Pensions eat 70% of Decatur, Illinois’ budget; New York City’s $76 billion shortfall; Houston Mayor wants pension benefit cuts
The coming battles in 2011 over public pensions will be brass-knuckled death matches. Liberals, progressive, and unions howl that conservatives want states and cities to file bankruptcy so their public pensions can be re-negotiated. This is unquestionably true. But the pensions are unsustainable, with most pension plans being deeply in the red. Those who want to save the pensions better figure out where the money will come from, because it simply isn’t there now.
Me, I think it’s inevitable there will be many such bankruptcies and the entire public pension system will be re-done.
The money is there to provide a decent public pension to public safety employees but it is a partnership that must be treated fairly. The Houston Fire Department is currently being attacked by a liberal mayor for being too expensive. In none of the articles or editorials discussing this situation has the mayor pointed out that the HFD pension fund is almost completely funded and has been for years. The majority of funding is from member contributions and market returns, the city balking at future costs that will likely hit a third of HFD’s payroll for a single year. Most of the time, it only needs about 20% of payroll; not an unfair pension benefit considering the city underpays firemen by more than that for their entire career.
Contrast that with the municipal pension in Houston which is often called $2 Billion underfunded. The majority of employees pay in nothing, the system refuses to hire the best advisers, and it has a far less impressive track record. The police pension was cut in half in 2004 and the city has underfunded it over $320 million since that time, the result being it is hundreds of millions under water even though the officers pay more into it and have a similar investment record.
Unlike the gold plated pensions of Illinois, California, and New York, Houston has long been considered on the low end of the pension scale in terms of benefits and pay. Now, thanks to the nationwide scandal of pensions being too expensive, our mayor thinks she can cut them with impunity despite relatively strong finances, hinting at bankruptcy. Funny thing is, much of the problem lies in the additional debt she signed off on when she was our elected Controller and a City Councilor. Bankruptcies courts are notorious for voiding bonds and debt payments before canceling employment contracts too so the end result might well be that a lot of others feel the sting of bankruptcy before the employees do.
I thought bondholders generally went to the head of the line in bankruptcies
Chapter 9 bankruptcies, much like their corporate counterparts, are not above declaring bond covenants too expensive; those owed wages or for work/contracts finished go to the front of the line. A city the size of Houston has tremendous amounts of income that is enough to sustain an awful lot of government so it couldn’t declare it anytime in the near future to begin with. The premise of using bankruptcy to avoid paying workers, break unions, and otherwise truncate benefits is completely different than how the extreme right wing allowed it to happen in corporate America which is the only reason they are talking about it now (wishful thinking).
What is far more likely to happen is the mayor will threaten to lay off scores of employees unless they are willing to make concessions to existing, vested, pensions. I suggest the municipal workers make a trade to contribute the same amounts as the fire and police, around 10% of their pay, to secure their pension system over time and get a better pension as a result. With all the talk of defaulting on pensions though, not to mention what Mayor White did in 2004, I just don’t see anyone as being foolish enough to believe the promises.
After the money I spent and the time I invested in a public employees union that turned a blind eye as I was harassed for six years by a religious, racial and homophobic bigot in a position to do get away with it – and get away with it it did – before I was forced to quit a job I had worked fifteen years and invested several tens of thousands of dollars in educational expense to have…
Do it. Don’t talk about it, do it.
They’re a bunch of fucking amateurs who otherwise wouldn’t have a job.