By: Scott Redler
Across America, State pension funds are facing massive shortfalls. States and cities are on the verge of going bust. The main reason: gold-plated pensions for police, firemen, teachers and bureaucrats. Some 80% of public employees are beneficiaries of defined-benefit plans under which monthly pension payments are guaranteed, no matter how stocks and other volatile assets backing the retirement plans perform. I think that’s a major problem when the S&P, a decade ago, was 19% higher and the NASDAQ was almost 50% higher. So, a private sector employee contributing to his 401k could be wiped out or in the same spot as ten years ago, but these defined plans for public sector employees usually guarantee 7-9% gains a year.
The bill is being footed by us, the taxpayer, which in turn is forcing states onto the verge of bankruptcy. Governor Chris Christie of New Jersey showed us an example of a state worker who contributes about $100,000 over the course of his employment then gets paid about $3 million in retirement. I would love that deal! Most public employees, if they hang around to retirement, can count on pensions equal to 75-90% of their pay in their highest earnings years, and many public employees earn even more in retirement than their best year’s base compensation by “spiking” their last year’s income: working huge amounts of overtime and rolling in unused sick and vacation pay. This is a bit of a problem if you ask me.
There must be pension reform before states like New York and California come knocking on Washington’s door the same way General Motors and AIG did, or the way Greece is in desperate need of a bailout from the EU. We are in a time when the SYSTEM NEEDS CHANGING. No more bandaids and plugging the holes of a sinking ship. President Obama called Wall Street a bunch of “fat cats”–he should take a hard look at the public sector, which is pillaging the taxpayer with their entitlements and sense of privilege. I’m just a technical analys, but it’s time for the President and Washington to build some character instead of washed out opinoins.