7 ms·

Payroll is the number 1 expense for government agencies. Easier firing would make a world of difference. I think the root cause is pensions. When people are tie

Payroll is the number 1 expense for government agencies. Easier firing would make a world of difference. I think the root cause is pensions. When people are tied to pensions for a retirement, firing people becomes a much bigger deal. Just pay a match into a retirement account and then when people can go, they go. Private sector pensions are for the most part long gone. Why should public sector keep them.

pc86 9y ago
Pensions just don't make sense mathematically. If they're solvent based on the state's investments, then the employee is getting a raw deal compared to having just invested the money themselves. If they're not, then I as a taxpayer am getting a raw deal by helping to pay for someone's retirement because they worked for a state agency decades ago. My state starts doling out pensions at 5 years. A friend of mine worked for a state senator in the 90s for 6 years. He's got something like $1200/mo guaranteed during his retirement for 6 years of borderline political work ~25 years ago. I know it's a politically charged subject but I don't see why from an economic/mathematical perspective it's any better than moving the same investments to the market. Or at least if you're going to keep the pensions, only give them out for full service (20 years) like the military, and make it easier to fire a government worker for poor performance. I shouldn't be able to sit on my thumbs for a few years and have my mortgage covered by the taxpayers during my retirement.
- dmm 9y ago
  Pensions make a lot of sense mathematically. If I personally fund my retirement I have to save enough for the "worst" case scenario of living many years longer than average. A pension on the other hand only has to invest enough for the average lifespan because the person who dies a week before retirement and collects nothing helps fund the person who lives to be 105. State pensions are in trouble because govt pensions are allowed to assume overly optimistic rates of return.
  - maoistinquisitr 9y ago
    If you're worried about living too long you can buy an annuity. It makes no sense for employers or the government to make that choice for you.
    - majormajor 9y ago
      Mandatory safety net/insurance policies make sense because what we know from experience is that if you don't have a mandated program, some people will blow it off. And as long as we don't have the political will to let them die on the street alone in poverty, it'll be very expensive to try pick up the pieces of the mess once they hit the safety net. Especially if that's something like hitting the ER needing tens of thousands of treatment to stabilize, before just getting kicked back out to the street. Or wasting people's time in the ER without medical need because the ER has heating and a bed and the cold winter street doesn't. Not everybody has family to fall back on in retirement, but we still don't want to let them simply die. So the money has to be given somewhere.
      - maoistinquisitr 9y ago
        It sounds reasonable in theory to collectivize this stuff, but in practice the programs all run out of money. Politicians always over promise. This happens over and over again all over the world. I see no real alternative to freedom here. Let people make their own choices. Over the long term you can't really conjure up better investment returns and better retirements for people by decree. The wealth has to be there.
        majormajor 9y ago
        Do you think the political will is there to let people die in the street? If not, the running out of money part happens either way.
      - kavalg 9y ago
        I fully agree with your statement, but would also like to point to the darker side of the coin, where some people managing the mandatory pension fund will probably make some nice amount of money out of it.
- deleted 9y ago
  [deleted]
- okaram 9y ago
  Pensions make a lot of sense ... they spread out the risk (notice this also means they spread out the rewards :). Now, the actual level of pensions is a different matter ... Notice, also, that if you only give pensions for 'full' service (say, 20 years) you create a big incentive for people to stay exactly 20 years ... both people who should leave at 18, but stay 2 more years 'doing time', and people who get screwed because their boss knows they have to stay 2 more years (kind of like H1 abuses). There's no good reason to not make them increase linearly with time.
