"contractual agreements that can't be broken"

That's how government pension plans are described in this highly informative video I found via Michigan Capitol Confidential:

What is happening is worse than most people imagine. Most people tend to think that the people on the public payroll are at least "working" in some capacity or another. But as the above documents, they often retire at age 50 ("50 with 90%") and live high on the hog (many retired public employees receive over $100,000 a year).

The guy who is interviewed (Jack Dean) runs a web site called Pension Tsunami -- which documents the appalling nature of the problem.

"The whole idea of the pension was to provide public servants with a decent retirement. It wasn't to make them wealthy, to allow them to retire younger and with more money and be able to go off and play golf while the rest of us supported them."
What's even more shocking -- if you take the time to get into the ugly details as I did earlier -- is that governments are doing everything they can to keep information about pensions secret!

Which means the news media and public interest groups have to mount legal battles in court, simply to find out how the taxpayers' money is being spent.

The California Public Employees' Retirement System and numerous county retirement systems have already released that information. A list of all retirees drawing more than $100,000 a year from CalPERS, for example, is available online.

Sacramento County's system, however, has steadfastly refused, claiming such records are confidential.

Judge Allen Sumner disagreed and ordered the system to release the information.

"Sacramento County faces difficult budget decisions. Its reduction of critical services has generated significant public debate. The public has a strong interest in knowing how government is spending their money, and a constitutional right to such information," according to the judge's final order.

Well, good for that judge! The only hope of doing something about this problem lies in getting word out to the citizens who have to pay for it.

Asks one commenter,

I wonder how much of the public's money was squandered trying to keep these pensions a secret?
They'd probably like to keep that secret too.

These wild government spendthrifts seem to think that they not only have a right to attach themselves to an endless stream of tax dollars, but that they shouldn't even have to disclose that they're doing it. If only there were some way to make them personally liable for their actions the way corporate officers in the private sector are. (Equal Protection, anyone?)

The endless expansion of government employment is bad enough, but if there's one thing worse than having useless unaccountable people "working" it's having them retire. (And it might make more sense economically to pay them not to be there, it's just inherently unfair to pay able-bodied people not to work.)

Hey, if they keep this up, the hateful anti-government bigots will start demanding death panels for government pensioners.

In the above video, former California Assembly Speaker and San Francisco Mayor Willie Brown's column was quoted:

Talking about this is politically unpopular and potentially even career suicide for most officeholders. But at some point, someone is going to have to get honest about the fact that 80 percent of the state, county and city budget deficits are due to employee costs.
He went on to say that "either we do something about it at the ballot box, or a judge will do something about in Bankruptcy Court. And if you think I'm kidding, just look at Vallejo."

And in a recent interview, Brown was asked whether California would go bankrupt, and he said this:

No I don't think the state will go bankrupt. I think they'll just stop sending out pension checks.
Which is fascinating, really. Because governments can't really go bankrupt in the ordinary sense of the term.

What I would like to know is what will be the actual real-life consequence of these pensioners not getting their checks? Will we see rioting in the streets by retired bureaucrats? Or will they be content to file lawsuits and obtain unenforceable judgments? Who owes this money? The people who pay the taxes? Why? Under what theory? It's worrisome, and I wonder how many people have taken the time to think through the various legal and philosophical implications.

All politics being local, I thought I'd try to ascertain whether Ann Arbor (the city where I live) has pension plan, um, "issues." Boy do they ever. This was a year ago (and since then things have only gotten worse):

The pension fund has lost $127 million from last June to last Thursday. That's a 31 percent decrease, from a market value of $410 million to $283 million.

The $7.5 million the city pays each year into the pension plan might need to grow to $13 million in 2011 and $15 million in 2012, according to a worst-case scenario projection by city staff.

"If the financial markets don't improve, this delayed reaction on the effects on municipal finances will start coming on in the next few years, and it is a real risk that we are concerned about," said Ann Arbor's Chief Financial Officer Tom Crawford. "If it is long term, then we have a problem. If it is short term, then the system will work its way out. We have to be careful how we react."

Even in a liberal Democratic city like Ann Arbor, the pension problem has become a current campaign issue:
Glorie [City Council candidate in the 5th Ward] said residents she talks with are concerned.

"I hear about their worries and I share them as well," she said. "We see our government spending money, borrowing money for projects that we consider nonessential, while critical infrastructure like the Stadium bridge crumbles."

