Explorations in Policing, Faith and Life (With a hint of humor, product reviews, news and whatever catches my attention)
Showing posts with label police pensions. Show all posts
Showing posts with label police pensions. Show all posts

Sunday, March 20, 2011

Some Public Pension Thoughts-from one who is going to receive one.

I have been following all the news concerning the efforts of pension reform throughout the Midwest (Wisconsin's attempting to end collective bargaining)( Indiana's attempt to do the same)(Illinois moving to end the pension process with current benefits locked in place and future investment in a 401k type program) and as is typical with the modern American press I am not hearing a number of facts/elements that need to be interjected into this national debate.  The only coverage seems to be in support of the idiotic vitriol from either the right or the left. Here is a quick bullet point list of elements that should be considered in this debate.


  • For the City that I work for, the pension obligation for Police/Fire/Public Works/City Employees is the single biggest budget item. Last I checked over 35% of the cities tax base/operating capital is spent on pensions.

  • All public pensions were negotiated in public and signed off by duly elected officials.  Every union contract is on file and obtainable by any citizen, further all pension provisions/benefits are also publicly disclosed.  There are no secretes here...where has everyone been for the last twenty years?  The public/tax payer was fully represented by the official they elected.

  • The real problem with pensions is not their insolvency or undue burden on the taxpayer but rather on the total corruption of the politicians that did not fully fund them (right and left).  Had the proper payments been maintained, rather then used for other purposes, there would not been a pension problem right now at all.  I find it interesting that after years of political mismanagement and under payment into the funds the demonetization is not on the politicians that created the problem but rather on the workers that had the governments promise broken.  I keep hearing that we do not need to look into the past but rather reform them now.  Question:  if you cut my benefits now and have not fixed the funneling out of the funds in underpayment or misappropriations, are you not going to come back to me in ten years and ask for more? 

  • Most, more than 90%, of all public employees pay into their pensions, in my case 9%.  That is 9% of my gross income, the average American saves less than 6% of their NET income.  (Link source of data http://www.bea.gov/briefrm/saving.htm).  Bottom line?  I am paying much more for my retirement than you are.

  • I do not get social security.  I am one of the lucky ones in that I do not have to pay into social security either but the vast majority of public pensions employees pay into the fund.  At retirement the Social Security benefit is subtracted from the pension payment and if the number is above zero than that is the social security benefit for the employee.  That number is never above zero.  So public pensions employees are paying an extra 7% for everyone else to have social security.

  • The city I work for has on every contract claimed they are out of money and can not provide us with any percentage salary raise or increased benefits package.  Yet in the end they have always paid us and been in the black.  The city is attempting to lower our salaries and benefit packages and participate in a greater movement to lower all public pensions but it still has funds in the budget to pay for Christmas lights along our main street and fireworks on the fourth of July.  It is not an argument of lack of funds it truly is an argument of preference for the use of funds.  You want to convince us that you need to lower my quality of retirement permanently?  Then cut all discretionary spending and then show me your still in financial jeopardy, but as long as I go into the station and see coloring book handouts, newsletters, bicycle days, softball festivals and the like I know you really do still have money for my current pension.
  • When I decided to pursue my current vocation as a Law Enforcement Officer one of the major decisions points was the guarantee retirement provision that the pension offered me.  I had a number of my college buddies call me when the economy was booming and offer me a job over at their company.  The suggestion, well statement, they kept saying was I was a fool to work for a stupid little salary when there was so much money to be made so quickly.  Later, when the wheels came off the economy and their investments had tanked and they were let go, my stupid little salary looked awesome.  Bottom line: in a good economy my job looks like crap in a bad economy my job looks golden.
  • I have a master's degree, no discipline in my personnel file, I have never been successfully sued, I have given more money back to my department as a result of my job related actions than I have ever cost the department.  If plans continue to move forward where they would retire my pension and replace it going forward with a 401k program, I would have to re-evaluate my current employment.  Even right now in the private sector I could obtain employment in the private sector at a salary higher than my current one from my department.  But over all, however, with the pension in consideration it is a better situation for me if I stay.  The bottom line: do you want your Officer to be in that squad because he/she wants to be there and has passed by opportunities in the private sector or someone that had no where else to go.

  • I have to admit I always found it un-democratic, in that when I joined the force I was forced to join our union, I did not have a choice.  If the union was such a good deal for the police employee wouldn't I just join because it was the smart thing to do, why was that decision taken away from me?

