Fat pensions spell doom for many cities

[Dudeskey]

I know we have some people that work for a local government on some capacity... I hope other cities aren't set up the same way.
http://money.cnn.com/2008/06/02/pf/r...ion=2008060305

Vallejo, Calif., took the extreme step of filing for bankruptcy to get out of generous obligations to public employees. Other cities and states are watching.

By Janice Revell, Money Magazine senior writer
June 3, 2008: 5:49 AM EDT

NEW YORK (Money Magazine) -- The jig is up. For years, politicians have been playing what amounts to a multi-trillion-dollar shell game with state and local pensions. They've doled out lush retiree benefits to their heavily unionized workforces, knowing that they could shove the cost for those benefits onto future generations of taxpayers.

But a recent financial bombshell dropped by a San Francisco suburb shows why that shell game is now starting to unravel in a nasty way. And it's a cautionary tale that you can't afford to ignore.

Here's the skinny: In late May, Vallejo, Calif., became the largest city in California history to declare bankruptcy. Its financial demise was brought about partly by the real estate crash, which decimated home prices in the area and put a major dent in the city's tax revenues.

But the real nail in Vallejo's coffin was the city's labor costs. Under the current labor agreement, the average police officer walking the beat in Vallejo will be paid $122,000 this year before overtime, according to city documents. An average sergeant will make $151,000; a captain, $231,000. The average firefighter, meanwhile, will bring in $130,000 before overtime.

That's just the salaries, though. The final budget-crusher was the city's pension plan. Thanks to retroactive benefit enhancements approved by the city council in 2000, police officers and firefighters can now retire at age 50 and receive an annual pension equal to 90% of their final pay (assuming 30 years on the job), an amount that gets increased every year to help keep pace with inflation. The old plan had given the workers a pension equal to 60% of their final pay at age 50.

So a Vallejo police sergeant making $150,000 a year can now retire at age 50 and receive an annual pension of $135,000, increased each year for inflation. To put that amount in context, you would need to amass a retirement nest egg equal to about $3.5 million to produce a similar retirement income on your own.

It wasn't just police and firefighters who benefited from the city's largess. The annual pensions for rank-and-file city employees were jacked up from 60% of final pay at age 55 (after a 30-year career) to a whopping 80% of pay, increased each year for inflation.
Other towns in trouble

Here's the scary part: What's going on Vallejo isn't unique.

Back at the turn of this century, when the stock market was still booming, public pension plans across the country were suddenly overflowing with surplus money. Politicians responded by handing out heavily sweetened pensions.

Then, even though the stock market collapsed, politicians couldn't stop the trend. In 2001 alone, pension benefits were increased in at least 17 state plans, as well as some major cities.

For a while, inflated housing prices came to the rescue, handing many municipalities a windfall in increased property tax revenues.

Now that bubble has collapsed and the stock market is floundering. State pension plans alone are about $360 billion short of the assets they should ideally hold for future retirees, according to a recent report by the Pew Center on the States. And that's not including city plans.

Cities and states that enriched their benefits in the past few years are especially at risk. That's because no matter how badly a pension plan's investments perform, the enhanced pension benefits promised to state and local employees back in the boom times can't be taken away, or even modified - they are locked in by constitutional and legal guarantees.

There is, however, one potential option for cutting back on public pension benefits: bankruptcy. And that's what it has now come to in Vallejo. Elected officials in other struggling areas will surely be watching.

Of course, nobody wins in a bankruptcy. Vallejo must now slash services and lay off workers to make ends meet - a sad outcome for both the city workers and residents. Bankruptcy will also wreak havoc on the city's credit rating, making it much more expensive to borrow money for building roads and schools and maintaining the city's infrastructure.

So what's the lesson here? I'm certainly not suggesting that state and local workers be deprived of the pensions they were promised when they started their careers. That was part of the deal they signed up for and it should be honored. The police and firefighters of Vallejo, for example, were told they'd get a pension equal to 60% of their pay at age 50, and so they should.

But the practice of retroactively boosting public sector pensions without any serious debate or approval by taxpayers has got to stop. As the Vallejo debacle illustrates, the stakes are simply too high.

