Why Aren’t 100% ARC-Payers 100% Funded?

A good question that meep asks in a recent blog piece.

Having pulled together pension data on Union County participants in the the New Jersey Police and Fire (PFRS) and Public Employee (PERS) Retirement Systems where the local governments do have to put in 100% of their Annual Required Contribution (ARC) an answer emerges.

Local governments get a bill for their annual pension contribution that currently breaks down as follows:

Plugging in the 2017 numbers for PFRS:

Normal Cost by locality as a percentage of salary:

PERS numbers being starker:

There are also employee contributions going into the plans (10% for PFRS and 7.34% for PERS) but the propaganda line to taxpayers here is:

Contribute 2% of a PERS employee’s salary and you cover your part of their pension.

As it turns out the actual 2017 contribution works out to 14% of a PERS employee’s salary with 85% of that amount mostly attributable to willfully flawed assumptions for all those priors years that will continue to be misused until inevitably the money runs out.

70 responses to this post.

  1. Posted by rdquinn on August 30, 2017 at 5:25 pm

    Total pension funding as a % of payroll is about twice that of a good private pension plan. Total compensation of public employees in the US is 44% higher than the private section and NJ is no exception. State workers deserve a fair compensation package, but that package should reflect the packages of the states largest private employers and no more. It would be better for taxpayers to increase cash compensation to accomplish that.

    Reply

    • Posted by S Moderation Honestly on August 30, 2017 at 7:38 pm

      No, total compensation of public employees is not 44% higher.

      From the last BLS Employer Cost for Employee Compensation (June, 2017)

      “Total employer compensation costs for private industry workers averaged $33.11 per hour worked.
      Total employer compensation costs for state and local government workers averaged $48.24 per hour worked.”

      That is 46% higher, but that is the infamous “apples to oranges” comparison, suitable for those like Breitbart, and the Cato Institute.

      Real economists use the human capital method which compares workers with similar education, experience, age, marital status, and other demographics.

      Since you mention “largest private employers, though, check out the employee cost for “Private industry, by establishment employment size” of 500 or more. (Table 8 on the link below) $48.70 per hour, slightly higher than the $48.24 per hour for state and local workers.

      https://www.bls.gov/news.release/ecec.nr0.htm

      Most highly recommended study on state worker vs. private sector compensation…

      http://www.aei.org/publication/overpaid-or-underpaid-a-state-by-state-ranking-of-public-employee-compensation/

      If you’re wise, you will not take any one of these sources as gospel. Read several and use common sense and discretion.

      Then, if you are certain you understand the difference between private and public compensation… you probably got it wrong.

      SMH

      Reply

      • Posted by Tiugh Love on August 30, 2017 at 8:34 pm

        A very RARE instance where SMH is correct.

        Public Sector “Total Compensation” is NOT 46% higher, but it is (OVERALL) considerably higher than that of COMPARABLE Private Sector workers. The % by which it is higher (in 42 of the 50 States … by up to 42%-of-wages) or lower (in 8 of the States ….. by up to 6%-of-wages), based on data about 5 years old, can be found in Figure 6 in the following AEI Study link:

        https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwja78jT3P_VAhXrz1QKHfiXD6QQFggmMAA&url=https%3A%2F%2Fwww.aei.org%2Fwp-content%2Fuploads%2F2014%2F04%2F-biggs-overpaid-or-underpaid-a-statebystate-ranking-of-public-employee-compensation_112536583046.pdf&usg=AFQjCNEgBoTiN5n3CzTH49fPGFtEW8Bs8A

        Here are the details for SMH’s home State of CA and for NJ:

        In CA, there is a Private Sector “wage” advantage of 12% of wages (from AEI study Figure 1), that changes to a Public Sector Total Compensation advantage of 23% of wages (from AEI study Figure 6).

        In NJ, there is a Private Sector “wage” advantage of 4% of wages (from AEI study Figure 1), that changes to a Public Sector Total Compensation advantage of 23% of wages (from AEI study Figure 6).

        It’s just a coincidence that both CA and NJ show the SAME 23%-of-wages PUBLIC Sector “Total Compensation” advantage for all workers taken together………. but it is VERY meaningful.

        Taxpayers ……… how much more would YOU have for YOUR retirement needs if YOU had an additional 23%-of-wages every years to save and invest throughout your career ? An extra $500,000, $1 Million, perhaps $2 Million ? Well, THAT is a good estimate of how much Taxpayers are (on average) OVER-COMPENSATING each and every CA & NJ Public Sector worker over their career.

        Reply

      • Posted by rdquinn on August 30, 2017 at 9:42 pm

        According to BLS data on benefits spending my figures are correct and it has been that way for a long time. Having evaluated state worker benefits several times I know first hand how generous they are. When it come to federal workers it’s even worse. Their total comp ranges from 90% higher for lower paying jobs to 20% for advanced degree levels.

        Reply

      • Posted by rdquinn on August 30, 2017 at 10:00 pm

        None of what you say real economist use is relevant. The fact is that generous benefit programs from sick time to defined benefit pensions far offset and any lower cash compensation and are subject to more uncontrollable costs than wages. Private workers rarely have a pension whereas 80% plus of government workers do. Fifty years managing employee benefits and serving on three governors task forces to evaluate compensation provide a bit of common sense in this area. Taxpayers most of whom have modest or no benefits can’t afford to pay for something for others they don’t have.

