Public Pensions: Can Deferrals Keep Coffers Full?

 

My quotes in "Pension Bills to Surge Nationwide: Many States and Cities Face Hard Choices Because of Market Declines" by Craig Karmin (Wall Street Journal, March 16, 2009) seemed to have resonated with a lot of www.pensionriskmatters.com readers. If you didn't read the article, I said that current funding woes will result in a "huge showdown between taxpayers and public employees" and "The anger is more acute today when people are feeling economic hardship."

In response to queries about New Jersey's plan to use what some might describe as gimmickry to defer pension liabilities, I said that "An IOU is an IOU whether you recognize it now or push the bad news into the future. Taxpayers have the right to know the extent of a town’s pension plan underfunding. A more fundamental question to ask is why there is a need for a deferral in the first place. Why haven’t these plans been better funded to date? Who is accountable and what are their plans to address the retirement plan crisis?

Here is a sampling of the feedback from readers of this blog.

  • In response to "New Jersey Governor Calls for a Deferral of Pension Contributions" (November 29, 2008), one reader wrote: "This is apparently a done deal since towns and counties are making up their budgets assuming as much. Very sad that actuaries have been marginalized (bribed) to keep quiet."
  • In "Forbes Describes Public Pension Benefits as Rich" (February 23, 2009), a reader wrote: "It's helpful, we think, to occasionally put California's state worker issues in a larger context. Take a look at The Arizona Republic's story, "Union's request to halt state layoffs denied."
  • In another response to the Forbes post, dated February 23, 2009, a reader asserts the following: "I think this analysis is a bit overly simplistic. The general characteristics of a governmental workforce can vary greatly compared to the national private sector labor market. Many federal, state and other governments are loaded with a high share of college grads and highly technical workers. You should probably try to adjust for such differences, if you want to make such comparisions. I used to work for the labor statistics branch of the U.S. Department of Labor. It was a building of economists, actuaries and statisticians. Meanwhile, in the rest of the economy, every new job being created was as a Wal-Mart greeter. Should the government number jockey take pay cuts because outside jobs are falling in quality or should they be compared to people holding similar jobs in the private sector? Also, many government workers are not in the Social Security system so a pension with a sixty percent replacement ratio is not as crazy as it sounds (and a sixty percent combined replacement ratio shouldn't sound crazy - that's a big part of the problem). Look at the fed programs (FERS and CSRS) to illustrate..."
  • Another reader said, after reading my words about taxpayer- public worker friction: "We have, in the words of EJ McMahon, a "public pension time bomb" on our hands that the ordinary taxpayer does not understand. See http://www.empirecenter.org:80/Special-Reports/2006/06/defusing_new_yo.cfm. In my local Long Island school district of 1,600 students, the average teacher is paid in excess of $93,000. That is a base salary only, no overtime, extras, benefits - It is outrageous."

If you want to comment, please email us. We want to hear what you have to say, especially in the spirit of nurturing an informed debate.

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