Kailasapathy [City Council candidate in the 1st Ward] said the city should be worried about its millions of dollars in unfunded pension liabilities.

"This is I think the most pressing issue that is facing the city government right now," she said. "We really need to renegotiate with the unions in honesty."

She also cited growing debt from projects like the police-courts building. AnnArbor.com recently reported that city debt rose more than 25 percent over three years, from $167.2 million in June 2006 to $209.9 million in June 2009

City records show the city's governmental activities spending also has increased from $96.9 million to $130.2 million from 2006 to 2009. That includes all of the city's basic services like police, fire, public works, and general administration.

Records show a large portion of that increase happened between 2008 and 2009. About $9.9 million was due primarily to an increase in construction costs for the new police-courts building and for early retirement buyouts in the police department. And expenses for public safety increased by about $9.4 million due to increased wages and benefits and increased fleet costs.

So, the economy is in shambles, city revenues are in steep decline, and the city is spending more? In a sane world, this would be called insanity.

Obviously I don't have time (or what the government would call "resources" which means other people's money) to research every major town and city in the country. But I also thought I'd take a quick look at Philadelphia (from which I came).

The problem is worse than Ann Arbor. Philadelphia is cutting basic services like fire simply because it has to pay the retired government workers!

How long such madness can continue, I do not know, but even though I moved from the area, reading the details here makes me want to vomit:

Perhaps the greatest example of the city's peril is the pension bomb that is about to explode.

Any pension funded at less than 50% --- money currently in that pension to pay for future retirees -- is considered "severely distressed." That's insider-speak for the brink of insolvency, where there isn't enough money to even meet bare bones requirements.

And what is Philadelphia's pension?

45% funded. In other words, it's underfunded by a staggering 55%.

It's the details they don't want you to know about that get really appalling (like most bureaucrat-created nightmares) and while I can't devote an entire blog post to them, but if anyone remembers that horror show of a woman, Marge Tartaglione? I highlighted her name, because I remembered it, and I think she deserves attention once again. Like other tax guzzling bureaucrats in Philly, she availed herself of what is called the DROP plan:
...the Mayor is no rookie when it comes to pension debacles.

In 1999, then-City Councilman Nutter helped adopt a pension plan called DROP (Deferred Retirement Option Plan), which was signed into law by then-Mayor Ed Rendell. DROP was created to keep city employees from taking early retirement, accomplished through a financial windfall incentive plan.

The DROP plan was originally intended for just police and firefighters but later expanded to include all city employees and elected officials. After setting a retirement date four years in the future, DROP enrollees, upon officially retiring, receive a whopping lump sum of four years' worth of pension benefits plus guaranteed interest.

Mind you, this is in addition to their regular pension --- and Philadelphia's pension plan is one of the most lavish in the nation --- and at least five years of health benefits.

Here's the kicker: some well-connected appointed and elected officials have abused the system by "retiring" for one day. They then collect a huge amount of money, and return to their jobs almost immediately.

All told, forty officials have exercised this lucrative option, including City Councilwoman Joan Krajewski (who banked nearly $275,000), City Commissioner Marge Tartaglione, former Police Commissioner Sylvester Johnson and former Deputy Police Commissioner Robert Mitchell.

How can they do this? How can such an obscene act be legal?

Because the very people benefitting the most from DROP are the ones who created it.

Readers may recall the fiendish Marge Tartaglione, whose contempt for the voters was the subject of many a blog post (including one here).

I think she should be remembered, so here's the classic video which shocked ordinary people at the time.

Take a good look at the kind of person who has an "entitlement" to your money as she demonstrates dramatically what contempt she has for the people who pay her:

I'd say that I think Tartaglione looks like Gertrude Baniszewski, but that's not nice.

Greedy, petty, sadist though she is, Ms. Tartaglione is only one tiny example among the many thousands who are legally entitled to your money.

I realize that this stuff happens under the cover of democracy, but it makes the divine right of kings look sensible. Today we laugh at the divine right of kings, but there was an important difference between those who believed their power was bestowed by God and the rulers of today. Nutty as they were, at least those who ruled by divine right still believed they had to answer to God.

These people answer to no one.

And we have to answer to them?

posted by Eric on 07.17.10 at 12:52 PM


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