        Reply

        • Posted by Tiugh Love on August 30, 2017 at 10:10 pm

          Welcome rdquinn………. we certainly are short of those who recognize the ludicrous level of CURRENT Public Sector pension and benefit promises (EVERYWHERE).. And if you have ….”Fifty years managing employee benefits and serving on three governors task forces” I’m sure you will bring valuable insight to the discussion.

          Since you are new here, S Moderation Honestly* is the resident denier of excessive Public Sector compensation. He a retired CA Public Sector worker who among other things was responsible for changing light bulbs.

          * S Moderation Honestly goes by a variety of Handles….. S Moderation Honestly, S Moderation Douglas, S Moderation Anonymous, Anonymous (occasionally), and I believe the person commenting under “Earth” is also S Moderation Honestly.

          Reply

          • Posted by Tiugh Love on August 30, 2017 at 10:23 pm

            Oh, and so there is no misunderstanding………….. I am NOT the host of this BLOG (that person being John Bury, an Actuary practicing in NJ), and my above “welcome” is just MY welcoming someone with your perspective and apparent qualifications.

            I am simply a long time commentator on this (and other) BLOGS where I (as a Fed-UP NJ Taxpayer) STRONGLY advocate for very material Public Sector pension reform. Via years of experience and both formal and on-the-job education, over a decade ago I became aware of the extreme generosity (and hence cost) of the Public Sector pension/benefit promises that have been granted by Elected Officials who gleefully trade their favorable votes on Public Sector pay, pensions, and benefits in exchange for BRIBES disguised as campaign contributions and election support. I have no other dog in this fight.

      • Posted by George on September 1, 2017 at 3:40 pm

        “Real economists use the human capital method which compares workers with similar education, experience, age, marital status, and other demographics.”

        Once criticism of government employment practices is they require over credentialization. That is the civil service tests and demands for educational attainment are much more than the jobs require.

        Some private sector pay is due to the fact that you must commute to work in nyc, as opposed to working for county government.

        Comparing seniority of government workers who have union protections with private sector workers, who attain seniority by being better than younger employees, misses the point.

        But this misses the point. What to do about underfunding of the NJ government pension scheme. What ever the value of a currently working government worker today, retired government workers are not policing, rescuing, inspecting, or whatever. How to pay for current retirees is the problem.

        Reply

        • Posted by Tough Love on September 1, 2017 at 11:08 pm

          Or the better option …. expending our energy in figuring out how to pay less than was “promised” ……………. far far less.

          Why SHOULD taxpayers pay for pensions that are ROUTINELY 2 to 4 times (4+ times for Safety workers) greater in value upon retirement than those typically granted comparable Private Sector taxpayers?

          Especially with their having been granted by NJ’s self-serving, vote-selling, contribution-soliciting Elected Officials more than willing to trade their favorable votes on Public Sector pay, pensions, and benefits, for BRIBES disguised as campaign contributions and election support.

          Reply

  2. Posted by S Moderation Honestly on August 31, 2017 at 12:05 am

    Good to see that you recognize the difference between lower level jobs and the advanced degree levels. The same relationship occurs in state and local compensation, to different degrees, of course.

    For federal compensation, according to the latest CBO study…

    Among workers with a high school diploma or 
    less education, total compensation costs averaged 
    53 percent more for federal employees than for their 
    private-sector counterparts.

    Total compensation costs among workers with a 
    professional degree or doctorate, by contrast, were 
    18 percent lower for federal employees than for similar 
    private-sector employees, on average.

    Biggs said, although he had some “quibbles” he generally agreed with the CBO (they used the same “human capital” method he used in federal as well as state/local compensation.

    I wouldn’t quibble quite so much, either. Often the argument I hear is “there’s two retired firemen on my street…yadda, yadda, yadda.

    Having said that, no way am I buying…

    “Total compensation of public employees in the US is 44% higher than the private section and NJ is no exception.”

    Even TL is locked in on 23% in NJ, and CA (33-34% with the value of job security). It got carved in his/her cranium as if engraved in stone.

    Perhaps you’ve read Ed Ring of California Policy Center, who claims California public workers earn twice as much as the private sector.

    rdquinn, you said you rely on BLS data, and public package should reflect the packages of the states largest private employers and no more. 

    Did you read the link from BLS stating the cost of state/local employees is $48.24 per hour worked, and the cost for private workers in establishments of 500 or more is $48.70 ?

    Do you have an opinion on that? I happen to believe it is misleading, but perhaps for different reasons.

    On one thing I agree with Tough Love; welcome to the board.

    SMH

    Reply

    • Posted by Tiugh Love on August 31, 2017 at 12:25 am

      Quoting SMH …………

      “Total compensation costs among workers with a
      professional degree or doctorate, by contrast, were
      18 percent lower for federal employees than for similar
      private-sector employees, on average.”

      Yes, only IF they work as many hours/wk and are as “productive” as their Private Sector Counterparts ….. which I seriously doubt.

      I know MANY Private Sector CPAs, attorneys and high level “professional” executives, MANY of whom routinely work 60 hours/wk. Call me a skeptic, but I really doubt that Public Sector employees in such occupations put in the same hours (or are as productive per-hour-worked). Billing clients by the hour (as many Private Sector Professionals do, tends to force a higher degree of “productivity”.

      Reply

      • Posted by Anonymous on August 31, 2017 at 12:39 am

        You are a skeptic, but.

