But the comfortable retirement promised to retired firefighters and police officers is taking its toll on the city where DeGenova still lives. Today, Cranston is staggering under a huge underfunded pension liability equal to more than twice its annual budget, and paying the pensions of retired police officers and firefighters now absorbs some 20 percent of the city’s budget.
“Right now the unfunded liability is well over $240 million,” says Mayor Allan Fung. “And so it’s a big obligation and is basically a ticking time bomb for the city of Cranston that we are trying to get a handle on.”
How this happened is a monument to political shortsightedness. For years, Cranston operated a separate pension fund for more than 500 police and firefighters who regularly contributed money from their paychecks to the fund. (Other municipal employees were part of the state pension system.) Instead of setting the money aside and investing it, the city used the funds to pay operating expenses ”” everything from shoveling snow to paying employee salaries, says former Mayor Stephen Laffey.
“It was like taking your 401(k) plan and saying, ‘I have to buy a lot of bubble gum with it.’ That’s what they did, and they really did it with a straight face,” Laffey says.
[i]Instead of setting the money aside and investing it, the city used the funds to pay operating expenses — everything from shoveling snow to paying employee salaries, says former Mayor Stephen Laffey.[/i]
And how, exactly, does this approach differ from Social Security?
Even worse, when it was proposed to allow people to direct voluntarily up to one-quarter of their employee OASDI deductions to something that actually was an investment … Democrats in Congress pitched a tantrum and blocked the effort.
Or the totality of all Federal entitlements. If a private citizen did this it would be called theft and extortion.
I believe the word is “Ponzi scheme”
It’s the same with most public pension systems, I believe, certainly with the state employee retirement system here in KY, which is underfunded to the tune of some tens of billions of dollars.
#1 Bart, it differs from Social Security in that the amounts are much smaller for the city’s unfunded obligations. That and the Social Security IOU’s are apparently kept in a “lockbox” somewhere, so they’re totally safe. Of course, we will have to [url=http://news.yahoo.com/s/ap/20100314/ap_on_bi_ge/us_social_security_ious]cash in some of those IOUs this year[/url], but that won’t be a problem, because our political leaders in the Federal Government have long been noted for their wise stewardship of the fisc. Why, just this past Sunday, I heard that they passed some legislation to reduce the deficit.
This is a story we need to get used to hearing. It will not be the last or the largest in scale.
#6—no, it will not be the largest. Social Security, Medicare, are already larger. No money in there at all. Imagine that?
Soooooo—who is going to “make good” to all these firemen and policemen?
WE ARE.
bl
“The Greatest Generation” had to suffer through the Depression and WWII, but afterwards were able to bloom through the GI Bill, a wonderful economic boom, and financial blessings given through Social Security and strong labor unions.
However – we Baby Boomers had a wonderful childhood and prosperity (for the most part) up until now. We are likely to have a straightened old age because what the Feds and the labor unions did was to establish a set of Ponzi schemes that will soon fall through.
Unlike Cranston, Social Security can be made subject to things like means testing and delayed inceptions, since it’s a matter of legislation, not a contract. Our elected representatives may have punted this entitlements problem out a few years, but they can alway ensure that I can’t draw my benefits until I’m 70. Or if I have a decent pension. Or still have savings (as long as they haven’t been sucked up by taxes).
America has no native criminal class, except Congress.