Today on the front page of the Drudge Report, the banner headline is a link a New York Times story talking about "quiet conversations" taking place about seeing how to possible change federal law to allow state governments to utilize some sort of bankruptcy-type approach to reorganizing debt. The Sacramento Bee’s Capitol Alert blog has a story on that here.
From where I sit, this is really all about a massive problem (that is not exclusive to California and local governments within the Golden State) — where politicians, largely those elected BY the political donations of public employee unions, have committed governments to long term employment contracts that are simply not affordable, or realistic. Of course I am referring to all of these overly generous defined benefit programs (I should note that not every government employee has a gold-plated plan, but a whole lot do).
Efforts to reform public employee retirement benefits for new hires is important — and should be centered around a "pay as you go" plan such as 401k-style defined contributions. This is best for the employer (who knows they can pay for their retirement as they actually get their money as they earn it) and best for taxpayers because it means there is no long term liability. This system also embraces the American ideals of individual liberty and individual responsibility.
That having been said, we have a huge problem dealing with all of the obligations to current employees. Ideally, a shift to defined contributions should not be limited to new hires, but we should have a system to transition existing employees over to such a system for their remaining years of service. But we also need to figure out how to make sure that government employee retirement benefits are equivalent to what is being offered in the private sector.
Right now, with 12% unemployment and many companies going under, or having to make major cuts in their workforce (whether large or small businesses) — many employees are taking pay cuts and serious reductions in retirement benefits in order to keep their jobs, and to keep companies solvent. This is not fun – it’s just a painful reality of a recession.
The idea that states should be able to enter into some sort of bankruptcy process is a disturbing. It is hardly an ideal option. But it may be the only way to bring public employee unions to the table to ensure the any reforms of public employee pensions not only apply to new hires, but also apply against remaining years of service for current employees.
Public employee unions exist only to increase their own size, and the salary and benefits for their members. At least that’s what I always say. Let’s see the leadership of the CTA, SEIU or CCPOA (or the myriad of local government employee unions) come forward with a plan that reduces benefits for existing and new employees to a level that makes sense (ideally with a shift to defined contributions), and allows state and local governments to continue providing services without raising taxes (don’t miss Dan Walters’ column in the Sac Bee today regarding tax levels in California).
If the unions aren’t willing to come to the table, then the politicians they control won’t be able to really participate in a meaningful solution. In which case look for proposals like bankruptcy options to be discussed. It’s basic math — politicians have promised more than they entities they represent can afford.
January 21st, 2011 at 12:00 am
It is frustrating to watch this painful process go down, because conservatives know that it was all avoidable in the first place.
A new policy regarding new hires is a commonsense idea for sure, but there may not still even be enough money to sustain the current payouts to the retired government employees we already have.
Too over grown period. My guess is that the most amount of pensions and benefits paid to former employees that could carried and sustained is no more than 6 to 9 percent of the total budget size.
I guess them Dems could get it down to the 6-9% range simply by passing a budget that is ten times larger than we have now.(Go get em tigers-with your cute little Prop 25 thing).
Problem is…the money does not exist and it does not grow on trees. Finally government has progressively grown to become so large, that it can no longer be sustained finacially…even if we paid Donnelly to feed government waste down his shredder 24-7.
Even a resurrected President Reagan equipped with a Tea Party turbo charger would find it a difficult task…but ceratinly one still worth fighting for.
Good conservative leadership can make a difference.