        Reply

      • Posted by Seesaw Junior on August 31, 2017 at 11:52 am

        Yes, only IF they work as many hours/wk and are as “productive” as their Private Sector Counterparts ….. which I seriously doubt.
        You CANNOT compare ANY “profession” (jobs requiring a college degree, many a graduate degree) in the private sector to the public sector. These are “exempt” employees not subject to overtime in the private sector. Lawyers in the private sector work 70-100+ hours per week, most 6 days per week. So do CPA and doctors. In the public sector they work at most 40 hours per week. CA judges, who have a base salary of $182K-$220K PLUS benefits, work less than 40 hours per week (99% only work half days on Fridays). NO pubic sector attorney works these hours, and if they do they are paid overtime.

        Reply

      • Posted by Anonymous on August 31, 2017 at 5:32 pm

        not doubting your statistics, but when you say CPAs and Lawyers typically work 60 hours per week (perhaps true), they also do mostly in their pajamas at 10:00 PM while watching Game of Thrones.

        Reply

  3. Posted by Earth on August 31, 2017 at 12:35 am

    Earth to SMH:

    Tough Love is not the host???

    Then why is Tough Love always telling people they “asked the wrong question”?

    Maybe Anonymous knows?

    Can’t tell the players without a program.

    Reply

  4. Posted by S Moderation Denier on August 31, 2017 at 1:43 am

    Tough Love, for years I have read people who insist all public employees are overpaid because they “know this guy” on their street who retired at 50 with a $100,000 pension. (Or, the cops in my town make $120k after 5 years, whatever.) Or, gawd forbid, “just look at Transparent California”!!!

    Well, I don’t know enough public workers to make a representative sample. And the plural of “anecdotal evidence” is not “data”.

    If I question someone’s statement, I look up the data, I don’t make it up. Don’t shoot the messenger. Your debate is with the CBO, or Biggs. Like I said to rdquinn, take all these studies with a grain of salt. If you’re certain of your comparison, you are probably wrong.

    Here is another federal “study” that is certainly wrong. In the same way the “44% public advantage is wrong.

    https://federalnewsradio.com/pay/2015/10/federal-workers-paid-well-complain-cato-study-finds/

    And my personal favorite, a GAO “study of studies”… 5 studies of federal vs private pay… 5 different answers. Wildly different.

    In short…

    https://www.google.com/amp/s/www.washingtonpost.com/amphtml/news/federal-eye/wp/2015/10/12/expert-we-have-no-idea-how-federal-pay-compares-to-the-private-sector-so-lets-stop-acting-like-we-do/

    Reply

    • Posted by Tough Love on August 31, 2017 at 2:12 am

      S Moderation Denier (another one to add to the list) ………

      Above, I commented that I question the accuracy of your comment (from Biggs AEI study) that Public Sector Professionals and PHDs make 18% less than their Private Sector counterparts.because a great deal of personal observation (over many years) shows that MANY Private Sector Professionals (some with PHDs as well) routinely work 60+ hours/wk.

      I readily admit that I don’t know what % of their Public Sector counterparts do so as well, but the (fewer number) of on-sight Public Sector professionals (mostly auditors) that I have observed over the years, run for the door the minute their 8 hour shift is up …… and they did it like clockwork, EVERY SINGLE DAY (with robotic predictability). And it didn’t bother us one bit, because they less time they spent on-sight, they fewer (generally sophomoric and disruptive to business operations) questions they would ask.

      Not everything can be backed up with reams of statistically credible data, and reasonable extrapolation from substantive observations is not without merit.

      Reply

    • Posted by Seesaw Junior on August 31, 2017 at 11:58 am

      Well, I don’t know enough public workers to make a representative sample. And the plural of “anecdotal evidence” is not “data”.
      If I question someone’s statement, I look up the data, I don’t make it up. Don’t shoot the messenger. Your debate is with the CBO, or Biggs. Like I said to rdquinn, take all these studies with a grain of salt. If you’re certain of your comparison, you are probably wrong.

      #1- You always try to compare national “data” to states that are at the very top of the bell curve/standard deviation, like CA.
      #2- as TL said, you compare sub-groups who in gov work half the hours of the private sector without accounting for that difference.
      #3- Your “data” does not include the massive benefits given to the public sector, which never accounts for the two (2) to three (3) months of time-off that no one in the private sector gets ; such as 12 PAID sick leave days, 14 PAID holidays (that right there is 26 paid days off/5+ weeks, before any vacation pay is added in) and 3-8 weeks of PAID vacation.

      Reply

  5. Posted by S Moderation Denier on August 31, 2017 at 1:58 am

    John,
    Have you or Mary Pat Campbell looked at the New York State pension system? They claim to be 100 percent funded, because their law (I haven’t read it.) Doesn’t just require that 100 percent of the ARC must be paid, it REQUIRES that the pension be fully funded.

    https://www.google.com/amp/s/calpensions.com/2017/05/01/new-york-pension-systems-outperform-california/amp/

    Reply

    • Posted by Tough Love on August 31, 2017 at 2:18 am

      Basically true for NYS, but not NYC.

      And even then, NYS (like all other Gov’t Plans) uses extremely optimistic assumptions in their liability valuation and funding calculations. NYS’s funding ratio would be a great deal lower (likely by at least 25%) if they used the assumptions & methodology commonly used by Private Sector pension Plans.

