New York State Comptroller Thomas DiNapoli says state and local governments will have to come up with more money for their workers’ pensions in the next fiscal year to offset losses in the stock market.The average contribution rate to the state pension fund for public workers will rise from 16.3 percent of salaries to 18.9 percent. The average for the police and fire retirement system will rise from 21.6 percent to 25.8 percent.
Note to younger readers who don’t pay attention to boring subjects like pension contributions: over the years, politicians got votes from public worker unions by promising generous guaranteed pension plans and early retirement. But because they didn’t want trouble with voters who weren’t public workers, they didn’t put enough money aside from year to year to pay the pension bill when it came due.When pressed, state officials said that the money they did set aside for the pensions was invested so cleverly in the stock market that it would earn very high rates of return and, therefore, the pensions would all magically be paid.They lied. The money did not earn the big returns they claimed to expect, and now, as Baby Boom era workers (your grandparents) start to retire, the bills are coming in — and there isn’t any money to pay.So what happens? Cities and towns now have to start taking more of their general tax money and using it to pay the pension bills. That means less money for schools now so that retired teachers can collect their full pensions. It means fewer cops on the beat now, and fewer firemen and firetrucks now, because the old ones still need to be paid.At the state level it means higher tuition in public colleges, because the state has to cut other costs to pay state pension bills. For the rest of your lives you will likely be paying higher taxes and getting less back for them because you are going to be paying for the lies that these weasel politicians told in order to keep the unions and the voters happy. Many of these irresponsible liars are still in office and still asking for your votes.You, unluckily, are not going to be able to stick it to your children and grandchildren the way the older generations stuck it to you. Investors and the bond markets have finally figured out just how sleazy government finance has been these last thirty years, and they aren’t going to keep lending unless governments start keeping honest books and show the true cost of all the debts they have outstanding.Even as you pay taxes to honor past pension promises, people in your generation won’t get the same pension promises that older workers get. For one thing, a favorite tactic of union leaders when they have to negotiate contracts with states that don’t have any money is to sacrifice the pensions and benefits of future workers in order to preserve the privileges that the current ones have. Younger workers will then have the joy of doing the same job for less pay as their older colleagues — and they also get to pay union dues to support the labor leaders who created this mess.Ironically, when the Boomers were your age one of their favorite slogans was “Don’t trust anyone over 30.” It’s not a slogan we Boomers repeat much today, but confidentially, kids, there just might be something in it.