4 ms·

The pensions payouts are simply outrageous. Do the math, you'll see a 60-70% final value pension on 100k salary (60-70k/year) with a 3% cost of living increase

The pensions payouts are simply outrageous. Do the math, you'll see a 60-70% final value pension on 100k salary (60-70k/year) with a 3% cost of living increase (standard in Illinois) is worth 1.8-2.0 million dollars (25 years @ 3.5% discount rate). This is equivalent to having nearly 2 million dollars saved in a retirement account and when you retire, buying an annuity with credit quality equivalent to a promise from a major government (not a junk bond which may become insolvent). Anyone who thinks that's "fair" really needs a reality check. 600k pensioners in Illinois [1], many of them living out of state, and the ones that live in-state aren't even taxed on their pension income. They also don't have to pay for health insurance. This is simply insane. There's really no other word for it. This needs to be indexed to private benefits or otherwise tethered to reality. Sidenote. We need a rethink of public service in this country (US). The old bargain of "you get paid less working for the government but the benefits and job security are better" needs to go. Everyone receiving this $2 million entitlement is going to say, well, I work for the government so I deserve my "better benefits". It shouldn't matter if you work private or public sector. There needs to be some equivalence otherwise you get Illinois, where politician after politician promises great treatment to AFSCME and SEIU and to nobody's surprise, no real attempt is ever made to fix this broken system. [1] https://ballotpedia.org/Public_pensions_in_Illinois https://ballotpedia.org/Public_pensions_in_Illinois

notJim 6y ago
I'm not sure I see what the problem is with these pensions. Standard retirement advice is that one should save enough money to live in retirement at a similar lifestyle that they lived while working. If the idea of these pensions is that your salary is lower, but you need to set aside less for retirement, what is the issue? As far as the $2 million figure, if you go to any retirement calculator and try to figure out how much you need to save to have a similar lifestyle in retirement as to working, you will indeed find they advise you to save $2-4m. In the private sector, you're expected to do this on your own, but you get a higher salary to compensate. Looking at my own career, a comparable government job seems to pay about $40k less than a private sector job. If your argument comes down to the public pensions being too generous relative to private ones, shouldn't we instead make private pensions more generous? Why do we want old people who work their whole lives to have a massive step down in lifestyle when they retire? Is that what you want for yourself or your parents?
- lotsofpulp 6y ago
  That's not the argument. The argument is the state and city government remuneration model of defined benefit pensions and other post employment benefits such as retiree healthcare results in a situation where voters of today, politicians, and higher ranking government employees especially in positions of power with the unions are all incentivized to dump the cost of today's labor onto taxpayers decades into the future. I'm sure everyone is in agreement for giving everyone an awesome life. The problem is no one wants to pay for it. The proof is that voters won't vote for a politician who would compensate government employees a cash amount in their 401k equivalent to the defined benefit pension, because that would require increased taxes compared to a politician that pushes those costs into the future via defined benefit pensions. And taxpayer funded defined benefit pensions and retiree healthcare are a proven vehicle for corruption where costs are shifted from today to tomorrow. And unless the government has the power to print money, they should not be in the business of promising people money decades in the future. That's the only way I see to prevent a repeat of IL/Chicago/Detroit/NJ/CT/RI/KY/CA/San Diego, and the list goes on and on.
  - notJim 6y ago
    I understand now. The issue basically comes down to pensions not being pre-funded, right? Although one could argue that by paying a substantially lower salary than the private sector, they are sort of funding the plan by saving money now. It seems the real answer to this would be to have a more generous version of social security at the federal level. And the interim answer is to switch to defined contribution pension plans at the local level, I suppose. Though one thing I don't understand is how governments plan to attract workers when they pay substandard salaries and don't even offer very generous benefits anymore. I was looking at government jobs with the city here (which has a defined contribution pension pretty similar to a 401k), and across the board it was so much worse than any private sector job I've worked.
    - lotsofpulp 6y ago
      Sort of. I would say the issue comes down to it being humans being limited in how much of their wealth they want to share with others, and so will jump on many opportunities to hoard for themselves, especially if the victim is faceless and nameless such as future taxpayers. All blessed with plausible deniability from actuarial calculations. I don't see how it could have played out any other way. Politician A offering low taxes and high services by skimping on saving for future benefits is 100% going to win versus politician B offering high taxes and a fiscally responsible government. And it still plays out that way, until the system reaches a nadir, and it is forced to change, such as Puerto Rico or some of the other aforementioned cities and states. Government should offer people competitive pay, and the idea of it being okay for government jobs to offer less pay in exchange for more stability and retirement benefits should go the way of the dodo, as we can see it just results in long term pain.
lotsofpulp 6y ago
The only reason I can come up with for why politicians specifically exempted taxpayer funded entities from ERISA 1974 and PPA 2006 regulations is so that they can continue to dump labor costs for today onto future taxpayers.