      Reply

  6. Posted by S Moderation Denier on August 31, 2017 at 2:03 am

    If true, I especially like the part…

    “New York state pension systems are better funded, ….. currently take a smaller bite out of state and local government budgets, and still provide pension benefits well above the national average.”

    Reply

    • Posted by Tough Love on August 31, 2017 at 2:41 am

      SMD,

      The “cost” of the promised pensions to the contributors (the workers and the Taxpayers) doesn’t change with earlier (and higher) funding when the analysis properly reflects the time value of money.

      Example……..

      If under funding-pattern “A”, the Taxpayers contribute an extra $1 Million in year 1 vs funding pattern “B”, in which that extra $1 Million is contributed in year 6, sure the PLAN will earn more income under option “A” because it will be earning income on the extra $1 Million for 5 additional years…… and future contribution requirements will be lower (because the Plan has more assets).

      But ……. the Taxpayers will have lost the opportunity to earn income (for themselves) for that same 5 year period because they contributed that $1 Million 5 years earlier under funding-pattern “A”.

      Of course the above “offset” assumes that the Taxpayers would earn the same return as would the Plan….. which may or may not be the case.
      ********************************************

      Under a far more complicated analysis, Today’s “lower cost” of NYS’s Plans (relative to OTHER Plans which underfunded their Plans in past years), is likely offset by HIGHER contributions to the NYS Plans in earlier years ………….. again with time-value-of-money adjustment for the amount and timing of each contribution.
      *******************************************

      And no, math doesn’t suck (or whatever), it’s actually quite enlightening when you understand it.

      Reply

  7. Posted by MJ on August 31, 2017 at 9:21 am

    The way I see it…even if half of what TL says is true and half of what SMD says is trued……..the pensions are overly generous and unsustainable o matter how one looks at it. Looking at whether or not public workers are more overly compensated than similar private sector positions….let’s not forget that no matter the economy, the borrowing to pay for pensions and health benefits, etc. most public workers can never lose their jobs and their sick time and benefit packages are the best in NJ that they pay very little into for themselves and their families.

    Reply

  8. Posted by George on August 31, 2017 at 12:49 pm

    Pension Fund Problems Worsen in 43 States
    https://www.bloomberg.com/graphics/2017-state-pension-funding-ratios/

    Bloomberg claims NJ funding is now 30.9%. I personally like to think of NJ not as the most underfunded state, but the state that is most short financial markets.

    Bloomberg may be exaggerating NY pension soundness as NY state and NY city appear to report separately.

    Reply

    • Posted by Anonymous on August 31, 2017 at 1:05 pm

      Kentucky is on the verge. Possibly not only eliminating COLAs, but threatens to claw-back some COLAs already paid out.

      AND switching to DCs for new employees?

      Reply

      • Posted by Tough Love on August 31, 2017 at 2:55 pm

        Any corrective action will fail unless it includes a hard freeze (zero growth in the pensions of current workers) or for the future service of all CURRENT workers, a combination of formula & provision changes that reduce the annual accrual value by no less than 50%.

        The FIRST step in digging yourself out of a deep financial hole is to STOP digging it deeper, and EVERY DAY that the current Plans remain in effect, that hole gets a bit deeper.

        Reply

  9. Posted by Anonymous on August 31, 2017 at 2:25 pm

    %funded, ARC, GASB what do they really matter in comparison to projected cash flow?

    Reply

  10. Posted by Anonymous on September 1, 2017 at 7:30 am

    Go Red they know how to do public workers’ pension right!

    http://www.al.com/news/index.ssf/2017/08/alabama_lawmaker_wants_to_reop.html

    Reply

    • Posted by Tough Love on September 1, 2017 at 1:39 pm

      This Alabama lawmaker wants to bring back a DROP Plan that was closed in 2011 due to being too expensive for Taxpayers.

      Such “DROP” Plan are ALWAYS outrageously expensive and a taxpayer-ripoff.

      He’s a retired Fireman and evidently still has the mindset that Public Sector workers are “special” and deserving of more ….MUCH MUCH more ….. than the Taxpayers called upon to pay for it.

      A far better option for Taxpayers would be to through him and all the other with a similar mindset out of office.

      Reply

  11. Posted by Earth on September 2, 2017 at 2:43 am

    Earth to Tough Love:

    Now you’ve done it !

    “Public Sector “Total Compensation” is NOT 46% higher…”

    A new commenter comes in, and you chase him away. This is why we can’t have any friends.

    Sorry, rdquinn.

    Reply

  12. Posted by S Moderation Honestly on September 2, 2017 at 6:11 am

    So, Kentucky is eerily like NJ,,, it is about 30% funded mainly because the state system is as low as 16%, while local systems are much higher. Local have been paying their ARC, the state, not so much.

    Should further accrual for all workers be reduced by 50% (or more)? Are pension grossly excessive? According to Biggs, compensation is (was) “market rate”, at about 4% over private compensation.

    Clearly the reason for the crisis is that the state just hasn’t been contributing the full ARC, especially since 2008. According to Governing dot com…

    “In Kentucky’s Drastic Pension Reforms, No One Would Be Spared”

    Meaning, of course, no *employee* (or retiree)would be spared.

    Employees who were arguably “overpaid” before by maybe 4% will now be cut by 25% or more? Including clawing back COLAs from those already retired?

    Kentucky (state) was definitely *not* one of the 100% ARC payers, and…

    Math really is a beatch.

    SMH

    Reply

    • Posted by Tough Love on September 2, 2017 at 1:29 pm

      SMH, when you have a valid point, I’ll admit it.

