Posted on 02/25/2011 8:10:46 PM PST by tcrlaf
Pulitzer Prize winning tax reporter, David Cay Johnston, has written a brilliant piece for tax.com exposing the truth about who really pays for the pension and benefits for public employees in Wisconsin. Gov. Scott Walker says he wants state workers covered by collective bargaining agreements to “contribute more” to their pension and health insurance plans.
Accepting Gov. Walker’ s assertions as fact, and failing to check, creates the impression that somehow the workers are getting something extra, a gift from taxpayers. They are not. Out of every dollar that funds Wisconsin’ s pension and health insurance plans for state workers, 100 cents comes from the state workers.
How can this be possible? Simple. The pension plan is the direct result of deferred compensation- money that employees would have been paid as cash salary but choose, instead, to have placed in the state operated pension fund where the money can be professionally invested (at a lower cost of management) for the future.
Many of us are familiar with the concept of deferred compensation from reading about the latest multi-million dollar deal with some professional athlete.
A review of the state’s collective bargaining agreements – many of which are available for review at the Wisconsin Office of State Employees web site - bears out that it is no different for state employees. The numbers are just lower.
(Excerpt) Read more at blogs.forbes.com ...
“To a significant degree, the $1 trillion reflects states’ own policy choices and lack of discipline:
* • failing to make annual payments for pension systems at the levels recommended by their own actuaries; * • expanding benefits and offering cost-of-living increases without fully considering their long-term price tag or determining how to pay for them; and * • providing retiree health care without adequately funding it”
Um, how do benefits expand and cost-of-living increases occur? Oh yeah, through collective bargaining. The unions got the benefits without upping the amount employees contributed, and the taxpayer picks up the rest.
Sounds like deliberate fraud to me.
I think he is assuming that the pension funds make money in the stock market and elsewhere. Fact is, though, that local boards put money into the fund. Of course it is deferred compensation, but that benefit is denied to most in the private sector. Then there is the undeniable fact that taxpayer/teacher money passes on to the unions, and that the unions continually work on politicians to funnel money into the public schools—large amounts of which goes to school administrators. Which is one reason why administrators—despite their protests—like unions.
And most of the time this seems to happen when governments get union "concessions". Give them only a little bit now since the economy is in the tank, but guarantee payments to their dogs 20 years later.
State employees are paid from TAX money - regardless of how the pie is divided up - it is still TAX money - paid by tax paying citizens... differed this or that ... it is still tax money - paid by citizens of that state...
So this Forbes article is lunacy
How stupid do they think we are? Their compensation, immediate or deferred, is provided by taxpayers. So the taxpayers are, indeed, funding their pensions.
I looked around on the site and it seems this is just a blog. One guy’s opinion but since it is connected to Forbes, it gives leftists cover. I just read a story, a real story, not a blog, on Forbes’ site about how non-union states are eating the lunch of union states.
Anytime I see the word “blog” in a title or url, I take it with a grain of salt.
I have no idea who Rick Ungar is but he seems to be Forbes’ token liberal.
OK - start paying income tax on all the health insurance if it is just salary in a different form.
Oh, I see. The taxpayers don’t pay for the pensions, the employees pay for it out of their own pay. The tooth fairy leaves their pay under their pillows.
The better question is:
Who is making the health insurance payments after they retire?
Why the tooth fairy of course.
Turning taxpayer money into a shell game... it’s all taxpayer money. Hell, the point is, the taxpayer pays the tab, and the other point is, public service employees pay should be commensurate to the private sector middle class... ya, its a thankless job, but if holding a job is all one cares about, in this economy, they should probably keep quiet and do their work.
“Oh, I see. The taxpayers don’t pay for the pensions, the employees pay for it out of their own pay. The tooth fairy leaves their pay under their pillows.”
Ok, now that’s just damned funny....
This is the most insidious aspect of government-employee negotiations.
The unions push for elevated pension and health benefits, then agree to an irresponsibly low level of funding.
The practice allows the union to claim huge gains for their employees. And allows the state to claim that the cost increase was minimal.
