Straws in the wind (part two)
April 05, 2010
Public pensions are in trouble and causing trouble.
"Losses in state retirement fund create $1 billion crisis for [Oregon] agencies, local governments".
There's another budget crisis brewing in Oregon.
It's still a year and a half away, but when it hits, it will affect every level of government in the state.
"State, local pension plans dropped $179 billion even before markets crashed".
"Vallejo's Painful Lessons in Municipal Bankruptcy".
"Public Pension Deficits Are Worse Than You Think: How Can Fund Managers Assume An 8% Return?"
Pension plans for state government employees today report they are underfunded by $450 billion, according to a recent report from the Pew Charitable Trusts. But this vastly underestimates the true shortfall, because public pension accounting wrongly assumes that plans can earn high investment returns without risk. My research indicates that overall underfunding tops $3 trillion.
"New York's $105B pension timebomb".
"Public Pension Funds Are Adding Risk to Raise Returns".
Public unions are a big reason why.
"Cash-Poor Cities Take On Unions".
But with the city facing a budget deficit that could drain its reserves by summer, Mayor Villaraigosa wants to re-open contract talks with 45,000 cops, firefighters, librarians and other city employees in hopes of persuading them to contribute more to their pensions and health-care costs. His deputy chief of staff, Matt Szabo, puts it bluntly: "Unions have priced themselves out of a job."
Nationwide, politicians looking for budget cuts are confronting politically powerful unions that represent state and local government employees—15% of U.S. workers and organized labor's biggest stronghold. . . .
Lee Craig, an economics professor at North Carolina State University, says pressure has been building for years to cut government benefits, with the financial crisis accelerating that. "Their promises have finally outstripped the growth of their tax bases," he says.
"We're twisting arms. We're threatening people."
Playing nice with the unions is how we get a $63.6 billion budget -- more than 25 percent higher than when Bloomberg came in (adjusted for inflation).
"Public-sector unions bleed taxpayers".
Public-sector unionism is a very different animal from private-sector unionism. It is not adversarial but collusive. Public-sector unions strive to elect their management, which in turn can extract money from taxpayers to increase wages and benefits -- and can promise pensions that future taxpayers will have to fund.
The results are plain to see. States such as New York, New Jersey and California, where public-sector unions are strong, now face enormous budget deficits and pension liabilities. In such states, the public sector has become a parasite sucking the life out of the private-sector economy. Not surprisingly, Americans have been steadily migrating out of such states and into states like Texas, where public-sector unions are weak and taxes are much lower.
"What Politics Looks Like in a Union-Run World That Has Run Out of Money".
"Labor Pains and Gains: The Extraordinary Transformation of America’s Unions".
At the same time that private union membership has been on the decline, public sector union membership has been surging and is higher today by 781,000 government employees than in 2000 (see chart below).
If Obamism is carried to its logical conclusions, we will start to see Californization or Hellenization. An increasingly furious public work force refuses to take cuts or furloughs, and so continues to demonize the supposedly greedy “them,” who in turn nod and leave or begin to marginalize themselves. (Our radio ads out here now blare with teachers unions demanding higher taxes on the most taxed “wealthy” and “corporations” in the nation.) . . .
Government is not an abstraction, but a work force; its prime directive is for self-survival and perpetuation. Public workers will find the rationalization to lash out, when the money dries up and the checks begin to bounce. Again, here in California, professors are on furloughs each month, prisoners are being released, teachers pink-slipped, and 3,500 leaving the state each week. Our schools are rated 47-49th in the nation, but we employ America’s highest paid teachers, and level the highest state, gas and income taxes in the United States — and yet we have not a shred of introspection over how we managed to have the highest taxes, the highest paid teachers and the worst schools. To suggest that this is logical rather than aberrant earns one all sorts of calumny.
"How the Coming Union Pension Plan Collapse is Affecting White House Decisions".