- dragonwriter 9y ago
  > I know it's a politically charged subject but I don't see why from an economic/mathematical perspective it's any better than moving the same investments to the market. It's worse on average, it's better at minimum (ignoring, for this analysis, municipal bankruptcy) > My state starts doling out pensions at 5 years. A friend of mine worked for a state senator in the 90s for 6 years. He's got something like $1200/mo guaranteed during his retirement for 6 years of borderline political work ~25 years ago. Assuming a 2% of highest full years salary per year of service formula at typical retirement age (a fairly generous public, non-safety pension), with 6 years of service that would require a base salary of $120,000 over the highest paid year of those six, that’s—today, not in the 1990s—a fairly senior staff salary for the California State Senate, which has the highest legislator and staff salaries in the nation. Your description is not necessarily impossible, but it's extremely far from typical.
  - trhway 9y ago
    > that would require a base salary of $120,000 over the highest paid year of those six https://en.wikipedia.org/wiki/Pension_spiking https://en.wikipedia.org/wiki/Pension_spiking piling up overtime and sick and vacation days saved over previous years, people are frequently able to 2x and more their salary for pension calculations.
    - dragonwriter 9y ago
      > piling up overtime and sick and vacation days saved over previous years, people are frequently able to 2x and more their salary for pension calculations. Yes—with a long career over which to save (especially since public employers tend to have vacation allocation which increases with years of service)—and an hourly wage rather than salaried job so that they are eligible for overtime, and participation in one of the systems that hasn't adopted controls to prevent pension spiking, sure. But not with a 6 year stint in political staff position.
      - pc86 9y ago
        Salaried workers can receive overtime as well. Your thinking of exempt/non-exempt, which has more to do with responsibilities (e.g. management is an exempt category). And the "political staff positions" are the in the same state bureaucracy as the other agency employees. They're not treated differently for retirement based solely on the fact that they work for the legislature. And it's certainly possible to build up a lot of vacation and flex time (not strictly OT but it's still paid out at a reduced rate) in 6 years.
- ak217 9y ago
  > If they're solvent based on the state's investments, then the employee is getting a raw deal compared to having just invested the money themselves. Institutional investors have access to investment opportunities that individual retail investors don't. Many pension funds are big LPs in VC, PE, and hedge funds.
Chaebixi 9y ago
> Private sector pensions are for the most part long gone. Why should public sector keep them. Because we don't want a race to the bottom?
- pc86 9y ago
  What about getting rid of pensions in order to be financially solvent is a race to the bottom?
  - Chaebixi 9y ago
    > What about getting rid of pensions in order to be financially solvent is a race to the bottom? The idea that the little guy needs to be made more financially insecure so those at the top can benefit from something more "financially solvent." This applies to business (less pensions, more dividends and share buybacks) and government (less pensions, lower taxes [for the rich]). Also, IIRC, private sector pensions are quite common for CEOs and executives. They're only less common for the little guys.
- alexanderstears 9y ago
  What we really don't want is the government spending tax money to stop the race to the bottom.
- GlenTheMachine 9y ago
  Because they're a way to compensate highly skilled government workers for the fact that their salaries aren't competitive.
  - bradleyjg 9y ago
    It’s true that highly skilled government workers are underpaid. But non-highly-skilled government workers are overpaid. Both groups get pensions, and there are a lot more of the second group.
    - GlenTheMachine 9y ago

