Why Teacher Pensions Don't Work

wsj ^ | JANUARY 10, 2011 | joel klein

[Coleus]

We live in a funny world. Bernie Madoff pretended he was getting 8% returns on his clients' investments—and he's in jail for running a Ponzi scheme. But in the public sector that kind of make-believe is common. As former chancellor of the New York City public schools, I learned that one of the options the city pension plan offered teachers and administrators guaranteed an 8.25% return, regardless of what the investments actually earned in the market. In fact, throughout the country public-employee pension plans have been massively underfunded, often pretending, like Madoff, that they'd get 8% returns forever, even if they didn't get them in reality.

Whether the investment returns are there or not, defined-benefit pensions require the government to pay retirees a predetermined amount for life. For example, today a teacher in New York City can retire with an annual pension of $60,000 (or more) that is exempt from state and municipal taxes. In short, lots of obligation; little set aside to meet it.

While irresponsible, this kind of behavior makes good political sense. After all, people run for office in the short run, and money spent now—rather than put aside in a pension reserve—is more likely to garner votes. As one legislator recently told me, "When budgets are tight, as they often are, we simply kick the can down the road by underfunding pension obligations." But as with Madoff, inevitably a day of reckoning arrives. For many states and municipalities, that day is now.

[Cisco Nix]

Government Unions will destroy America.

[pieceofthepuzzle]

When politicians ‘kick the can down the road’ they are committing fraud, and should be prosecuted for it. They are running a Ponzi scheme to keep themselves in office. That, in my view, is theft and should be treated as such.

[Menehune56]

The article is on the paid side of WSJ online. Is there a free link? Looks like an interesting story here.

[kingu]

We don’t have enough... Fill in the blank, the lament happens all the time from public officials. Why is the library closed? Because there are 45 ex librarians pulling down 65k a year in cash, and another 25k a year in benefits. Why isn’t the school open after hours? because there’s 17 ex janitors pulling down 45k a year in cash, and again another 25k in benefits.

Just as every airline, factory and all other union bastions that have been crippled or bankrupted by outlandish benefits, so it has come to the public sector, because unlike the factory, here in public service land, there are people with guns to go take money to feed the pension beast.

[FromLori]

You know how you can read this type the title into Google search and then click on it and for some reason you can read it then.

[E. Pluribus Unum]

Ten years from now all public-sector pension funds will be bankrupt, and all the public employees who thought they had it made will be working until the day they drop.

Funny how things even out in the end.

[Principled]

you’re right FromLori...

here’s the link via google

http://online.wsj.com/article/SB10001424052748704415104576066192958395176.html?mod=googlenews_wsj

[Clint Williams]

When politicians ‘kick the can down the road’ they are committing fraud, and should be prosecuted for it.

Mark my words: it is NEVER going to happen. Not unless we can and do go above the existing system to restore it.

America -- a great idea, didn't last.

[sergeantdave]

“America — a great idea, didn’t last. “

So, how many years have you been whining and peeing in your pants?

Every damn time I see your surrender poodle posts, you inject your crap:

AMERICA - A GREAT IDEA, DIDN”T LAST!!!!!!!!!!!!

We get it. You’re a GD surrender monkey, French white flag flying loser.

How about you crawl in some hole and not inject your loser attitude here on Free Republic.

[Menehune56]

You know how you can read this type the title into Google search and then click on it and for some reason you can read it then.

Thanks for the tip!

[HiTech RedNeck]

None were alert enough to realize the unrealistic promise amounted to a Ponzi?

[MSF BU]

I don’t think it will be quite that bad, but there will likely be a lot of pensioners whose COLA’s will be capped well below the future rate of inflation. I can also see many cases where entities (transit authorities for instance) will not only see COLA caps, but also delays in the frequency of COLA adjustments and caps in overall pension amounts. It would not be surprising ten years from now to see people who thought they’d retired with 65K a year adjusted annually for inflation instead with a 30K pension adjusted pentadly for inflation. In an inflationary environment they’d be hurting.