  • Finally for this posting, one of the realizations that was made in the early modern era of Law Enforcement was that there is a indirect ratio between salary and corruption.  The higher the salary the less the corruption.  Conversely, the lower the salary the higher the corruption.  It is a little like the speed limit, in which the calculation is made for safety verses travel time.  If everyone drove at 5mph then few, if any crashes would be fatal but it would be faster to take a horse to get around town.  However if you go 200mph you get everywhere quick but most crashes would be fatal.  I have not seen this decision tree been discussed so far in this debate. 
Just some thoughts...probably will have a few more some time soon.  Gets you thinking when you starting imaging the future and you see your retirement home moving form San Diego and heading to Detroit.


Thursday, February 3, 2011

I Wonder When It Stops?

Politicians from both sides have raided the social security funds for small wasteful politically motivated pet projects to obtain and maintain local voter support, till there is nothing left except a huge I.O.U..  Medicaid and Medicare underfunded to the point of insolvency.  States years behind in payments, so that their friends and family can get rich on easy and fat contracts that would have cost anyone in the private sector their job.  I wonder when its going to end?  The fees that Illinois is paying to maintain a fund that is loosing money can only make sense if the lawmakers and fund managers are together getting rich.  Illinois is taxing itself to death and yet there is no cuts or the end to the friend of the program deals.  It is quickly running to catch up with Detroit and New Orleans in quality of living and financial stability.  They are almost maxed in taxes and yet each day there is another proposal to either raise or create another.  The politicians and the friends and family of the politicians will walk away millionaires but the teachers, Policemen and firemen will just come up empty handed and working till their eighty.  That old man greeting people at Wal-Mart in ten years, just ask him which Police department he retired from, I am sure he will be happy to tell you.

The article's link: http://www.reuters.com/article/2011/01/25/illinois-pension-idUSN2523235020110125

  

US SEC probes statements on Illinois pension-report



Jan 25 (Reuters) - The U.S. Securities and Exchange Commission has started an inquiry into public statements by Illinois officials about the state's underfunded pension fund, the Wall Street Journal reported on Tuesday.

The state's governor's office confirmed the SEC inquiry late on Monday, the newspaper reported.

It quoted the governor's spokeswoman, Kelly Kraft, as saying the inquiry is focused on public statements concerning a measure passed last year intended to shore up the retirement system.

"We are fully cooperating" with the inquiry, it quoted her as saying. "We feel our disclosure was always accurate and complete."

The newspaper, citing Robert Kurtter, a managing director in the public finance division at Moody's Investors Service, said as issue being examined is whether Illinois was taking future savings and treating them as current reductions in the cost of the pension fund.

A measure Illinois took to save costs was to raise the retirement age for newly hired Illinois workers.

The newspaper said Kurtter mentioned the inquiry in a report released on Monday evening.

The SEC informed the state about the inquiry in September, the newspaper quoted Kraft as saying.

She said Illinois has included mention of the SEC inquiry in documents being prepared for the sale expected in the next few weeks of an approximately $3.7 billion bond, the newspaper said.

Illinois' underfunding of its pension system is one of the worst among U.S. states.

 

Carnival Shell Game with Illinois State Pensions

On November 4, 2010, all State Senators were called to Springfield ostensibly to vote on a $4B proposal to pay into state employee pension plans. The Democrat leadership had a political caucus off-site, but no vote was taken on the important fiscal matter, nor any other substantive issue.

Last year I believed Governor Quinn's promise that he would spend approximately $3.5 Billion in borrowed funds wisely and, incredibly (for me), I voted "yes" to give him broad borrowing and spending authority. Unfortunately, that promise was broken and nearly all of that debt was used to pay for public employee pension deposits, while our schools languished and social service agencies were decimated.

Fool me once, shame on you - - fool me twice shame on me.

Two days after the election, Governor Quinn was back again to squander another $4 Billion of debt on a desperately bankrupt pension system. He still has not presented a comprehensive plan of real cuts nor even tax increases that will restore solvency to Illinois--despite the false statements he made regarding the budget during the campaign.

If you believe, as I do, that the pension promise made to public employees represents a real financial obligation, then creating new debt to pay off this existing debt is like borrowing on your Visa at a higher interest rate to pay off your Discover credit card. It's an unfortunate carnival shell game being played with important pension obligations... shuffling deck chairs on the Titanic as it slips beneath the frigid waves.

