SLAYING THE PUBLIC EMPLOYEE PENSION MONSTER

If there is one issue that animates the Tea Party, and more and more the American public, it is the ever growing cost and intrusion of government into our lives.  This trend had started many decades ago but has accelerated dramatically over the last two years, with the Democrats taking control over both congress and the White House.

The most expensive cost component of this ever increasing government is employee costs.  Of those costs, pension obligations, both current and future, to those public employees are the fastest growing cost of state and local governments.  The Pew Research polling company estimated recently that the unfunded future obligations, nationwide, of public pension plans exceed $1 trillion.  A recent Stanford University research estimates that in the next 20 years, California public pension alone will be liable for $500B of unfunded liabilities too its retirees.  And who is it exactly that state politicians expect to bail out these pension funds?  You guessed – the California taxpayers.

Not only is a government employee guaranteed a fixed pension payment for his or her life after retirement (a guarantee very few private sector employees have), but because the way these payments are computed the employee can cook for himself an artificially high retirement pay by spiking his final year’s hours worked to achieve a higher pension payment.  This is done by accumulating heavy overtime, during that last year of employment.  This corrupt practice is done with explicit or tacit agreement by government managers, who have little to lose, personally, finally there is an ever existing struggle by the public employee unions to keep the retirement age of public employees low, allowing them to retire with full and guaranteed pension at a significantly lower age than their counterparts in the private sector.  This open ended guarantee is ultimately provided by the taxpayer, and therefore threatens us all.

How can we put a stop to this ever growing menace to our economic security?

The most straight forward approach is to transfer the responsibility for an individual’s retirement plan from the taxpaying public to that individual.  This can be done by converting the defined benefit plans currently in force in the public sector to a defined contribution – where the employee is responsible for his retirement plan, by contributing a percentage of his wages to his retirement plan – just like the great majority of private sector workers.  A defined contribution plan, similar to a 401K or 403b plan would allow the individual to contribute a percentage of his wages towards a retirement plan.  This approach would create a more portable workforce in the public sector, relieving the individual from completing a minimum number of years on the job to be eligible for retirement, as he can move on to other jobs at any time, taking his accumulated retirement funds with him, exactly as is done in the private sector.  Most importantly, the taxpayers would be off the hook for retirement payment liability to public employees beyond those employees working years. 

Raffy Chatav

MyLiberty Member