hours of service needed to earn a FULL YEAR of service credit, but with ZERO credit until you reach 1,000 hours. EXAMPLES: If your work 1,500 hours, you only get 1500/2000=75% of one year of service credit. If you work 800 hours,you get zero service credit,
There is a very clear logic to the rules PRIVATE Sector employers use (you must EARN the service credit factored into your pension) ….but almost no logic at all in the procedures followed by PUBLIC Sector Plans (heck,it’s Taxpayers’ money so lets take all we can get).
Posted by skip3house on December 17, 2013 at 3:32 am
For many years this blog has commented about this abuse of time served. A former Middlesex NJ mayor was but one example. Many professionals like lawyers, too.
Many of us agree the abuse can only be wiped out by changing all present, future, and past public employees to benefits from actual contributions of money from pay checks and actual government funding, not promises.
“Only a pension/medical fund balance on your pay stub, actually audited, is proof the fund exists” should be the reality.
Posted by Tough Love on December 17, 2013 at 12:13 pm
What you are describing is a Defined Contribution (DC) (401K-style) Plan….and I wholeheartedly agree that shifting ALL current employees to DC Plans for FUTURE Service is not only one of the best reform options available, but in many places,the ONLY one that “may” prevent a catastrophic reduction in services, increased taxes (encouraging productive tax-paying residents to move away) AND failed DB pension Plans with pension reductions. Such a change (with a modest DC Plan as a replacement) stops digging the financial hole we are in even deeper.
And even if we do so, we will STILL have to deal with (in some places via Bankruptcy) the unfunded liability for PAST Service accruals…..no small challenge