What makes the credit card analogy even worse for Illinois is that the guy holding both credit cards is bankrupt. If you don't believe me, look at four pieces of evidence:
Unfunded liabilities exceed assets by $80-100 Billion where the State's entire annual general revenue is a bit over $25 Billion.
To pay that amount back over a 30-year mortgage with no interest cost, it would take more than $200 million every 30 days over the next generation of years.
Crain's Chicago Business reports that the state pensions are "eating their seed corn" selling assets to pay current benefits, i.e. a forced liquidation of assets in a bankruptcy.
To issue the last set of state bonds, taxpayers were penalized an extra $550 Million in interest cost over the life of those bonds.

Folks, you just reelected the leaders who produced this mess over the past eight years to another four years under their direction.

At least three reasonable reforms that must be implemented to close and seal the holes in the leaky bucket before we start pouring more money into these pension funds are:

Ask state employees, including teachers, to please work until 62, rather than the current 55 years old, which is early retirement under Social Security that our neighbors receive.

Cap the maximum pension pay at a whopping $120,000 annually, or $10,000 per month for no longer coming in to work. (It takes $3 Million of assets at 4% safe return per year to produce that $120,000 for every single retiree. Staggering!)

Eliminate "double-dipping" multiple state pensions.

Without these commonsense reforms, I will not only vote "No", they'll have to add a new button to my voting console that votes "Heck No".

Governor Quinn has not produced a comprehensive budget plan in two years including repayment of our enormous debt. It looks like voters have sided with the public employee unions and voted themselves a stiff tax increase in Illinois. My guess is that Chicago Democrat leadership will implement what they can claim is the majority will of the people by the end of January.

The really sad part of all this is that this pension borrowing won't solve the fundamental spending binge, and it will accelerate the exodus of employers-with-jobs and seniors-with-assets from our state. Pensions seem to be a higher priority to the current and newly-elected Springfield Democrat one-party leadership than paying the bills for local schools and social service agencies.

I hope I'm wrong, but it appears that Illinois is in a comparative economic death spiral. I will continue to give the best recommendations that I can think of to the Chicago Democrats who are still in total charge of Springfield (Quinn, Cullerton and Madigan), but hope for much different results.


And the third and last...link http://illinoisreview.typepad.com/illinoisreview/2010/02/a-modest-proposal-on-public-pensions.html


SEIFFE: A MODEST PROPOSAL ON PUBLIC PENSIONS

by Ralf Seiffe

There’s a lot of talk about increasing income taxes in Springfield. Democrats, and even rubbery Republicans, confess they have no other idea on how to fix the giant hole in Illinois’ fiscal situation. What appears to be missing is any nexus between the cause of the problem and the possible solutions. Until that connection is made, any tax increase will simply increase state spending without remedying the causes of the problem. Smart Republicans and Democrats who can spell “Michigan” should insist the General Assembly make that connection before voting for any tax increases.

The Pew Center for the States has investigated some 400 pension and healthcare funds operated by the states and found these plans had actuarial underfunding to be at least $1 Trillion. Their report is here. Of the financial disasters exposed by this report, Illinois has the dubious distinction of being one of the worst with only about half its pension fund promises actuarially funded. Indeed, of the total debt Illinois faces, pension underfunding explains 91% of it, according to a chart based on data from state’s Commission on Government Forecasting and Accountability. All tolled, the state’s obligations will reach $130 billion by this year’s fiscal year end, according towww.illinoisisbroke.com.

There’s a difference between short-term budget shortfalls and long-term structural imbalances. Considering only the long-term, it seems to me that the problem Illinois faces are its pension obligations. Even our leaders seem to have come to the same remarkable command of the obvious; our stern-faced governor has proposed that we stop accruing lavish pensions for new state and municipal employees who enjoy much higher career earnings, have near-certain job security and retire much earlier than the taxpayers who fund these benefits. The governor makes this bold and timely proposal secure in the knowledge that his pension(s) are safe from reduction.

He’s also proposed that we increase taxes by 66% to pay for these obligations and for other spending priorities. He justifies this proposal on the Democrat mantra of “shared sacrifice” spiced by the notion that “ability to pay” is the way to apportion the new levies. To meet this objective, he’s proposed very large personal and family deductions that create at least two tiers of taxation. So, despite the Illinois Constitution’s prohibition against progressive income taxes, the governor’s appears to have found a novel way to achieve one of the great aims of all socialist philosophers.

