Monday, February 28, 2011

Fan mail: Why the big public pensions? No Social Security.

It's not all insulting mail I get. Ed Spondike wrote this morning—probably a longer piece than I should reproduce here. A relevant excerpt:
A private sector worker has three sources of retirement income. He has Social Security, his own savings plan, and probably a company pension. Teachers do not get any Social Security benefits, so they rely heavily on a good pension plan. So, if you do away with the union's right to collectively bargain benefits, some teachers may be without retirement benefits that private-sector workers have.
Spondike raises a great point. Here's some relevant info from the New York Times:
More than six million public employees work outside the Social Security system, including roughly 1.7 million teachers in California, Illinois and Texas, and nearly two million employees of all types in Alaska, Colorado, Massachusetts, Nevada and Ohio, as well as Louisiana and Maine. For years, these and other states have insisted they could provide richer pensions at a lower cost, both to workers and taxpayers, because of investments.

Some of those states’ pension plans now have shortfalls so large that they need outsize contributions. Virtually all state pension funds have had big losses in the last two years, but the go-it-alone states appear especially vulnerable.
So: States promised big pensions to state workers who stayed off Social Security because it was cheaper. But the states failed to put enough money away to cover their promises. And now the states want to reneg on those promises because of "shared sacrifice." That means the states get teacher's services for lower cost than what those states valued those services at, both on the front end and the back end. And yet it's the union members—not state officials—who are being maligned.


KhabaLox said...

Aren't these state pension plans in (large?) part invested in stocks and/or bonds? The states may have put enough away, only to see the value evaporate in the crash. In other words, maybe it's not that "the states failed to put enough money away to cover their promises" but that they failed to adequately manage the funds (perhaps with mitigating circumstances).

Allen said...

So here is a story that happened to my mother.

She started working for the school district at 55 to teach learning disabled children, a physically demanding job with kids who are often very strong but not necessarily in control of their own bodies.

The school district had it's own Teacher's Union, which had it's own pension system and didn't contribute into Social Security.

In all of her previous jobs, she had given a portion of her income to Social Security.

She worked for a few years, and then had a medical emergency which prohibited her from ever working again.

Because she hadn't been in the Teacher's Union long enough, no long term retirement benefits. Because she'd spent several years working for the Teacher's Union and not contributing to Social Security, she isn't allowed to collect Social Security either.

Long and short of it, she's now disabled and unable to work, and no retirement benefits from Social Security or the Teacher's Union.