      While KY will likely HAVE TO reduce pensions as I suggested above (because there are few other good options), on an EQUAL “Total Compensation Basis”, I hadn’t checked the AEI Study for the KY-Specific Public/Private Sector Total Compensation differential ….. only a 4% Public Sector Total Compensation advantage for non-safety workers (noting that the AEI Study excludes Safety workers).

      What sticks in my mind is NJ’s (the same for your State of CA) outrageous 23%-of-pay Public Sector non-Safety-worker Total Compensation advantage, and per Figure 6 in the AEI study, a population-weighted average for all States of roughly 15%.

      With only a 4% Public Sector Total Compensation advantage, there is justification to lower future service pension accruals, but by a smaller %. With the TRUE level annual taxpayer-share of the total cost of non-safety worker pensions being about 25% of pay, future service accruals would have to be reduced by about 4%/0.25=16% to eliminate that advantage.

      If we factored in the impact of the higher wages and richer pensions of Safety workers, the 16% would be greater, but I don’t know how much greater.

      Lastly, the PAST service accruals of both active and retired workers are similarly excessive, so where a legal basis exists to do so exists, there IS justification to implement reductions of a similar magnitude …. one example being the suggested COLA reduction and rollback.

      Reply

  13. Posted by Anonymous on September 2, 2017 at 11:58 am

    One key element absent from KT pension reforms, necessary and required EMPLOYER CONTRIBUTIONS!

    http://amp.kentucky.com/news/politics-government/article170760197

    Reply

    • Posted by S Moderation Honestly on September 2, 2017 at 1:24 pm

      The devil is in the details.

      I suggested to rdquinn and anyone else, to take all these studies with a grain of salt.

      For the Kentucky compensation of “nearly equal” to the private sector, I was relying on Biggs again, even though I have consistently stated that his data is old, and subject to error/bias. It is still about the most complete study out.

      And now, I read this quote from Biggs in a statement before a house oversight committee.

      ” I find an average federal salary premium of not 2 percent but of about 14 percent. My point is not that 2 percent is “wrong” and 14 percent is “right,” but rather that there is a range of reasonable answers found in studies of federal salaries and the CBO’s result is likely toward the lower end of that range.”

      Seriously? Not wrong? Not right? That’s a very substantial “range”.

      And this is so vague, I don’t even know what it means… “According to PFM Consulting Group, benefits in Kentucky Retirement System plans compare “highly favorably” to those offered by Kentucky’s 12 largest private employers.”

      Better? Worse? Similar?

      Apparently, there is “a range of reasonable answers”.

      SMH

      Reply

  14. Posted by S Moderation Honestly on September 2, 2017 at 1:48 pm

    Kind of important because Kentucky pensions are similar in so many ways to NJ… Their “reforms” may become a template for other grossly underfunded states. It is possible their workers were never overpaid to begin with, but since math always wins, cuts will have to be made. It is inevitable.

    Tommy Turner…

    “I keep hearing the term used by many in Frankfort that they no longer want to “kick the can down the road”. It seems as if what they desire is to kick the can in someone elses yard, in this case the employees, and let them clean up the mess. Employees have done everything asked of them includinging paying what was required of them into the retirement system. Why should we not expect the state to do likewise? 

    If this situation involved a business or industry in KY that had 20,000 employees and it suddenly decided it was going to use the employee’s retirement funds for something else and just cut their retirement, I’m certain a special session would be called. One to REQUIRE the business or industry to live up to it obligation and not take what belongs to the employee (the retirement accounts BELONG to each employee) and use for something else.”

    SMH

    Reply

    • Posted by Tough Love on September 2, 2017 at 3:49 pm

      Quoting SMH ……….

      “Kind of important because Kentucky pensions are similar in so many ways to NJ… Their “reforms” may become a template for other grossly underfunded states. It is possible their workers were never overpaid to begin with”

      So now you’re dismissing the 4% KY Public Sector Total Compensation advantage you noted above. Sure it’s “possible” the 4% is wrong and it’s zero or less, but it’s equally possible it’s 8% or more.

      Quoting SMH ………

      “Employees have done everything asked of them including paying what was required of them into the retirement system………. ”

      But what’s “required of them” (and Public Sector workers just about everywhere), are contribution levels (INCLUDING all the investment earnings thereon) that are rarely sufficient to buy more than 10% to 20% of their VERY rich pensions (always MULTIPLES greater than those typically granted comparable Private Sector workers).

      So NO, we should NOT expect Taxpayers to pay 80% to 90% of the cost of these MUCH MUCH richer Plans than what they get from their employers.

      ***************************************

      Bottom Line (more applicable to States other than KY … such as yours and mine CA & NJ) is that excessively generous Public Sector Pension (AND benefit) …… Excessive Plan promises that resulted from Union/Politician collusion (as ALL have) should NOT be honored.

      Adjusted for any verifiable wage differential (up or down), Taxpayers should contribute towards Public Sector pensions and benefits, an amount no greater than the contributions THEY receive from their employers towards retirement security and retiree healthcare benefits (the latter of which is most often ZERO).

      Reply

  15. Posted by S Moderation Honestly on September 2, 2017 at 5:45 pm

    Quoting TL…
    “So now you’re dismissing the 4% KY Public Sector Total Compensation advantage you noted above. Sure it’s “possible” the 4% is wrong and it’s zero or less, but it’s equally possible it’s 8% or more.”