As he is the governor, one must assume this is a constitutional approach, vetted by the phalanx of lawyers at his command. What it fails to accomplish, however, is either linkage to the problem of out-of-control pensions or to accurately assess those with the ability to pay. It also fails to take responsibility for the root causes of the problem.

Starting with the root causes, Illinois taxpayers have every right to be miffed at the management of state and municipal workers’ compensation packages. Our leaders have not resisted their workers’ demands in the fiduciary fashion that the concept of honest services demands. They allowed the formation of public sector unions and then colluded to raise compensation and benefits well beyond those available to taxpayers. Without the countervailing force of the profit motive that exists in the private sector, our leaders have treated themselves and their workers to salaries and benefits that have literally bankrupted Illinois. Now, they expect Illinois taxpayers to pay for their conspiracy with massively higher taxes. This is immoral, it should be illegal and there should be some penalty for letting it happen.

One of the ways the governor and the general assembly have been able to skirt the state constitution’s requirement that it only spend funds available is through accounting gimmicks that are felonious in the private sector. The most evident is the failure to report or consider the current service costs of pensions. Each year, state workers earn a fractional part of their eventual pension. Truthful accounting demands that the amount earned be charged to this year’s operations and accumulated through the career of the employee. Then, when the worker retires, funds will be available to pay the promised benefits. These costs are simply ignored by the general assembly which spends the dollars that should have been reserved on current projects. Were it not for the state’s sovereignty, this practice would be indictable.

So, as one great socialist philosopher once said “What’s to be done” about pensions? Why not adopt the governor’s theories on taxation and link the solution to the problem? First, let’s consider the notion of “ability to pay”. If that’s a legitimate basis for taxation, why not recognize that the lavish pensions the governor and other state workers receive are so much better than the average private sector pension that they literally define the ability to pay. So, using the governor’s logic, why not create a pension tax for public sector pensions? Then, connect that with the average pension in the private sector and make that average the “personal pension tax deduction”. In that way, only the excess benefits--that portion that collusion produced--would be taxable.

The future pension obligations would be directly reduced by the rate of taxation imposed by the public sector pension tax. The higher the tax, the greater the reduction in future pension obligations. And there’s no reason to not to tax the plan heavily because turnabout is fair play. Whenever the politicians talk about “taxing the rich”, there is always a subtle undercurrent that the rich got their wealth in some underhanded way and have some duty to pay it back. In the case of public pensions, there is actual collusion between the parties designed to hurt a third party, in this case the taxpayers. Under these circumstances, the opprobrium politicians have for the rich—and for taxing them--should be liberally turned towards a public sector pension tax in the form of a very high rate.

Given the sneaky way the governor has sidestepped the prohibition on progressive income taxes, a public sector pension tax would be an analogously clever way to comply with the constitutional pension guarantees yet solve the problem. The benefits would be paid, fulfilling the contract and extinguishing any constitutional attack. Then, in a method unrelated to the benefits, a tax would justifiably tax excess benefits.

Finally, the accounting mess. One is reminded of the folks who worked for Enron and invested their 401(k) money in Enron stock. Then, they proceeded to swindle the stock price up from its fundamentally worthless value to a huge number. All along, the workers thought they were getting rich, based on the rising price of their Enron shares. Eventually, the market detected the lie that was Enron and marked the shares down to pennies. The workers felt they were damaged because they “lost” all their gains. But, these were ill-gotten gains based on lies about the company’s financial condition which were passed off on the public. Their gain was illusory.

Similarly, public pension benefits at the state and local level have been based on a lie of the same character as in the Enron situation. The state did not accurately report its true financial condition and the benefits were created only because of this falsity in accounting. Public sector employees knew, or should have known, that the prolific benefits they anticipate are based on this lie and were also illusory. If the system explodes, they will not have lost any real value because, just like the Enron employees, there was no real truth in the plans, there was only the state’s empty promise. Public sector workers had and have a duty to complain and complain loudly when the general assembly created the pension fiction. That they did not makes them just as complicit as our leaders—or the Enron employees—when these plans come apart.

Readers might consider this a rant, and in some ways it is. The facts, as I see them are these: the politicians swindled the public and the rank and file state workers to make themselves more electable. That they take no responsibility now, and tell us that the private sector must now make up for their deceit is not only maddening, it’s unfair. It demands some penalty and taxing their excessive pensions is just one thought.


Proverbs 13:11
Dishonest money dwindles away, but whoever gathers money little by little makes it grow.