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Pension Blues
Pension Apathy and Public Sector Luxury

Pennsylvania has the second-most underfunded pension system in the country, but there’s apparently little political concern about it. The Morning Call reports:

On Monday, the 23 steps and two landings were packed with corrections officers and lawmakers voicing opposition to Gov. Tom Wolf’s plan to close two state prisons.

On Tuesday, the steps were empty when three citizens and two lawmakers held a news conference to draw attention to what they believe is the biggest problem facing the state: pension debt and the need to somehow pay it off to keep it from growing.

The void was not lost on Rep. Paul Schemel, R-Franklin. In June, Schemel said, the Rotunda was jammed with lawmakers joining Wolf to announce a bipartisan effort to combat the scourge of heroin and prescription-opioid drug abuse. The pension debt crisis is just as important, Schemel said, even if the long-term ramifications of it are not as visible to the public.

Pennsylvania has either $69 or $74 billion in pension debt, depending on how one calculates it. By 2019, that number is expected to rise to $94 billion. So far, repeated reform efforts have failed, and there’s little indication that future attempts will succeed.

Can kicking is all fine and dandy as long as the problem remains unnoticed by voters and as long as there’s enough money to fund liabilities. But when, for example, education and social service budgets are cut so that the state can pay its retirees, people suddenly start to care. The problem for policymakers and constituents alike is that by the time people care, it may be too late.

The big-picture challenge, of course, is that public sector workers have become used to making far more than their private sector equivalents. While wages have stagnated for most Americans, they’ve increased (dramatically, in some cases) for civil service employees. In California, government workers earn twice as much as private sector workers do. The California Policy Center has more:

[T]he average pay and benefits for a full-time state/local government employee in 2015 was $121,843.

At the same time, the study found that the average pay and benefits for a full-time private sector worker in California in 2015 was half that much, $62,475.

Moreover, the study found that if the pensions these state/local workers have been promised were being properly funded, their actual pay and benefits in 2015 would have averaged $139,691. And that elevated figure still didn’t take into account the impact of properly pre-funding their supplemental retirement health care, nor did it normalize for their myriad paid days off – typically including 14 paid holidays, 12 “personal days” and 20 or more vacation days as they acquire seniority. And let’s not forget the “9/80” program, common in California government but virtually unheard of in the private sector, where public sector salaried professionals can skip a few lunches and show up a few minutes early or depart a few minutes late each workday, and take 26 additional days a year off with pay because, every two weeks, they worked “nine hour days for nine days, then took the tenth day off.”

If you’re not counting, that adds up to 72 days off per year with pay for a seasoned public sector professional. The study didn’t take that into account.

This is all great for public sector workers, but it’s terrible for taxpayers. And it can’t go on forever.

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  • Jim__L

    “Can kicking is all fine and dandy as long as the problem remains
    unnoticed by voters and as long as there’s enough money to fund
    liabilities. But when, for example, education and social service budgets
    are cut so that the state can pay its retirees, people suddenly start to care.
    The problem for policymakers and constituents alike is that by the time
    people care, it may be too late.”

    Remind me again, why everyone thought the TEA Partiers’ point about public debt was crazy and had to be ignored?

    • CapitalHawk

      Because, caring about public debt was determined to be “racist”.

      • Jim__L

        Is it any wonder that the whole “racist” epithet has lost all corrective force?

        People are doing studies about how being personally called a racist has the same negative effects on mood as being called an ethnic slur. I’d go even farther, and say that being called racist by a hostile source leads to the same sort of defensiveness and rejection of that source that being called an ethnic slur causes.

        Hey, I thought of a question for an internet quiz!

        Which of the following statements is likely to lead to a constructive political dialog?

        a) “All white people are racist.”
        b) “All [select a minority group] are [select a personality trait, positive or negative].”
        c) “All Leftists are insufferably self-righteous when they get going about identity politics.”
        d) None of the above.

        • CapitalHawk

          It certainly has with me. It is clearly now just used by minorities (and many whites) as a quick and easy way to say “I don’t like you and I’m going to force you to bend to my will.” I have a true story to relate that illustrates this point.
          A few years ago I lived in a townhouse that had a shared driveway. The people at the end of the driveway nearest the road had a (bad) habit of parking behind their house and blocking part of the driveway so that you couldn’t easily drive up. These people were east African of some sort (I’m not sure exactly, because we didn’t associate at all). One day I came home and they had blocked the driveway, again. I marched to their door and pounded on the door. When the woman of the house answered I told her that she needed to move her car so I could access the driveway. I admit that I was in a bad mood and I was fairly rude about it. She walked to her car and as she was passing me she said “You’re just a racist!” And I laughed in her face because it actually struck me as funny that she would accuse me of racism because I was making her move her car. But her expression when I laughed was one of absolute shock. I guess she was expecting me to suddenly collapse in fear and ask her forgiveness or something, but she sure didn’t get it.

  • QET

    And it can’t go on forever.

    Apparently it can.

    • rheddles

      No, it can’t. D-Day is when it ends. That’s the day when all the funds in the retirement system are depleted. Then the pension costs will come directly from the annual budget or there will be a default. Either will be ugly. Probably 12-15 years away for PA which is tomorrow in pensionland.

      • QET

        I have been hearing this for a very long time now. And while I am inclined to believe the “can’t” side, so far the actual evidence has not borne out its predictions. Somehow or other no pension system ever collapses. The money is always running out but never actually runs out.

        • rheddles

          I felt the same way about the subprime mortgage market.

          • QET

            That market was not in existence for as long as we have been hearing about underfunded government pensions. And the crisis was triggered not by running out of money but by defaults on GSE-guaranteed mortgage-backed securities, which had been wildly issued because of the fee income generated to the originators. The crisis originated, that is, among the investor community, like a stock market panic. Private bank money was being lost. Totally different mechanism from state pension funds.

            And besides, as I’m sure you’ve noticed, it’s like the crisis didn’t even happen. Money was miraculously found to save the banks (as it will be for the pension funds). Subprime lending is rolling along once more. The system hardly collapsed.

  • Fat_Man

    Things that can’t continue on forever won’t. Things that are unsustainable can keep going longer than you thought possible, and fall apart faster than you imagined. The end result will be more bizarre than anything anyone projected.

  • Psalms564

    Well, yes, public sector unions are a blight that destroys everything it touches. This is yet another example of that.

  • FriendlyGoat

    Why was it that “wages have stagnated for most Americans”? Why was it that the magic of free enterprise treated so many people so badly in the private sector in recent years that they are out trying to imagine themselves “making America great again”?

    • Boritz

      You have to go to a zoo to see free enterprise. There have been none living in the wild for a long time, certainly not “in recent years.”

      • FriendlyGoat

        There are a lot of people trading equities who, by their activities, are arguing against your point. There are a lot of companies lobbying Congress and legislatures for legal and financial favors which, by their activities, are arguing against your point. There is a lot of debate about international trade agreements which, by the existence of that debate, is arguing against your point.

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