Six Fallacies About Government Pensions

After years of having their way in the political arena, public employee union leaders are now on the defensive, victims of their own success.

Since given collective bargaining rights in the late '70s, these union bosses have become accustomed to dictating the labor agenda through their use of union dues to elect lawmakers and local officials who would toe the union line. Because of scant opposition to their efforts to guarantee their members "millionaire" pensions at taxpayers' expense, there was little publicity and voters have been slow to catch on.

However, the labor bosses overreached. Recent revelations have exposed that some government entities are approaching the abyss of bankruptcy because of their inability to fund their pension obligations. These horror stories, such as San Diego where pension costs have increased by as much as a thousand percent in just a few short years, have awakened Californians to the threat to taxpayers and to public services.

A pension reform initiative filed by the Howard Jarvis Taxpayers Association and a nearly identical bill authored by Assemblyman Keith Richman (R-San Fernando Valley) certainly got the attention of union leaders. But when the governor announced in his State of the State address that he would fight the unions on this issue, union headquarters around the state went to "DefCon 3". It took the unions but a matter of hours to launch their massive disinformation campaign.

Are the union bosses correct that this proposal would take away existing pensions? Hardly. The modest goal of reformers is to stabilize government budgets by replacing defined pension benefits (a guaranteed pension amount) with defined contributions (a guaranteed payment amount toward a worker's pension). Moreover, it applies only for those taking government jobs after 2007. Current retirees and employees under defined benefit plans can keep them if they want. Period.

But that is not the only distortion coming from union leadership. Here are some of the old canards about public pensions that have been trotted out by those defending the status quo:

Fallacy 1 - Government employees are driven by some higher calling to serve the public. Their self-sacrifice should be rewarded.

The Truth - Most public employees go into government work because it pays quite well, has great job security and offers a host of generous benefits. James Buchanan won the Nobel Prize in Economics in 1986 for his research demonstrating that public employees and politicians, rather than working for "the public good," work in their own self-interest -- just like everyone else.

Fallacy 2 - Since government employees are paid far less than their counterparts in private business, they are entitled to additional compensation in the form of medical and retirement benefits that will provide security in their golden years.

The Truth - Several decades ago, public employees generally were paid less than their private sector counterparts. No longer. Today, government employees in the vast majority of job classifications earn considerably more than those in the private sector doing similar work. They have even better job security than before and they enjoy many far superior benefits -- including a pension which can exceed the salary they earned while working.

Fallacy 3 - Generous pension benefits are essential for government to recruit and retain quality workers.

The Truth - Since historically few public employees quit government positions after a few years on the payroll, and most "public servant" occupations have far too many qualified applicants per job opening, it is clear that taxpayers are paying government workers who are already strongly motivated to hold onto their jobs.

Fallacy 4 - Generous benefits have helped to eliminate much of the need for public servants to solicit and receive bribes and partake in graft.

The Truth - In the U.S., widespread bribery and graft were not a problem when pay and pensions were modest, and it is not a problem today with our opulent compensation payouts. Some politicians and employees still take bribes and graft -- and always will. Most did not, do not and will not.

The Truth - Some public employees live on modest pensions, particularly those who retired several years ago. But increasingly, due to union backed changes in the law over the last seven years, public employees are retiring on lavish pensions.

Fallacy 6 - By all means, let's discuss ways to improve our government, but let's not pretend that we can cut government spending -- or cut the demand on future budgets -- without getting less in return.

The Truth - Taxpayers can cut future government spending, or at least the rate of growth, which is taxpayer enemy number one, and government will still be able to provide good quality essential services. While state and local government revenue in California is growing at a rate far in excess of inflation, government spending is growing even faster. The rate of increase in spending is simply unsustainable and everyone in Sacramento knows it. Over the long term, pension reform will help the state balance its budget, reduce the pressure on taxpayers and provide fair and competitive benefits to future public workers.

In the coming months, those with a vested interested in the status quo will use their substantial financial resources to spread disinformation about pension reform and to instill fear in the hearts of current retirees and employees. But those of us who are concerned about the future of California can take heart. The truth is on our side.

I would clarify that he isn't talking about military retirees. I joined the retired reserve in 1992. I'm still subject to call-back (over 5,000 retirees were called back for the first Gulf War...) and view my pay as a retainer, not retirement. It is, in fact, modest and I anticipate working until I drop.

I think he is only talking about California state employees. This is probably true of teachers in most states, who have used bargining to create rather generous pensions. Federal employees don't have much of a pension plan any more. They have been put on a 401K type plan where you get what you save plus some matching money.

'Retainer' is exactly what a military retirement is, they even call it that legally. IIRC, you are on 'retainer' until you reach your 30th year, at which point you are transferred to the 'retired list'. If you do 30 years active duty, you go straight to the retired list.

You are still subject to recall on the reitred list, but it is far less likely than when you are before 30 years, and still being paid retainer.

The problem at the state level is too often it is easy for politicians to negotiate to unions to promise them big bucks in the out years. They keep their current pay somewhat reasonable, but make promises in the future when the politician is no longer around to have to figure out how to pay for it.

Federal employees don't have much of a pension plan any more. They have been put on a 401K type plan where you get what you save plus some matching money.

Plus a basic benefit of one percent of their "high three" times years of service.

The old system was exceptionally generous to lifers but was not particularly good for folks who moved in and out of federal service, especially to those who came into government later in a career. The new system is not as generous to the lifers but is portable and flexible.

While we are looking at outrageous pension benefits, how about looking at waste and cut down on the number of state employees..

James Buchanan won the Nobel Prize in Economics in 1986 for his research demonstrating that public employees and politicians, rather than working for "the public good," work in their own self-interest -- just like everyone else.

Back to the socialism vs. free enterprise debate or big government vs. small government. We pay the freight whether as consumers or taxpayers as we are both. Government workers have no incentive to improve or to please on a day in day out basis. That means in our taxpayer role we have little ability to affect services.

Businesses have a 100% incentive to please because as consumers we have a choice. Therefore, we have a direct and immediate influence on goods and services.

We seems best to you?

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