There was never any effort to make the commitments actuarily sound. It would have destroyed the purpose of the negotiations.
-—Lets not pretend that union leadership wasn’t sitting on both sides of the bargaining table-—
This has been demonstrated by events in Wisconsin. Several local governments and school boards have hurried and completed contract negotiations so that they don’t have to incorporate Walker’s changes. He’s giving these bodies to negotiate to lower costs and they are saying - screw you, we want to pay our teachers at this level’.
Taxpayers pay public employees' salaries. Even when employees pay into a retirement program from their paychecks, they are doing so with money they received from the taxpayers. How that doesn't add up to taxpayers paying pensions for public workers is beyond me.
How, one might ask, were policymakers ever convinced to agree to such generous terms? As it turns out, many lawmakers found that increasing pensions was very good politics. They placated unions with future pension commitments, and then turned around, borrowed the money appropriated for the pensions, and spent it paying for public services in the here and now. Politicians liked this scheme because they could satisfy the unions, provide generous public services without raising taxes to pay for them, and even sometimes get around balanced-budget requirements.
Unfortunately, the hit pension funds took recently in the stock market has exposed the massive underfunding that results from states’ and municipalities’ not paying for the public services they consume. In Illinois, for example, public-sector unions have helped create a situation in which the state’s pension funds report a liability of more than $100 billion, at least 50% of it unfunded. Yet many analysts believe the figure is much higher; without a steep economic recovery, the Prairie State is looking at insolvency. Indeed, Northwestern University finance professor Joshua Rauh puts the date of collapse at 2018; he also predicts that six other states — Connecticut, Indiana, New Jersey, Hawaii, Louisiana, and Oklahoma — will see their pension funds dry up before the end of fiscal year 2020. What’s more, according to the Pew Center on the States, 18 states face long-term pension liabilities in excess of $10 billion. In the case of California, like that of Illinois, the unfunded pension liability exceeds $50 billion. In fact, Pew estimates that, when retiree health-care costs are added to pension obligations, the unfunded liabilities of the states total an astounding $1 trillion.
The skyrocketing costs of public employees’ pensions now present a huge challenge to state and local governments. If allowed to persist, such massive obligations will inevitably force a fundamental re-ordering of government priorities. After all, if government must spend more on pensions, it cannot spend more on schools, roads, and relief for the poor — in other words, the basic functions people expect their governments to perform. But because many states’ pension commitments are constitutionally guaranteed, there is no easy way out of this financial sink hole. Recent court decisions indicate that pension obligations will have to be fulfilled even if governments declare bankruptcy — because while federal law allows bankruptcy judges to change pension and health-care packages in the private sector, it forbids such changes in public employees’ agreements.
More on public unions: http://www.nationalaffairs.com/publications/detail/the-trouble-with-public-sector-unions
Thanks folks. I was looking for intelligent, informational responses, and got them.
Unfotunately, I also realize that you can’t explain complicated matters, especially financials, without their eyes glossing over, and screams of “Why do you hate the working man!” We end up in the situation of trying to explain thermodynamics to infants.
How do we boil the response down to something simple, that even the most brain-dead liberal can understand?
The whole article is nonsense. He first objects to the “gift” aspect... ( but nobody called it a gift), but that’s a setup. He’s claiming that the sum of the individual’s compensation, once bargained for, is NOT taxpayer money. It belongs to the individual employee. And, if you withhold it from the paycheck of the employee, then the employee IS PAYING THE BILL.
Accounting procedures, nothing more. As many responders pointed out, the taxpayers dont’ give a flying fig HOW the money is accounted for, the fact is, every dollar comes from the taxpayers. The fact is, the people collecting the paychecks, are indeed, paid very well. And, more importantly, the fact that there’s a union, means that the government employees can hold the taxpayers hostage, by refusing to agree to work for less than whatever fantastic deal they want, AFTER they are hired.
I’m sorry, but that’s wrong. There is no need for ANY public sector union, no purpose under the sun.
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