Cutting benefits to make ends meet won't "crush the elderly." Just reducing pension benefits to the social security rate will save a ton of money: https://www.illinoispolicy.org/reports/fact-finder-pension-b...
We can argue about what the correct public policy is to correct the problem - any number of solutions exist. Governments have failed to make the required changes - but they have also consistently failed to pay in the funds (this isn't limited to States - companies have done this as well).
None of the solutions will likely include keeping benefits for retirees where they currently exist.
The States seem to be playing a game of chicken - waiting until it is a crisis because they know, politically, discussing changes to the pension system for those currently in it or about to enter it is effectively political suicide.
> Some career city workers even retire in their mid-50s while collecting pension benefits equal to most of their final salary. In contrast, private sector workers cannot begin drawing a full Social Security benefit until nearly a decade later – at the age of 67.
Why on Earth would you compare Social Security with public pensions? Of course private sector workers cannot draw Social Security until 67. City workers can't draw Social Security until 67 either. But private sector workers can draw on their pensions (the few that are left) and on 401(k) accounts as early as age 55, too.
Both city workers and private sector workers draw on Social Security and their retirement funds, whether those be investment accounts or pensions. Why the strange pretense that public sector pensions are equivalent to private sector retirees collecting Social Security?
We're supposed to be outraged at 'excessive' pensions that, at the extreme end, match the salary of the retiree before they retired. But that's exactly where private sector pensions are, and that's exactly what you're supposed to target in your 401(k)/IRA etc. (Of course, the reality is that the vast majority of 401(k) accounts are drastically underfunded, but as this doesn't represent a liability to anyone, nobody cares.)
Then you have paragraphs like this:
> The amount of money a career city worker contributes to his or her pension has no bearing on what that worker will receive in retirement.
...And the article then goes on to note that a) pension contributions are a percentage of your salary and b) the % of your salary depends on your years of service and c) the pension ultimately pays out your salary every year, assuming (b). So it absolutely does depend on the amount of money a career city worker contributes.
Finally, you have this comparison:
> Rhea Fries Boldman’s experience as a Chicago Public Schools teacher reveals just how out of sync city worker contributions are compared to the benefits they receive.
> Boldman retired in 2012 at the age of 59 with a final average salary of $87,057.
> Boldman is receiving an annual pension of $71,674 – and she will receive $2.4 million in pension benefits during her retirement if she lives to her full life expectancy.
> Yet she contributed just $147,032 to the pension system over her 30-plus year career. Her direct contributions to the Chicago Teachers’ Pension Fund will cover just 6.2 percent of her expected lifetime benefits. Including the interest earned on those contributions, the total would cover approximately 12 percent of her expected lifetime pension benefits.
Hopefully Boldman is earning a lot more than interest in her pension account. If not, that's mismanagement. These numbers aren't drastically different from what you'd see in a 401(k). Were I to retire at 59, my company's 401(k) projection calculator says I'd have contributed 380k and would receive 3.5 million. I expect this is optimistic, but you can still see there is nothing totally ludicrous about those numbers.
EDIT: My own back-of-the-hand calculations indicate 'optimistic' is perhaps an understatement. Hm.
Because both are paid for with tax dollars, while private sector pensions and 401(k) accounts are not. Moreover, the public can't be forced to raise taxes to bail out underfunded private sector pensions, while courts are doing just that with public pensions.
> We're supposed to be outraged at 'excessive' pensions that, at the extreme end, match the salary of the retiree before they retired.
The fact is, that if you were an employee whose private sector employer went bankrupt or you didn't put enough into your 401k, then you're stuck with whatever you get from Social Security. I love paying my taxes, but I don't want to see that money go to giving former public employees a standard of living beyond that enjoyed by those who worked for private employers that failed.
Both private sector and public sector employees receive Social Security benefits. It makes no sense to pretend that Social Security benefits are exclusive to private sector employees. The article makes it seem as though only public sector employees can retire at 59 and expect to get anything, while hardworking private sector employees must wait until 67. This is certainly not the case. Private sector employees are (sometimes) offered pensions and (almost always) offered 401(k)s, both of which allow for early retirement.
> I'm outraged because I'm paying for it with tax dollars. I love paying my taxes, but now that we're at the point where a dollar that goes to pensioners is a dollar that doesn't go to schools and infrastructure, it's definitely legitimate to question how comfortable a living we want to provide to public employees at taxpayer expense.
We should pay them every dollar we owe them. It isn't their problem if they paid in every year and the government did not meet its obligations. If you must, cut off pensions for new employees. Don't change the rules on the old ones.
As for 'taxpayer expense', you may be interested in this:
https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corpo...
If too many private pensions start failing, taxpayers may still be on the hook.
It's a lot more complicated than that. School districts can unilaterally give raises to teachers, which increases the tax-payer's burden via additional pension obligations when that teacher retires. The most egregious form this takes are large raises in the few years before someone retires to "supercharge" their pension. Should the tax-payers be on the hook for obligations that were unilaterally created by local school districts? If a school board creates a new assistant/associate/full superintendent/principal position and elevates an existing teacher to that position, they've just added hundreds of thousands of dollars to the tax-payer's bill in the form of additional pension obligations with no approval whatsoever.
People on public pension systems are owed a fair deal that gives them a secure retirement. Obviously at a minimum they should receive what they paid in, compounded yearly at 6.7% (adjusted for inflation). But they're also going to have to bit the bullet for the greater good, just as I'm going to have to do when I lose at least 25% of social security when I retire. We've got a fixed pie of blood and treasure and we owe it to all people to spend that pie wisely, even if it means adjusting pensions.
The Pension Benefit Guaranty Corporation (a government agency) explicitly exists to bail out private sector pensions with tax dollars. These taxes are already "raised" so the public isn't being forced to do anything in addition. This is just to say that we do spend tax revenue backstopping private pensions beyond just social security.
One other thing I would point out is that the courts are forcing the public do pay pensions because the public wrote it into law (the frickin' state constitution in the case of Illinois). It was truly an idiotic idea, but the public and the lawmakers need to undo it, not the courts.
> The fact is, that if you were an employee whose private sector employer went bankrupt or you didn't put enough into your 401k, then you're stuck with whatever you get from Social Security.
Plus PBGC payouts, as mentioned above.
> I love paying my taxes, but I don't want to see that money go to giving former public employees a standard of living beyond that enjoyed by those who worked for private employers that failed.
Definitely. The yearly caps for PBGC coverage of private pensions (http://www.pbgc.gov/news/press/releases/pr14-12.html) would be a good place to start for public pensions. More serious reform is probably needed though. The math doesn't lie. We can't be mortgaging our future to fund unsustainable retirement payments. Cap existing payouts, close the plan to future participants, bolster self-managed retirement options like 401ks, and strengthen the social safety net by injecting some capital into social security. It definitely would be a raw deal for many people, including some people who are very close to me. However, there's just no other way to make the numbers work out.
Are you sure? From what I'm reading it draws the money it uses for payouts from premiums and the assumed assets of failed plans.
http://www.ebri.org/pdf/publications/facts/0107fact.pdf http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/66xx...
Because in same cases employees covered by a pension plan don't participate in Social Security. This was true of Federal Workers who were hired before 1984 for example and I believe there are some state employees in that situation as well possibly even a few private companies covered by pension plans though I'm not 100% clear on what mechanism allows that.