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Pensions or Bust

On and off, I’ve obsessed over public pensions and retirement costs, and about the menace posed by unfunded liabilities to state and local governments. Now, I’ve come across the Arnold Foundation’s website, which publishes a periodic Pension Litigation Update (link no longer available). It’s very competently done, and supremely useful: there’s no other way to keep track of pending or even adjudicated cases (they’re often unpublished).

If you eyeball the cases, there’s stuff you won’t believe. E.g., the State of Illinois (Illinois!) bestirred itself to pass a law that limits the ability of state employees to take a leave of absence to work for a labor union but to then receive a higher pension based on the union salary rather than the public employment salary. You’d think that even unions should be a bit ashamed to defend that sort of naked self-dealing, but no: the Chicago Teachers Unions have filed suit (Carmichael v. Laborers’ & Retirement Board Employees’ Annuity & Benefit Fund of Chicago). It’s a bit like picking a naked man’s pocket: the city already contributes over 20 percent of its budget to pension funding, and that’s unsustainable. Not true, say Karen Lewis (head of the largest union, and a real piece of work): it’s all the fault of “rich white people,” who caused the school crisis in the first place and should now be made to pay.

Overall, the Foundation’s Update illustrates how modest pension reforms have been to date. Even those humble efforts are being litigated into the ground, and I suspect that the skirmishes herald much tougher confrontations in years ahead. Overwhelmingly, state reforms aim to enhance the long-term sustainability of funds without curtailing current benefits. (Reducing future cost-of-living increases is an example.) That’s commendable but for many cities and some states, it’s too late: places like Chicago need to curb pension and other retirement contributions now, and they have to deal with the accumulated legacy costs.

All glory, laud and honor to the first official who explains that to Karen Lewis, and lives to tell the tale.

Reader Discussion

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on August 27, 2013 at 10:05:55 am

http://www.chicagobusiness.com/article/20130810/ISSUE01/308109979/so-you-think-you-know-karen-lewis

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John Ashman
on August 28, 2013 at 13:09:12 pm

This reminds me of a boss of mine who kept fighting my demands for a higher wage, given my productivity. So he gave me a "promotion" and a raise that suspiciously never showed up in my paycheck. Not playing games, I put in my 2-week notice. He suddenly said he WOULD pay me the difference, but only if I stayed another 6 months and he'd pay me then. I left.

This, of course, is practiced on a larger scale. The city doesn't have the money (though my boss certainly did), so they simply make deferred promises and convert money they would have to pay today to keep an employee to "someday".

And I'm sure someone more famous and clever than I has said "Someday always comes".

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John Ashman
on September 01, 2013 at 04:52:17 am

Minor issues aside, it is always mystifying to see otherwise well educated people rail against employees and their representatives as the primary, if not sole, focus of the problems facing society. In the case of public pensions, the evil doers are always the unions and greedy employees, no matter that study after study shows workers for the public sector are compensated less, on average, after everything is weighed.

The real culprit is, of course, the politicians and voters that repeatedly elect them to office. Everyone thinks they can get something for nothing, kicking pension and other benefit costs years down the road for someone else to deal with as a means of trying to compete for better employees. When both employees and voters come to grasp that everything comes at a price, some communities will find no one is willing to fix the sewers, chase after criminals, or fight fires when they see they will not be getting what was promised to them in retirement. No, those people will work as corporate drones and safely sock away their 10 or 15% of earnings into a 401k plan with matching, an outside company holding the money to insure against corporate raiders. The ones that are willing to do society's dirty work will be the type you really should be afraid of, the kind of people who look out for their own self interest first, never that of the people they serve.

It is hard to overcome the incumbancy factor when running for office short of the major scandal that kills a political career or very rare event when a whole political party sweeps many additional races. Benefits are sure to be trimmed, taxes raised, and all sorts of hand wringing to take place but ultimately, employee contracts include benefits so start preparing the next wave of new hires to understand that they are going to lose the equation much more than those already retired or those close to leaving public service. Your elected agents have gotten you into this mess and you have not paid enough attention as the problem grew so be prepared to cut services as additional monies are paid into retirement systems instead, perhaps discussing what level of services you truly want and can afford to be the next topic of debate.

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Steve Houston

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.