pc86 9y ago

Pensions just don't make sense mathematically. If they're solvent based on the state's investments, then the employee is getting a raw deal compared to having just invested the money themselves. If they're not, then I as a taxpayer am getting a raw deal by helping to pay for someone's retirement because they worked for a state agency decades ago. My state starts doling out pensions at 5 years. A friend of mine worked for a state senator in the 90s for 6 years. He's got something like $1200/mo guaranteed during his retirement for 6 years of borderline political work ~25 years ago. I know it's a politically charged subject but I don't see why from an economic/mathematical perspective it's any better than moving the same investments to the market. Or at least if you're going to keep the pensions, only give them out for full service (20 years) like the military, and make it easier to fire a government worker for poor performance. I shouldn't be able to sit on my thumbs for a few years and have my mortgage covered by the taxpayers during my retirement.

dmm 9y ago
Pensions make a lot of sense mathematically. If I personally fund my retirement I have to save enough for the "worst" case scenario of living many years longer than average. A pension on the other hand only has to invest enough for the average lifespan because the person who dies a week before retirement and collects nothing helps fund the person who lives to be 105. State pensions are in trouble because govt pensions are allowed to assume overly optimistic rates of return.
- maoistinquisitr 9y ago
  If you're worried about living too long you can buy an annuity. It makes no sense for employers or the government to make that choice for you.
  - majormajor 9y ago
    Mandatory safety net/insurance policies make sense because what we know from experience is that if you don't have a mandated program, some people will blow it off. And as long as we don't have the political will to let them die on the street alone in poverty, it'll be very expensive to try pick up the pieces of the mess once they hit the safety net. Especially if that's something like hitting the ER needing tens of thousands of treatment to stabilize, before just getting kicked back out to the street. Or wasting people's time in the ER without medical need because the ER has heating and a bed and the cold winter street doesn't. Not everybody has family to fall back on in retirement, but we still don't want to let them simply die. So the money has to be given somewhere.
    - maoistinquisitr 9y ago
      It sounds reasonable in theory to collectivize this stuff, but in practice the programs all run out of money. Politicians always over promise. This happens over and over again all over the world. I see no real alternative to freedom here. Let people make their own choices. Over the long term you can't really conjure up better investment returns and better retirements for people by decree. The wealth has to be there.
      - majormajor 9y ago
        Do you think the political will is there to let people die in the street? If not, the running out of money part happens either way.
    - kavalg 9y ago
      I fully agree with your statement, but would also like to point to the darker side of the coin, where some people managing the mandatory pension fund will probably make some nice amount of money out of it.
deleted 9y ago
[deleted]
okaram 9y ago
Pensions make a lot of sense ... they spread out the risk (notice this also means they spread out the rewards :). Now, the actual level of pensions is a different matter ... Notice, also, that if you only give pensions for 'full' service (say, 20 years) you create a big incentive for people to stay exactly 20 years ... both people who should leave at 18, but stay 2 more years 'doing time', and people who get screwed because their boss knows they have to stay 2 more years (kind of like H1 abuses). There's no good reason to not make them increase linearly with time.
dragonwriter 9y ago
> I know it's a politically charged subject but I don't see why from an economic/mathematical perspective it's any better than moving the same investments to the market. It's worse on average, it's better at minimum (ignoring, for this analysis, municipal bankruptcy) > My state starts doling out pensions at 5 years. A friend of mine worked for a state senator in the 90s for 6 years. He's got something like $1200/mo guaranteed during his retirement for 6 years of borderline political work ~25 years ago. Assuming a 2% of highest full years salary per year of service formula at typical retirement age (a fairly generous public, non-safety pension), with 6 years of service that would require a base salary of $120,000 over the highest paid year of those six, that’s—today, not in the 1990s—a fairly senior staff salary for the California State Senate, which has the highest legislator and staff salaries in the nation. Your description is not necessarily impossible, but it's extremely far from typical.
- trhway 9y ago
  > that would require a base salary of $120,000 over the highest paid year of those six https://en.wikipedia.org/wiki/Pension_spiking https://en.wikipedia.org/wiki/Pension_spiking piling up overtime and sick and vacation days saved over previous years, people are frequently able to 2x and more their salary for pension calculations.
  - dragonwriter 9y ago
    > piling up overtime and sick and vacation days saved over previous years, people are frequently able to 2x and more their salary for pension calculations. Yes—with a long career over which to save (especially since public employers tend to have vacation allocation which increases with years of service)—and an hourly wage rather than salaried job so that they are eligible for overtime, and participation in one of the systems that hasn't adopted controls to prevent pension spiking, sure. But not with a 6 year stint in political staff position.
    - pc86 9y ago
      Salaried workers can receive overtime as well. Your thinking of exempt/non-exempt, which has more to do with responsibilities (e.g. management is an exempt category). And the "political staff positions" are the in the same state bureaucracy as the other agency employees. They're not treated differently for retirement based solely on the fact that they work for the legislature. And it's certainly possible to build up a lot of vacation and flex time (not strictly OT but it's still paid out at a reduced rate) in 6 years.
ak217 9y ago
> If they're solvent based on the state's investments, then the employee is getting a raw deal compared to having just invested the money themselves. Institutional investors have access to investment opportunities that individual retail investors don't. Many pension funds are big LPs in VC, PE, and hedge funds.

Chaebixi 9y ago

> Private sector pensions are for the most part long gone. Why should public sector keep them. Because we don't want a race to the bottom?

pc86 9y ago
What about getting rid of pensions in order to be financially solvent is a race to the bottom?
- Chaebixi 9y ago
  > What about getting rid of pensions in order to be financially solvent is a race to the bottom? The idea that the little guy needs to be made more financially insecure so those at the top can benefit from something more "financially solvent." This applies to business (less pensions, more dividends and share buybacks) and government (less pensions, lower taxes [for the rich]). Also, IIRC, private sector pensions are quite common for CEOs and executives. They're only less common for the little guys.
alexanderstears 9y ago
What we really don't want is the government spending tax money to stop the race to the bottom.
GlenTheMachine 9y ago
Because they're a way to compensate highly skilled government workers for the fact that their salaries aren't competitive.
- bradleyjg 9y ago
  It’s true that highly skilled government workers are underpaid. But non-highly-skilled government workers are overpaid. Both groups get pensions, and there are a lot more of the second group.
  - GlenTheMachine 9y ago