    To Biggs, +/- 5 percent was considered “market rate”, so he was effectively dismissing the 4% and yes “it’s equally possible it’s 8% or more.” Or less, considering the reforms enacted after his 2012 data. I’ve said before, as others have implied… Trying to compare public and private compensation is like trying to nail jello to a tree. Or vice versa.

    But the other way Kentucky is similar to NJ is the percent of ARC paid since 2001… 102% for county systems and 56% for state system. Seriously underfund the state system for two decades, then cut benefits (for both systems) by 25% or more because “the math”? Or because it’s “possible” they were overpaid?

    “DON’T PAY THE BILLS, THE DEBT GETS LARGER”

    ¡no es problema! Blame it on the unions!

    4% +/- is nothing. Especially considering Biggs remark… “My point is not that 2 percent is “wrong” and 14 percent is “right,” but rather that there is a range of reasonable answers found in studies of federal salaries and the CBO’s result is likely toward the lower end of that range.”

    I have mentioned before that there is a great deal of room for error in these studies. And room for different “interpretations”. And room for bias. And for changes over time. So what? Just assume the worst for public workers?

    At least the Ky governor is fair. He wants to share the cuts among all public employees, new hires, current workers, and retirees.

    SMH

    Reply

    • Posted by Tough Love on September 2, 2017 at 6:04 pm

      Quoting SMH ….. “But the other way Kentucky is similar to NJ….”

      Being kind of selective, aren’t you. How about the “dissimilarities” …… that Public Sector workers in NJ (and CA) don’t have only a 4% Total Compensation advantage, but a 23% of pay Total Compensation advantage.

      And does any of what you’ve stated NOT justify HUGE pension reductions for the future service of all CURRENT Public Sector workers in CA and NJ where the evidence shows that Public Sector workers in BOTH Sates are VASTLY over-compensated ……………. to the tune of 23% of-wage every year per Biggs.?

      Reply

      • Posted by S Moderation Honestly on September 2, 2017 at 7:49 pm

        #23%bulls hit

        SMH

        Reply

        • Posted by Tough Love on September 2, 2017 at 8:31 pm

          So…………… KY’s only 4% greater Public Sector Total Compensation advantage is OK with you because it meets your agenda (to minimize the lusciously excessive compensation granted MOST Public Sector workers) but the 23% for CA and NJ ………… from the SAME study is not ?

          Yup, like I’ve stated before, your a charlatan, an idiot, or both.

          Reply

          • Posted by Anonymous on September 2, 2017 at 9:06 pm

            Bottom line, total compensation comparisons vary depending on data sources. One thing that doesn’t vary is the breach of fiduciary responsibility for woefully underfunding P&B obligations!

          • Posted by Tough Love on September 2, 2017 at 11:31 pm

            Anon,

            First of all, there is no “fiduciary” obligation to fund Public Sector Pension Plans. NJ’s Court decisions proved that.

            And any MORAL obligation is goes out the door when factoring in the Public Sector Union/Politician collusion behind the granting of these ludicrously excessive Public Sector pensions.

          • Posted by Earth on September 3, 2017 at 12:49 am

            Earth to TL:

            You forgot to say “allegedly”, again.

  16. Posted by S Moderation Honestly on September 2, 2017 at 10:10 pm

    Quoting SMH @ 7:38

    “If you’re wise, you will not take any one of these sources as gospel. Read several and use common sense and discretion.

    Then, if you are certain you understand the difference between private and public compensation… you probably got it wrong.”

    Quoting SMH @ 1:24 pm…

    “For the Kentucky compensation of “nearly equal” to the private sector, I was relying on Biggs again, even though I have consistently stated that his data is old, and subject to error/bias. It is still about the most complete study out.

    Quoting SMH @ 5:45 pm…

    “yes “it’s equally possible it’s 8% or more.” Or less, considering the reforms enacted after his 2012 data.”

    Detect a pattern there? You can’t take these numbers too seriously. Any of them.

    There are some folks (you know who you are) who automatically assume that all public pensions are excessive. Same ones who think unions are a cancer, may be.
    Yet, according to Biggs, there are (were, maybe) nineteen states which are “market level” (5%+/-) or less. And Biggs is the most conservative serious study out there. There are other equally qualified experts who say the average public worker nationwide earns roughly the same, or slightly less, than the private sector. Take them with a grain of salt, also. But don’t entirely dismiss them.

    Also some folks who swear that public workers have much more paid time than privates.

    Some who believe public workers retire 15-20 years younger.

    Or public workers are somehow less professional than the private sector.

    There are a lot of rants out there that repeat this stuff ad nauseum. And a lot of data contradicting that.

    That’s where Moderation comes in. It’s not just a name, it’s a way of life.

    Some folks even believe public unions are a cancer and should be eliminated. Imagine that.

    SMH

    Reply

  17. Posted by S Moderation Honestly on September 3, 2017 at 12:20 am

    As I understand, federal employees have “collective bargaining” rights, but they can not “bargain” for wages or pensions. Ironically, from what studies I have seen, federal wages and pensions are higher than most, if not all state or local governments.

    My guess is, for the guys behind the anti-union push, the problem is not collective bargaining, but fair share. If CIR can get Friedrichs back to the Supreme Court and cancel out Abood, they won’t care about the unions any more. It’s all about the money… Campaign money, not “taxpayer” pension money.