Historically, the justification for these types of pension enhancements has been that public sector workers are forgoing the salaries they would have otherwise received in the private sector, in exchange for better retirement benefits.

But that no longer seems to hold true. According to the federal Bureau of Labor Statistics, the hourly salary (before benefits) of public-sector professionals (including teachers and lawyers) was $31.51 in December 2007, virtually identical to the $31.75 for private-sector professionals. Public-sector service employees (including many blue-collar jobs) averaged $16.72 an hour in salary, compared to $9.87 for private-sector employees.

This is an election year. As such, many states and municipalities are under heavy pressure to sweeten the pension plans for their workers - Massachusetts, South Carolina and Pennsylvania are but three high-profile examples. And ironically, just a few hours south of Vallejo, the city of Rialto, Calif., recently approved a similar retroactive pension increase that will give police officers a pension equal to 90% of their salaries at age 50.

The bottom line: If similar changes are being considered in your city or state, the Vallejo disaster tells you that it's well worth your while to get the facts.

Maybe you'll discover that your local pension fund is flush with money and that elected officials in your area have out laid out a sound, fiscally responsible plan for funding any pension improvements. But I wouldn't bank on it.

[yavoon]

a lot are. the easiest way to get elected locally is to ride on the back of a politically active government union. government unions hold the power locally, they will do everything for your campaign if they like you, volunteer, donate, GOTV, pressure enemies, show up to vote in a bloc, etc. just more proof of the disastrous consequences when prosperity is directly tied to political clout, everyone who doesn't work in one of the favored unions is about to take it up the ass very hard for a very long time because of this.

[Dudeskey]

Originally Posted by yavoon

a lot are. the easiest way to get elected locally is to ride on the back of a politically active government union. government unions hold the power locally, they will do everything for your campaign if they like you, volunteer, donate, GOTV, pressure enemies, show up to vote in a bloc, etc. just more proof of the disastrous consequences when prosperity is directly tied to political clout, everyone who doesn't work in one of the favored unions is about to take it up the ass very hard for a very long time because of this.

You can't aim your **** cannon strictly at the Unions. Whats a cop supposed to be paid in Vallejo? Cost of living is high as hell out there.

[yavoon]

Originally Posted by Urinal_Cake

You can't aim your **** cannon strictly at the Unions. Whats a cop supposed to be paid in Vallejo? Cost of living is high as hell out there.

well most of this has nothing to do w/ salaries, which are a little easier to hold unions accountable for(though it still gets abused) a lot of this is deferred future promises(pensions etc). which politicians hand out like candy to buy the vote getting machine that is the union. and the unions eat it up because it buys them loyalty, which is the #1 purpose of a union in the first place, political loyalty. this and making union employees impossible to fire, plus running a seniority system are all part of the loyalty unions nurture to develop the political clout necessary to rape the american taxpayer as hard as they do. and make no mistake about what I said earlier, this is a complete cavity search of the american taxpayer on the part of powerful unions.

[cutthemdown]

no cop anywhere in the country should make that kind of cash. It should be 40-45 grand for avg cops, up to 100 grand for captians. To pay them what doctors and lawyers make is ridiculous.

[Spider]

Originally Posted by cutthemdown

no cop anywhere in the country should make that kind of cash. It should be 40-45 grand for avg cops, up to 100 grand for captians. To pay them what doctors and lawyers make is ridiculous.

I cant believe i am going to do this ....... But I dont like alot of cops , I think they are power hungry geeks turned Butch ..... But with that said , they do put themselfs in Harms way , or serve the community ...... I saw a colorado state trooper give CPR for over 10 minutes without stopping to save a life on I 70 east of Idaho Springs 2 years ago ....... with that said ****ing New Mexico gave me a 150 Dollar ticket the lousy bastards

[cutthemdown]

Originally Posted by Spider

I cant believe i am going to do this ....... But I dont like alot of cops , I think they are power hungry geeks turned Butch ..... But with that said , they do put themselfs in Harms way , or serve the community ...... I saw a colorado state trooper give CPR for over 10 minutes without stopping to save a life on I 70 east of Idaho Springs 2 years ago ....... with that said ****ing New Mexico gave me a 150 Dollar ticket the lousy bastards

no doubt being a cop is a tough job in many jurisdictions. Other places don't see much violence. I think if not for being a dangerous job cops would only make about 25 grand a yr. The fact it is dangerous is what makes it pay like a job that requires a college degree without having to have one.

