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Thursday, April 28, 2011

INSTANT MILLIONAIRE

"I'm a hard-core liberal Democrat, and I say to Dem. legislators: FIX the damn thing NOW!"

Pension Debt Load
My friend Lance (who has his own blog) recently put a link on his Facebook page which points out a problem with how public employees are being handled in many states. In this case the state is Oregon which like most states is having serious financial troubles. Ted Ferrioli writes in Oregon Live:
Think about this: The Public Employee Retirement System is making more millionaires than the Oregon state lottery.

At the end of 2009, the last year in which numbers are available, 241 active members of the PERS system had more than $500,000 in their accounts. If, when they retire, they choose what is called the "money match" option, the state will take their account balance and double it. They would then leave public service with more than $1 million. Ironically, thanks to the 6 percent pickup, most of these employees did not contribute a penny of their salaries to these accounts.

As a comparison, while there are currently 241 potential PERS millionaires, the Oregon lottery's Megabucks game has created only 227 millionaires. That game is available to all Oregonians, while the PERS system is available only to those lucky enough to win a public-sector job.
As he points out, this is an especially troubling feature given that PERS is about to collapse into bankruptcy along with the state of Oregon. And that's a serious issue.

It is true, as some commenters noted at Lance's facebook link that this kind of thing is not unknown to big businesses, and it is true that people signed contracts to get these sort of benefits. The problem is that if a business is in the red several billion dollars like Oregon is, they stop giving these sort of benefits away and renegotiate the contracts, or go under. Unless they're GM, in which case they run to the government for a bailout.

If the state of Oregon has been saddled with unsustainable, impossible contractual obligations, its time to get to court and renegotiate those contracts - and follow in the footsteps of states like Wisconsin and Massachusetts where the legislature has dialed back public employee deals. These public employee pension loads are crushing states to the tune of almost 2 trillion dollars.

Its true that pensions aren't the only thing causing financial problems for Oregon. The biggest, ugliest elephant in the middle of the room people are ignoring is the Oregon Health Plan, which was slated to cost a billion dollars and has cost much more than that. Not only is it vastly expensive, but its driving health care providers and doctors out of Oregon, according to reports.

Newly elected (and former) Governor Kitzhaber of Oregon wants to increase coverage of this health plan, when it shouldn't have ever been passed to begin with and needs to end. Need to cut spending? There's where you start. Don't tell me people will die without it, they lived before Oregon started this plan up. Don't tell me its critical, the state got by over a hundred years without it before. This is the kind of spending that states shouldn't have ever gotten into and only did during fat years. When lean years come, you cut back or collapse under the weight of your own stupidity.

But the bulk of the Oregon budget does actually go into pension costs, and that's only going up every year as more and more people are added to the retirement rolls. So that has to be attacked as well. Public Employee Unions ought never to have existed and should be ended immediately, but until that can be done, they have to be cut back.

Those who are on this pension system rely on it, I understand. They signed a contract, and want their obligations met. I understand that as well. But if the state cannot pay for it, the state cannot pay for it regardless of how people feel about it. If there's no money, it doesn't matter what complaints you bring up.

At the very least the plan has to be scrapped and rebuilt with a more realistic perspective for people who have not yet retired. All states are facing this kind of problem, and the problem is union leadership seems to think there's an unlimited amount of money out there and nothing should ever be cut.

1 Comments:

Blogger lance said...

Thank you for the link. I am a little surprised at the directions that the conversation has gone on the facebook page but I also am finding it interesting.

9:39 AM, April 28, 2011  

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