    Follow the money. The so-called Center for Individual Rights is not fronting all that money and influence because they care about Friedrichs’ freedom of speech or “paycheck protection”.

    SMH

    Reply

    • Posted by Tough Love on September 3, 2017 at 1:53 am

      Quoting SMH …………….

      “Ironically, from what studies I have seen, federal wages and pensions are higher than most, if not all state or local governments.”

      Hogwash.

      Federal DB pensions (for those hired since 1987) are in the FERS system, and non-safety worker pensions are WAY lower than typical State and Local Plans with per-year-of-service formula factors of 2% to 2.5% vs the 1% (1.1% if retiring at age 62 with 20+ years of service) for FERS employees.

      FERS Safety-worker pensions are ALSO lower with a 1.7% per-year-of-service formula factor for the 1-st 20 years, dropping to 1% thereafter……………….. typically vs 2.5% to 3% in all years for most State and Local Safety worker pensions.

      Source:

      https://www.opm.gov/retirement-services/fers-information/computation/

      Reply

  18. Posted by S Moderation Honestly on September 3, 2017 at 4:53 am

    Geez, mo math.

    Biggs andRichwine, 2011

    “Using standard econometric methods, we find that federal workers receive salaries about 14 percent above those paid to similar private sector workers and benefits around 63 percent more generous per dollar of salary than those paid in large private sector firms. The greater job security enjoyed by federal government employees is equivalent to a compensation increase of around 17 percent. Together, these generate an overall federal compensation premium of approximately 61 percent.”

    Have you seen Biggs or any other researcher rate any state or local government that high in relation to the private sector?

    As a wise man once said, take all these numbers with a grain of salt, but that’s a significant difference, using the same methods at about the same time as his state studies.

    I reiterate, fed compensation is much higher than state/local, and they do not have collective bargaining for pay or pension.

    May be, “collective bargaining” is not the evil you claim.

    SMH

    Reply

    • Posted by Tough Love on September 3, 2017 at 2:12 pm

      SMH,

      Interesting how you like to quote something that supports your position, but often don’t provide a link to that source. Why not, you’re looking at it already? Makes me think your quote is “selective” to support your position.

      Easy to find that Biggs and Richwine article:

      http://www.aei.org/publication/comparing-federal-and-private-sector-compensation/

      and a summary referencing that larger report here:

      http://www.aei.org/publication/how-generous-are-federal-employee-pensions/

      Some weird assumptions made …… (here’s one):

      “In both federal and private sector employment the worker would receive the same annual Social Security benefit of around $21,656. At retirement, the worker’s highest three years of earnings average at $60,368; with an assumed 44 years of service and a 1.1 percent replacement factor”

      Did he really assume that Federal employees work for 44 year ??????

      ******************************************************

      I read through the study rather quickly (as well as some footnoted references) and here’s my take-away:

      (1) Based on the time period of the Study data (2006-2010) both Federal and State & Local Employees have higher considerably Total Compensation than Comparable Private Sector workers

      (2) Federal workers make MORE than Private Sector in wages (14% is noted) while State & Local Employees make LESS than Private Sector workers.

      (3) Formula-wise, the Federal retirement pension (with the DC component) is considerably less than State & Local pensions but Federal employees contribute less towards their pensions than State & Local employees.

      (4) Both Federal and State & Local pensions and benefits are MUCH greater than what comparably Private Sector workers typically get from their employers

      (5) From the linked study from footnote #9 on page 6,……..

      “While it is clear that federal workers’ wages and benefits are above market levels, it is less clear whether state and local employees are similarly overpaid. In the past year, several organizations have published studies arguing that state and local workers are underpaid. But these studies undercount or omit important benefits that public workers enjoy, leading to a substantial understatement of state and local compensation. Using the example of California, this paper provides a full accounting of state and local compensation, correcting the omissions of past studies. The conclusion is that California public employees earn up to 30 percent more in total compensation than comparable private-sector workers.”

      This 30%-of pay advantage is even higher than the 23%-of-pay California Public Sector Total Compensation advantage noted in the other AEI often quoted on this Blog ……. perhaps because the 30% includes Safety workers whereas the other AEI study excluded them.

      ***********************************************************

      To summarize, It appears (based on this oldish data) that Total Compensation of Federal workers is greater than that of comparable State & Local workers which is in turn greater than that of comparable Private Sector workers.

      It also appears that the Federal Total Compensation advantage over comparable State & Local workers is due (perhaps exclusively) to much higher wages (perhaps by 20+%), with retirement security likely lower (perhaps considerably lower) than that of State & Local employees even after adjusting for the lower Federal employee pension contribution level.

      Lastly, It appears that you are trying to “justify” the greater State & Local (vs Private Sector) Total Compensation by way of pointing out study results that conclude that Federal employee Total Compensation is even greater.

      That’s a distraction from the core issue of compensation “fairness” but little more. Without the Private Sector, there is no money to pay or pension or benefit Federal or State & Local Gov’t Sector workers, and with 3/4 of all workers being employed in the Private Sector, it is THAT Sector (unencumbered by the distorting influences of Public Sector Unions, Politicians, and campaign contributions) that should be the determinant of “market rate” Wages and Total Compensation.

      Or more simply stated …….. 2 wrongs don’t make 1 right.

      Reply

  19. Posted by S Moderation Honestly on September 3, 2017 at 2:37 pm

    That there is a whole lotta readin’ and writin’ just to confirm what I already said, twice…

    “I reiterate, fed compensation is much higher than state/local, and they do not have collective bargaining for pay or pension.

