A stiff sentence? Nope, the second rule of policing. While the first is get home for dinner, the second rule is protect the pension. Todd Zywicki (of Volokh Conspiracy fame) and Ellen Norcross write in the Daily News, it’s a sweet deal. Not only do New York police officers’ pensions vest after 20 years, but they get to crank up the pension machine in their three final years on the job via overtime. Then there’s cost of living increases. And many have side businesses as well. It’s really sweet.
Don’t blame the officers. New York’s pension rules make it pay more to retire than to work. And the horrible habits here are a window on a national pension picture that’s looking more disastrous by the day.
Really, don’t blame the officers. That’s the deal available to them, and who can blame them for taking full advantage of it? Like you wouldn’t do it if you had the chance. Consider hitting age 45 at 150% of your salary, plus full health care for you and your family, including dental, for life. You would have to be nuts not to love it. To want it. Take take it.
The problem is that society can’t afford it.
These and other sweeteners are part of the reason why the city’s annual pension payout has increased 900% since 2000. And that’s before health care benefits are included. For every dollar police officers contribute to their retirement, taxpayers contribute nine. Mayor Bloomberg’s office warns that if one thing pushes New York City into bankruptcy again – 35 years after the last time – it will be pensions.
But loopholes and gamesmanship aren’t the only reason why public pension systems nationwide face massive funding shortfalls. They are the result of a perfect storm of flawed accounting, which fueled unrealistic employee demands that were then underfunded by politicians. In plans across the country, during booming years of the late 1990s, many workers were promised retirement payouts that were “too good to be true” and, thus, impossible to make good on.
The miscalculation is massive. Technically estimated at $452 billion as a result of flawed accounting, the real unfunded pension obligation in state pension plans is closer to $3 trillion.
The origination of such sweet, and secure, pensions made sense, given low public employee salaries, shorter life-spans, and the need for inducements to fill jobs that were otherwise not terribly attractive. It was easy for our elected officials to keep labor peace by giving away deals that would be paid for in the future, somewhere down the line when they would be long gone from office, a hero with a bridge named after him, and some new guy to pay the tab. And the public didn’t exactly protest, buying into the whole “we work hard and deserve our pensions” propaganda, because, you know, nobody outside the public sector works hard. The rest of us sit home all day eating bon-bons while public employees provide excellent customer service.
But that was then. This is now, and the same benefits, once gained, can never be taken away. They only get sweeter. That’s the nature of Unionization, always more, even to the point of sucking the last drop of blood out of the rock. Now we find the the pensions are underfunded and underperforming. The deal is done and the money is due, with more coming due every day, and the piggy bank is empty. Uh oh.
According to the New York Times, Colorado has a bit of a shortfall already, and they’ve decided to do something about it.
Earlier this year, in an act of rare political courage, a bipartisan coalition of state legislators passed a pension overhaul bill. Among other things, the bill reduced the raise that people who are already retired get in their pension checks each year.
This sort of thing just isn’t done. States have asked current workers to contribute more, tweaked the formula for future hires or banned them from the pension plan altogether. But this was apparently the first time that state legislators had forced current retirees to share the pain.
Whether this will work has yet to be seen. After all, it’s a contract, and changing the terms afterward is generally frowned upon. But it can’t happen in New York anyway, as protection of pension rights is a matter of the state Constitution.
The alternatives in this scenario are bleak.
First is a federal bailout. But even if we can afford another trillion dollar plus bailout – a big “if” – should the citizens of the rest of the country foot the bill for the gold-plated pensions of Connecticut and Illinois retirees? And what reward does that provide for states that have acted responsibly?
Or states could end up simply defaulting on some or all of their debts. This hasn’t happened since the Great Depression. But 25 years ago, we didn’t expect General Motors to file bankruptcy – until excessive retirement benefits and escalating wages finally killed the goose that laid the golden eggs.
Worried? You should be. Zywicki proposes that public sector unions cooperate in pension reforms rather than “leading us all off a fiscal cliff.” Because unions care deeply about the public giving blood to fund their hard fought pension victories.
Lest anyone feel that this is somehow unfair, bear in mind that you could have taken the police exam instead of the bar exam. And if that doesn’t make you feel foolish, consider that after you retired from the job at age 45, you could always double dip in some other public sector job. So roll up your sleeves and get to work, as we’ve got bills to pay.