These are tough times for state governments, many of which are contending with huge budget deficits.
Many states are likely to face an especially daunting challenge in the years ahead, according to a report issued Thursday. The states have promised big pension and retirement benefits to their employees without putting aside money to pay for them.
The report was prepared by the Pew Center on the States, and it portrays a state pension system that’s headed for a crisis ”” if it’s not already there.
“The 50 states have racked up more than $3.3 trillion in long-term liabilities in pensions, health care and other retirement benefits that they promised to their current employees and retirees,” says Susan Urahn, the center’s managing director. “But they have not got any money to set aside to pay $1 trillion, which is almost a third of this bill.”
So there’s a TRILLION dollar gap? Yikes. It’s hard to get your mind around a number that large. A million millions. A thousand times a thousand milliion.
Sounds like a lot of state governments are going to be forced to reneg on some of those generous pensions and cut benefits.
David Handy+
So now the public employee unions are doing the same thing to government that the UAW did to the car companies. Just like the auto executives colluded with the union bosses to grant unsustainable health and pension benefits, our elected officials have colluded with the public employee unions to do the same thing.
Unlike the auto companies, whose customers voted with their feet and bought better, less expensive cars from other companies, the customers of government; i.e., us, can’t buy our government services from somebody else. We just get taxed into oblivion unless we wake up and throw the bums out every chance we get at the ballot box.
Daniel, the difference is that the autoworkers were paid well and got nice benefits. Government workers are generally offered benefits to partially offset the fact that they are paid substantially less than comparable workers in the private sector. In many states, public-employee unions aren’t a factor because public employees do not have the right to strike. The reason for the shortfall is not that government pensions are luxurious, but that legislatures have been unwilling to fund their contractual obligations.
These workers were induced to work for the public and to stay on the job by express promises of deferred compensation. To renege on the pensions that they have earned would be a breach of contract (and of justice) no different than refusing to pay someone their agreed salary. If you want to opt out of public services, just provide your local emergency medical service with a Do Not Resuscitate order and ask your local fire department to let your house burn down. If enough people do that, taxes could be lowered substantially. If, on the other hand, you want government services, you have to expect to pay for them… and that means setting public employee salaries high enough to attract competent workers and then paying them the compensation that they have been promised.
The idea that public employees are paid less than the private sector is an urban myth – or maybe a legend. It may have once had a basis in fact – but not now
4, I was a lawyer for the state of Florida and I earned nowhere near what my contemporaries were earning in the private sector. I once converted my salary to an hourly rate and it came to $25 an hour. The people I litigated against billed at $200 an hour and higher.
I don’t know where your live Paul, but as far as KY is concerned, Dale Rye is correct. Here in KY, a state employee must work 27 years to qualify for full retirement. When I began working for the state 19 years ago as a program manager in the Division of Emergency Services, I made the princely salary of $17,00.00 a year. This was in comparison to my previous job as a captain in the U.S. Army making $34,000.00 a year. KY’s salaries are not lavish. Dale is correct as to where the problems with our pension system lie. The legislature has consistently failed to fund the system at even a minimum level. There is no public employee’s union in state government, thank God. Unfortunaely for us, our retirement system is now underfunded to the tune of well over 27 billion dollars, and the gap widens every year. As for our lavish pay and benefits, we got a 1% pay increase this year (and last year, if I recall correctly) and the highest I can recall in the last several years was 3%. That means, with the huge increases in fuel costs over the last few years, our wages have been effectively slashed as there have been no cost of living increases to offset them.
Thanks to Dale (#3), Br. Michael (#5), and evan (#6),
I’m glad you all shared your experience as current or former state workers. It’s compelling testimony. I agree that it’s an inexcusable scandal that state governments have so often refused to fund adequately the pensions they’ve promised their workers. I’m sorry, because ultimately it’s all of us voters who’ve allowed this intolerable situation to exist and to continue for so long.
David Handy+
When I was a Federal DoD employee working in CT in the 90s, our pay (according to the Local Prevailing Wage Surveys) lagged the private sector by 17%. I started there making about $10 an hour working on sophisticated aviation electronics. After two promotions and 6 years of hard work, I was almost making a whopping $15/hour…working in aviation…during the height of the 1990s Boom. Our pay in Connecticut (one of the highest cost of living areas in the country), for some arcane and mysterious reason, was tied to pay at Kings Bay Georgia.
I found a better job.
My Mom was a state worker for the University of Connecticut. I know for a fact that the State forced workers to forego a raise and instead drop to a 35 hour work week (time off instead of pay increase). A few years later, the state then pushed through a return to 40 hours…without the commensurate pay increase…talking loudly in the press about those “lazy” state workers that worked short work weeks for “full pay”. She retired as an office manager a few years ago and she was earning at that time about $5K [i]below[/i] the median income.
Consider too, that most Federal jobs require a degree (sometimes advanced degrees), and I am sure that many in State employment are also required to have a degree. That has to be factored into any comparisons of compensation levels. You can’t compare the wages of a social worker that has a bachelors degree and 15 years experience with someone flipping burgers or greeting at the local WalMart. Wage comparisons need to be made between people of similar education, training, and experience to be valid.
How about all the folks in the Trades that work for the State. Do you really want to hire a contract plumber every time a toilet backs up at a State facility? Have you priced a plumber recently? I have. $700 to install a single shower valve…about 1.5 hours of work. You would pay $100 per visist [i]just for the plumber showing up[/i] if you went the route of contracting them out. Schools, courthouses, jails, administrative buildings, police and fire buildings, road work buildings, State military buildings…you name it. Do you want to pay a plumber that extra $100 just for showing up? Yeah, you wouldn’t be paying his pensions (directly) but you would be paying through the nose in taxes if you went that route because these guys are in business to [b]make a profit[/b] not serve the public good. So, if you want functioning toilets at the school, guess what…you are going to pay that guy enough for him [i]and his business to make a profit.[/i]
Folks that met the specific knowledge, skills, and achievements agreed to work at a certain level of compensation. Part of that compensation was the pension. The time to fuss about pension levels is at the front end, not after the lifetime of work. Failure to plan and set aside money to pay the agreed upon compensation and failure to pay it after the work is done is nothing short of fraud.
Oh yes, I can’t address State pensions directly, but I can tell you that since the 1980s, pensions offered to Federal Workers are 1% of your base pay times the years you worked and a normal minimum of 30 years of work required to be eligible. So, after a 30 year career, a current ( employed after 1986) average Fedeal worker will get 30% of his highest 3 years averaged base pay (which is less than 30% of his final year’s earnings). Hmmm…lower wages now but the promise of getting 30% of that lower wage in retirement. Such a deal! It’s worse than what the military get. They can retire after 20 years and get 50% of their base pay. I don’t hear too much chatter about how “over paid” the military folks are and how overly generous their pensions are (and I am former military as are many in my family, so please don’t see this as an attack on the military pension system), yet Federal workers (many times working right beside their military couterparts) receive about 20% less pension after 10 years MORE work…and people gripe about Federal civilian pensions!!! Where is Rod Serling? It’s like something out of the Twilight Zone.