Over-generous retirement benefits bankrupting local governments…

June 14, 2010

State and local governments, municipalities large and small, are facing near or actual bankruptcy, and besides or adding to the problem of the current Great Recession, a major culprit is over-generous retirement benefits. In some cases, as I understand it, they are eating up as much as 70 percent of the budgets.

Once upon a time, it is said, public employees were not paid as much as ones in the private sector, but a draw was job security and those retirement benefits. And when times were good, oh did local governments and the states (in many cases) go crazy with the retirement benefits.

In San Francisco, I heard on a radio talk show, some employees retire with 90 percent of their regular salary. And in many cases in that city, employees did not even have to contribute to their retirement. There is a move afoot via a proposed ballot measure to change that. The move is to force employees to contribute and/or contribute more.

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ADD 1: I don’t live in the big city. Up where I live at the northern end of  the Sacramento Valley, my hometown city council is asking some of its non-union employees to start paying 50 percent of their retirement contributions and may eventually demand that they pay all or make their own arrangements.

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(I’m not going to get into the specific issue of allowing police and fire personnel to retire early, 20 years, because of the special risks and possible health problems on their jobs. There is room for debate on that, but I think that gets off the general subject.)

Also, studies show that in most cases, government employees most everywhere make more than in the private sector.

If I had any sense — which I have never been accused of — I would have settled down in the small town in which I attended high school and got a job with local government. The pay is better than in the private sector and the retirement is better.

Having once been a newspaper reporter covering county government, I’ll give you a clue as to why county employees are treated so well. They are a tremendous voting block. Elected county supervisors who want to hold their own cushy positions often feel it necessary to curry favor with the employee unions.

I know elected county supervisors in the area where I live do a tremendous amount of work — that is they spend a lot of hours with county issues — and the pay for their positions varies from county to county. But it is extra pay, and it is often as much as many of their own constituents make at their regular jobs. And all these elected board members have their own businesses or employment. And there is no actual legal requirement they do anything, other than show up for meetings — but of course most of them spend a lot of hours at the task nonetheless.

But back to paid government employees (as opposed to elected officials), for my part, I think government employees should be paid well, but not above their closest counterparts in private industry. But they should have job security to the greatest extent possible.

And right now I’ll interject a thought here. I just read that President Obama wants to supply special federal aid for some local government employees, such as teachers and policemen and firemen, to head off layoffs due to the recession. I’m not sure that is such a good idea, at least not without a requirement that local governments agree to put up some matching funds. It’s about time local governments took more responsibility with the dollars they spend. It’s also about time local voters started to realize how much things really cost and make prudent decisions rather than pass the costs on to taxpayers elsewhere. That does not mean there should not be some type of federal aid or revenue sharing, but it needs to require some major commitment from local taxpayers first. Otherwise, what is the use of local government?

But back to these over-lavish pensions, which can be found in burgs large and small. There is a limit to what the public can afford. Government should not go into deficit spending to pay its workers. A private company could not do this and survive (And I know someone will say something to the effect that the law does not even allow their local government to deficit spend, but the states and federal governments do, and much of that cost is from having to bail out local governments).

And while it is apparently quite legal, I feel that it should not be legal for public employees, local or state or federal, to strike. To do so is to defy the popularly-elected government. While I was never a fan of Ronald Reagan and don’t look back at him as being one of our great presidents (I’d have to re-assess his terms in my own mind), I do think he was right to can the striking air traffic controllers. It’s one thing to conduct a job action against a private employer, but quite another to threaten the safety and security of the nation’s citizens. And even a strike by federal custodians (not to pick on them — just an example) would be a challenge to the day-to-day function of the government, so I do not believe government employees should be able to strike anymore than I would support the right of, say, our soldiers, to strike. But that’s why I think there does have to be special civil service protections (as long as they are reasonable) for government employees.

But again, public employment is not private employment.

Public employment should offer reasonable wages and above all job security and in return public employees should be required to serve the public or let someone else do the job.

But it is partly the fault of the voters for not being alert to what their elected governing boards do, and it is certainly the fault of elected officials who let retirement benefits get out of hand.

As I understand it, when the economy was better the retirement costs were not as burdensome. In some cases the funds were self-sustaining with their money invested in the market. But now that things are not as good, the costs of agreed-to retirement benefits still have to be met. With already-existing contracts or agreements, perhaps not much can be done, unless parties are willing to re-negotiate. But one exception is if a government entity goes bankrupt — then, as I understand it, things can get ugly indeed. All parties can lose out. Some employee unions should think of this.

Going forward, government entities need to be more prudent when it comes to wage scales and retirement benefits. And if at all possible, over-generous existing benefit structures should be scaled back.

I don’t necessarily blame public employees for taking what they can get, but they should also remember that there is a real danger of killing the goose that laid the golden egg.

P.s.

The editor of the first newspaper I worked for wrote an editorial one day about the high cost of public employee raises. That evening when he arrived home he found his wife crying. She worked in a county office and was told she would not be getting a raise. Her boss read the newspaper.

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