One thing that pisses me off to no end is the fact police depts write tickets as a matter of making the budget. The probably have a set amount they want to make off out of state truckers each yr in a state like new Mexico. As if fuel and insurance aren't enough for truckers, let's give them a bunch of tickets also and get and extra 300-400 a yr from each one unlucky enough to get pulled over. Meanwhile while you got your ticket people were probably flying by you at 80 mph thinking, I'm glad I'm not that guy.

[Florida_Bronco]

122k a year for a patrol officer? Looks like I picked the wrong place to be a cop.

[Bronco_Beerslug]

Originally Posted by cutthemdown

no cop anywhere in the country should make that kind of cash. It should be 40-45 grand for avg cops, up to 100 grand for captians. To pay them what doctors and lawyers make is ridiculous.

It's obvious you really have no clue about economics and living conditions outside of a very small area in podunk, USA. It's real, real simple mathematics. If it cost 5 times as much to live in area A as area B, the wages will compensate (for almost everyone).

[cutthemdown]

Originally Posted by Bronco_Beerslug

It's obvious you really have no clue about economics and living conditions outside of a very small area in podunk, USA. It's real, real simple mathematics. If it cost 5 times as much to live in area A as area B, the wages will compensate (for almost everyone).

Yeah because Los Angeles is so cheap.

[Bronco_Beerslug]

Originally Posted by cutthemdown

Yeah because Los Angeles is so cheap.

Then you know how expensive it is to live there, so what's the problem?

[cutthemdown]

Originally Posted by Bronco_Beerslug

Then you know how expensive it is to live there, so what's the problem?

You can't pay cops 100 grand a yr you need too many of them. Any city would go bankrupt doing that. Cops will have to do what other people do and have a 2 income household, invest wisely, or live in a condo or apt and not own a house.

You can't just pay everyone what it takes to own a home in every city.

[cutthemdown]

cops here in LA don't make 100 grand a yr I will tell you that. If they do I have a couple friends that better start buying me more beer and better birthday gifts.

[cutthemdown]

Originally Posted by Bronco_Beerslug

Then you know how expensive it is to live there, so what's the problem?

I would say more logically homes need to fall even further. I agree it's stupid to have homes worth a million dollars and people in the area not being able to afford to live there. The banks gave money out far to easily making the demand for housing too high. It will be a awhile before it fixes it but for sure the solution isnt to pay govt employees 100 grand a yr so they can afford to live. What about the people in the private sector?

We don't want there to become some chasm between private and public employment do we?

[Bronco_Beerslug]

Originally Posted by cutthemdown

I would say more logically homes need to fall even further. I agree it's stupid to have homes worth a million dollars and people in the area not being able to afford to live there. The banks gave money out far to easily making the demand for housing too high. It will be a awhile before it fixes it but for sure the solution isnt to pay govt employees 100 grand a yr so they can afford to live. What about the people in the private sector?

We don't want there to become some chasm between private and public employment do we?

If you don't pay them livable wages they won't be there. Private sector employees make that or much more too. Our hourly wage package there is around $70.

[Bronco_Beerslug]

Originally Posted by cutthemdown

cops here in LA don't make 100 grand a yr I will tell you that. If they do I have a couple friends that better start buying me more beer and better birthday gifts.

The average starting wage for police there are probably between $55,000 and $80,000 depending on education and experience.

[cutthemdown]

The median income for a household in the city was $47,030, and the median income for a family was $53,805. Males had a median income of $40,132 versus $32,129 for females. The per capita income for the city was $20,415. About 7.7% of families and 10.1% of the population were below the poverty line, including 12.2% of those under age 18 and 8.9% of those age 65 or over.

theres the rest of the people in this city

[cutthemdown]

Originally Posted by Bronco_Beerslug

The average starting wage for police there are probably between $55,000 and $80,000 depending on education and experience.

45 grand to 100 grand is what I said seemed fair

[cutthemdown]

but 100 grand only for commanders, captians etc, people in charge.