Retirement benefits for CA's state employees is growing 3x the rate of revenues??????

Discussion in 'Economics' started by misterno, Sep 10, 2010.


    America’s public servants are now its masters
    By Mort Zuckerman

    Published: September 9 2010 22:49 | Last updated: September 9 2010 22:49

    There really are two Americas, but they are not captured by the standard class warfare speeches that dramatise the gulf between the rich and the poor. Of the new divisions, one is the gap between employed and unemployed that President Barack Obama seeks to close with yet another $50bn stimulus programme. Another is between workers in the private and public sectors. No guesses which are the more protected. A recent study by the Mayo Research Institute found that “private-sector workers were nearly three times more likely to be jobless than public-sector workers”.

    Political tension is bound to grow when jobs disappear faster in the private than the public sector, just as compensation in the former is squeezed more. There was a time when government work offered lower salaries than comparable jobs in the private sector, a difference for which the public sector compensated by providing more security and better benefits. No longer. These days, government employees are better off in almost every area: pay, benefits, time off and security, on top of working fewer hours. Public workers have become a privileged class – an elite who live better than their private-sector counterparts. Public servants have become the public’s masters.

    In depth: US downturn - Apr-15.US Senate votes to extend jobless benefits - Jul-20.Opinion: US needs to make bad jobs better - Jul-05.Figures confirm slowdown in labour market - Jul-02.US jobs data hint at flagging recovery - Jul-02.Opinion: America’s jobless picture is alarmingly bleak - Jun-06..Take federal employees. For nine years in a row, they have been awarded bigger average pay and benefit increases than private-sector workers. In 2008, the average wage for 1.9m federal civilian workers was more than $79,000, against an average of about $50,000 for the nation’s 108m private-sector workers, measured in full-time equivalents. Ninety per cent of government employees receive lifetime pension benefits versus 18 per cent of private employees. Public service employees continue to gain annual salary increases; they retire earlier with instant, guaranteed benefits paid for with the taxes of those very same private-sector workers.

    More troubling still is the inherent political corruption. Elected officials tend to be accommodating when confronted by powerful constituencies such as the public service unions that agitate for plush benefits and often provide (or deny) a steady flow of cash to election campaign funds. Their successors will have to cope with the inherited debt burden – and ultimately the nation’s taxpayers are stuck with the bill.

    As Governor Arnold Schwarzenegger has pointed out, spending on retirement benefits for California’s state employees is growing at three times the rate of state revenues, now exceeding $6bn annually and growing at the rate of 15 per cent a year. In other states, however, the politics of public pensions appear to be changing. In Michigan, Governor Jennifer Granholm, a Democrat, recently enacted a teacher pension reform that should save about $3bn over 10 years by increasing the amount workers must contribute. Illinois raised its retirement age for newly hired public workers from as low as 55 to 67. Chris Christie, the Republican governor of New Jersey, decided that even if it took bruising clashes with public worker unions, public service compensation reform was essential for the fiscal health of the state. His stance surprised many, but it made him a national figure.

    There is no quick fix to deal with the billions in unfunded liabilities. Public service employees are almost impossible to fire, except after a long process and only for the most grievous offences. What is more, the courts have ruled in many states that pension increases granted by elected bodies are vested benefits that must be paid no matter what, precluding politicians from going back and changing past agreements.

    The only fair solution is to take the politicians out of the equation and have fully independent commissions in charge, fixing the scale of salaries and benefits for public-service workers and establishing an affordable second retirement tier for new employees. More reasonable retirement ages should be in order, such as 65 for general employees and 55 for public safety employees. This would take nothing away from the existing benefits of current employees.

    A fundamental rethinking of the public workforce is necessary. Americans cannot maintain their essential faith in government if there are two Americas, in which the private sector subsidises the disproportionate benefits of this new public sector elite
  2. California legislators increased spending at more than twice the rate of economic growth for almost a decade. Anyone who has even the most basic understanding of mathematics can figure out that when spending growth accelerates faster than economic revenue growth, the train runs off the track. The Internet boom is over. The housing bubble has burst. Unemployment is 13%. California taxpayers are stuck with an unfunded public-employees pension liability of a half-trillion dollars. The writing is on the wall. Businesses are leaving the state (over a hundred so far) and taking jobs with them. Wealthy people are establishing primary residences in other states to avoid California income taxes. The state's population is decreasing and the average income of people coming in is 20% less than those leaving. Those who believe that California is "too beautiful to fail" are going to be in for a shock.
  3. If benevolent dictator of the country, all govt employees would suddenly find out that their pensions were emptied into paying off their various govt deficits. And govt jobs would be illegal to unionize.
  4. zdreg


    this is exactly what caused argentina to go was the provinces that finally bankrupted the central government of Argentina . the central government decide to guarantee the debts of the provinces, I had a thread awhile back on the subject comparing the US to Argentina. a mod who was a patriotic economic ignoramus shunted the thread of to chit chat..
    this scenario has a more than fair probability of being repeated in the US as these deficits come due in the large populated states ie NJ,NY, ILL. etc.
  5. S2007S


    Another positive for CA going forward.

    Nothing like getting 6 figure pensions after working 30 years on the job.

    Isn't retirement great for those who can milk the system.
  6. poyayan


    Young vs old
    private vs public

    That is another reason why we must have inflation.
  7. Need to cut education to save some money. Adopt the same model as finland(who is #1 in the world for education) Start the kids in kindergarten at age 7 and then have 9 years of basic education where they can choose to go to 3 years of upper secondary school(like high school) or a vocational school Teachers spend 1100 hours in the united states teaching and finland they spend less than 600. Kids are not bogged down with 2-3 hours of homework per night like in the US. Kids get no more than 30 minutes of homework in finland. Not to mention that education costs so much less in finland (something like 70% less) which would give California an extra $40 billion dollars PER YEAR to do with what they please.

    So lets see...what makes more sense...adopting the finnish education model and saving 40 billion dollars per year and having the smartest kids in the world, or spending $40 billion and having "average" students while at the same time bankrupting our state. Tough choice liberals. What will you do, I wonder?
  8. Eight


    It was leaked a couple of years ago that California could never, ever, raise enough tax revenue to even pay just the retirement benefits... they will keep putting loan on top of loan, band aid on band aid, but eventually CA will be completely broke...
  9. Dont worry...the rest of the 49 states can bail us out. CA is a cash cow for the federal government. They are not going to let us collapse. We have all the big players here. Hollywood, silicon valley companies like Intel, google & ebay, DirecTV, Cheveron, Visa, amgen, 100s of wineries, ect. California basically controls everything the other 49 states watch, buy & drink, not to mention controlling the medicines you get. The U.S. is nothing without California.
  10. Eight


    people can get away with what they do here because of the weather, it's all tied to paying a premium for the weather... but all that above listed stuff can be done anywhere at all...
    #10     Sep 11, 2010