It’s simple; since the employees themselves in government rarely put their own money toward the pensions it’s all a future promise to pay. So don’t and say ‘tough luck’.
“It’s simple; since the employees themselves in government rarely put their own money toward the pensions it’s all a future promise to pay. So don’t and say ‘tough luck’.”
I disagree. From an economic perspective in a free labor market, an employee enters into a contract with an employer (public or private) to exchange his/her labor for a compensation package which includes cash, non cash, and benefits. An employer may offer generous retirement benefits in the future in exchange for lower cash compensation today. Essentially public pension are no different than the fully funded defined benefit pensions many private sector organizations provided employees.
When a public or private firm reneges on pension payouts, or reduces them, the firm is essentially stealing from the employee. The employee performed the work at a point in time for wages and the promise of future retirement benefits. The obligation of the employee has been met, if the firm does not provide the promised benefits at a future date it is breaking a contract and stealing the value of the labor represented by the benefits not paid.
The employee is not at fault because the organization to which he/she contracted labor did not put aside the funds to pay out the benefit at the future promised date. The employee is also not at fault if the organization made a bad contract (i.e. the total value of the compensation package for which the employee contracted was greater than market value) just as the employer is not at fault if an employee accepts a below market compensation package for a job. The contract is between the organization and the individual and should be inviolate from the point of both parties. Regardless of future circumstances, the employer owes the deferred compensation and benefits for which the employee contracted at the time he/she performed the work.
Free markets require contracts to operate efficiently. To say a firm or government agency can simply say “tough luck” to employees who have performed work in exchange for compensation that has not been paid is no different than an individual contracting a five year car loan with a bank, paying the loan for two years, and then telling the bank “tough luck” for the other three years. Any court in the land would consider such action breach of contract and the failure of the car purchaser to surrender the car would be consider theft.
Citizens of communities with underfunded pension plans elected representatives who chose not to fund the plans in the past through taxes or spending cuts. The voters who elected these representatives are ultimately accountable for the actions of the representatives, including the failure to set aside funds. The work was performed by employees resulting in an obligation for the employer to fulfill its contract to pay compensation according to the terms agreed to by both parties when the employee performed the work. The voters are obligated pay for the decisions they made in the past, and benefited from, by fulfilling the pension contracts and either pay higher taxes or accept a lower level of government services. To do otherwise would say contracts have no meaning, theft is permissible, and there is no free market.