    May be, “collective bargaining” is not the evil you claim.”

    SMH

    Reply

    • Posted by Tough Love on September 3, 2017 at 2:42 pm

      SMH. The more important take-awy is NOT….

      ““I reiterate, fed compensation is much higher than state/local, and they do not have collective bargaining for pay or pension. May be, “collective bargaining” is not the evil you claim.””

      but………….

      “Without the Private Sector, there is no money to pay or pension or benefit Federal or State & Local Gov’t Sector workers, and with 3/4 of all workers being employed in the Private Sector, it is THAT Sector (unencumbered by the distorting influences of Public Sector Unions, Politicians, and campaign contributions) that should be the determinant of “market rate” Wages and Total Compensation.”

      Reply

  20. Posted by S Moderation Honestly on September 3, 2017 at 3:08 pm

    It do appear your train of thought ran off the proverbial track.

    Someone who is not I posted a link to an article castigating public sector unions, which culminated with…

    “I believe public employees have a right to be represented and express their concerns to elected officials. I do not believe they should be allowed to negotiate wages and benefits with those officials.

    Have a nice Labor Day weekend!”

    Someone who is I replied that federal employees have higher compensation, even though they cannot negotiate wages and benefits.

    May be “collective bargaining” ain’t the problem?

    Moderation din’t try to justify nuthin. That’s your obsession.

    One thing a do agree with Howard Sierer…

    “Have a nice Labor Day weekend!”

    SMH

    Reply

    • Posted by Tough Love on September 3, 2017 at 3:23 pm

      SMH ,

      What’s the bottom line for Private Sector Taxpayers in your State of CA?

      Isn’t it the ENORMOUS Taxpayer-ripoff identified by the 23% (or 30%)-of-pay CA Public Sector Total Compensation advantage vs their Private Sector counterparts?

      WOW ….. 23% (or 30%) ADDITIONAL wages (year-in, year-out) to save and invest for YOUR retirement needs.

      How much MORE would Taxpayers then have upon retirement (if they got only what they are now forced to give CA workers?), an extra $500,000, $1 Million, perhaps $2 Million ?

      Reply

  21. Posted by Earth on September 3, 2017 at 6:54 pm

    Earth to SMH:

    WTH you guys talking about? I thought it was unions, now we’re back to 23% ?

    Pick a topic and stay with it.

    Reply

    • Posted by Anonymous on September 3, 2017 at 7:39 pm

      Lol ….. “with you guys….”

      I believe Earth and and are one and the same person.

      If I’m wrong, my apology.

      John,

      Care to answer whether comments from Earth and SMH (who is also SMD and SMA and sometimes anonymous) have ever come from the same IP address?

      Reply

      • Posted by Anonymous on September 3, 2017 at 7:42 pm

        With ANOTHER of SMH’s handles likely being ….”Unanimous”

        Reply

        • Posted by Anonymous on September 3, 2017 at 9:39 pm

          Please, like TL and others aren’t anon clones at times – let’s monitor ip addresses like the WH!

          BTW – interesting if Crispy Kreme was POTUS now with Harvey, etc. terrible as it is and will be. Didn’t seem to matter at the time when Sandy hit NJ. Rebs wanted cuts for ANY new spending including disaster relief. Well now how the story line has changed. IF ANY Dem votes are needed for Budget including Harvey funding TAX INCREASES should be demanded to fund the disaster relief and raise the debt ceiling.

          I think I’ve heard it said here and elsewhere; be careful what you wish for because…..

          Well back to the never ending pension saga. I don’t think taxpayers should be on the hook for a penny more than the politics ‘we the people’ put into office committed us to.

          Reply

          • Posted by PS Drone on September 5, 2017 at 6:55 pm

            Forget what the “politics” committed us to. Since those commitments allow for what amounts to grand larceny by the public sector, I do not think taxpayers should be on the hook for anything remotely resembling what the “politics” committed us to. Max $60k per year, benefits not payable before age 66.

          • Posted by Tough Love on September 5, 2017 at 9:12 pm

            PS Drone,

            Sounds reasonable ……. just about TWICE the Maximum Social Security benefit.

            But that should only act as a “cap”. The Public Sector pension formula/provisions should not result in a more generous pension than that typically granted a comparable Private Sector worker. E.g., the 30 year employee with a $85K final salary should NOT get a $60K pension when it would likely be $30K-$40K for the comparable Private Sector worker.

      • Posted by Earth on September 3, 2017 at 9:52 pm

        What
        The
        Heck

        I believe “Earth and and are one and the same person.” also.
        Whatever that means.

        Reply

        • Posted by Touigh Love on September 3, 2017 at 11:02 pm

          It was clear in the sentence that followed that one …….

          I believe that Earth and SMH are the same person.

          Reply

  22. Posted by Anonymous (NOT Earth. The other Anonymous.) on September 3, 2017 at 11:11 pm

    I believe,

    Seesaw Junior is Rex the Wonder Smurfpuppy Wildgurl.

    If I’m wrong, I won’t apologize because, who cares?

    Reply

  23. Posted by Tough Love on September 4, 2017 at 10:49 am

    Yup no doubt …….

    Public Sector Unions are a Cancer inflicted upon civilized society:

    https://calmatters.org/articles/california-unions-political-roll-see-threats-horizon/

    Reply

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