notJim 6y ago

I'm not sure I see what the problem is with these pensions. Standard retirement advice is that one should save enough money to live in retirement at a similar lifestyle that they lived while working. If the idea of these pensions is that your salary is lower, but you need to set aside less for retirement, what is the issue? As far as the $2 million figure, if you go to any retirement calculator and try to figure out how much you need to save to have a similar lifestyle in retirement as to working, you will indeed find they advise you to save $2-4m. In the private sector, you're expected to do this on your own, but you get a higher salary to compensate. Looking at my own career, a comparable government job seems to pay about $40k less than a private sector job. If your argument comes down to the public pensions being too generous relative to private ones, shouldn't we instead make private pensions more generous? Why do we want old people who work their whole lives to have a massive step down in lifestyle when they retire? Is that what you want for yourself or your parents?

lotsofpulp 6y ago
That's not the argument. The argument is the state and city government remuneration model of defined benefit pensions and other post employment benefits such as retiree healthcare results in a situation where voters of today, politicians, and higher ranking government employees especially in positions of power with the unions are all incentivized to dump the cost of today's labor onto taxpayers decades into the future. I'm sure everyone is in agreement for giving everyone an awesome life. The problem is no one wants to pay for it. The proof is that voters won't vote for a politician who would compensate government employees a cash amount in their 401k equivalent to the defined benefit pension, because that would require increased taxes compared to a politician that pushes those costs into the future via defined benefit pensions. And taxpayer funded defined benefit pensions and retiree healthcare are a proven vehicle for corruption where costs are shifted from today to tomorrow. And unless the government has the power to print money, they should not be in the business of promising people money decades in the future. That's the only way I see to prevent a repeat of IL/Chicago/Detroit/NJ/CT/RI/KY/CA/San Diego, and the list goes on and on.
- notJim 6y ago
  I understand now. The issue basically comes down to pensions not being pre-funded, right? Although one could argue that by paying a substantially lower salary than the private sector, they are sort of funding the plan by saving money now. It seems the real answer to this would be to have a more generous version of social security at the federal level. And the interim answer is to switch to defined contribution pension plans at the local level, I suppose. Though one thing I don't understand is how governments plan to attract workers when they pay substandard salaries and don't even offer very generous benefits anymore. I was looking at government jobs with the city here (which has a defined contribution pension pretty similar to a 401k), and across the board it was so much worse than any private sector job I've worked.
  - lotsofpulp 6y ago
    Sort of. I would say the issue comes down to it being humans being limited in how much of their wealth they want to share with others, and so will jump on many opportunities to hoard for themselves, especially if the victim is faceless and nameless such as future taxpayers. All blessed with plausible deniability from actuarial calculations. I don't see how it could have played out any other way. Politician A offering low taxes and high services by skimping on saving for future benefits is 100% going to win versus politician B offering high taxes and a fiscally responsible government. And it still plays out that way, until the system reaches a nadir, and it is forced to change, such as Puerto Rico or some of the other aforementioned cities and states. Government should offer people competitive pay, and the idea of it being okay for government jobs to offer less pay in exchange for more stability and retirement benefits should go the way of the dodo, as we can see it just results in long term pain.

lotsofpulp 6y ago

The only reason I can come up with for why politicians specifically exempted taxpayer funded entities from ERISA 1974 and PPA 2006 regulations is so that they can continue to dump labor costs for today onto future taxpayers.