eCONomic Scuttle Butt

Historically, public employees accepted lower salaries in exchange for attractive retirement pensions and cushy jobs handed to them by relatives and/or political friends. Now their salaries have become competitive with private sector employees, most of whom have been stripped of their pensions.

To match the guaranteed annual fixed income stream of a typical $80,000 public employee retirement pension, a pension less private-sector retiree would have to amass approximately $3 Million in their 401k, a nearly impossible feat.

Even if they did, by playing the stock market mutual fund switching game with unlikely skill and luck while trying to hold down their job, they’d still be at a double disadvantage. First, their income stream would not be adjusted up every year like that of their public-sector neighbors. Second, they don’t get the health care and other benefits such as free airline travel anywhere in the U.S. that some public-sector retirees, such as customs agents, are entitled to.

Laid-off nuclear engineer Dr. Choulda Kistass, age 71, doesn’t regret spending most of his life studying math and science and working long hours at his private sector job, only to wind up as a Walmart greeter. “I know now I’ll have to work here until I die, because I have no pension or benefits from my engineering career. But it’s not so bad, the people are friendly, mostly…. except for some of the customers who are into taunting and all that, but I don’t mind, really. And if I stay late picking up cigarette butts and garbage in the parking lot at night I have a chance to get promoted to bathroom cleaner. Then I won’t have to stand here in the same spot all day.”

Choulda’s brother Dimwad followed a more successful career path. After dropping out of school in the tenth grade to sell drugs and drive stolen cars across the Mexican border, he enjoyed life as a self-described “party animal” throughout his 20’s before finally settling down into a 9 to 5 government office job given to him by a friend. “Basically all I had to do was sit there and fill out forms to fine small business owners who couldn’t keep up with the rules and regulations we changed every year. It was kinda fun.” Now retired with a $110,000 guaranteed pension, Dimwad spends most of his time golfing with his fellow government retiree buddies, and watching the big games on TV.

Bucks County, PA public school gym teacher Doug Brickhed also made all the right moves. “Hey, I’m set for life. I never thought I’d be pullin’ down $86,000 a year for hangin’ around with kids a few hours a day, with two months off in the summer and more paid vacations than I know what to do with. Plus when I retire I still get full benefits for life and my full salary, plus annual increases every year, thanks to the teachers’ union. Not that I want to retire just yet! Have you seen some of the 14-year old girls these days?”

Former computer programmer Betty Wilson, age 59, was laid off from H1-Angle Software Corporation after being forced to train her replacements, three young recent college graduates from India who moved to the U.S. to take advantage of the opportunities they learned about from their uncle, who is the hiring manager at the firm. Betty now works the night shift at McDonald’s as a “closer”, mopping the floors, filtering the french fry grease vats and cleaning the milkshake machines. After losing her home to foreclosure, she moved into a two-room apartment with a McDonald’s co-worker. Times were tough before she landed the new job, but things are looking up. “We get one free burger and a small fry per day, so at least I’m eating again,” she said. “And I don’t blame Mr. Gonzalez (her boss) for slapping me around sometimes because after all he doesn’t understand English very well, it’s not his fault.”

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Are you ready for the recession and bear market? Your next-door neighbor who works for the city certainly is. That neighbor has been dealt a nice hand. A city employee who has worked 35 years and is in both the DROP program and the supplemental pension savings plan may retire at age 60 with a $75,000 annual salary but will rake in $170,000 a year in retirement — 226 percent of his or her highest pay.

Coast Community College District Trustee Armando Ruiz won’t resign despite complaints about increasing his pension ten-fold by retiring, then immediately running for re-election, which he won.

West Contra Costa Unified School District’s health benefit makes the point that these budget-sucking deals are everywhere. That 33,000-student district is being crippled by a lifetime benefit that is going to cost nearly $1 billion. The district offers lifetime health coverage for teachers, plus coverage for their spouses and their children, who are covered until they are 23 years old in some cases. To qualify for this extraordinary benefit, one need only work for the district for five years.

What role have politicians and public employee unions played in this crisis? Carl DeMaio CEO Performance Institute cites retroactive benefits approved by elected officials, and pension benefit debt is $130 billion before unfunded health care benefits that is three times all outstanding debt now in California.

Federal, state and local governments have promised pension and retiree medical benefits that would require more than $5 trillion to be invested today to cover costs over the next 75 years, according to the financial statements of the retirement plans. “These pensions are unaffordable,” says Alaska state Rep. Bert Stedman, a Republican. “If we don’t act now, we’re going to have social conflict in the future between the haves and the have-nots — those with government pensions and those without.”

This entry was posted on Sunday, June 8th, 2008 at 1:39 pm and is filed under eCONomy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.