Maggie's Farm

" "Solution" To The Pension Problem"

Imagine there was a huge pile of money and crooks had access to it and then you will understand the pension problem. Legislatures have used their state pensions to dole out gifts to supporters and to make promises they would never have to keep in their lifetime. The only "solution" that will work is to roll back some of these terrible mistakes that the legislatures have made in their effort to loot the pension systems. For example:

Police and firemen get to retire at full pension at age 50 (varies slightly from state to state). While the tough job of police and fire may indeed deserve early retirement it was never funded and became an incredible drag on the retirement funding for everyone else in the system. This should be corrected.

In most states the employee and employer contribute 6% each to the employees retirement. By law each employees 6% must be in the system by the end of each quarter. The state/employer however can wait forever before they contribute. That resulted in actual funds dedicated by the legislature to be spent on other things by the supervisor of each state agency rather than put it into the retirement system. Because of the law of compound interest this has created a mountainous debt for the state. A stupid move that they then made even worse by covering up the cause and allowing the media to make it appear that the problem was excessive benefits paid to the workers. Ask 100 citizens of any state what the problem with the pension system is and 99 will tell you it is excessive benefits. How can you fix a problem if you won't acknowledge what the cause is?

A third problem is that the legislature inexplicably created two retirement systems. One where benefits are determined based on the retirees actual money balance in the system. This is a logical and consistent with good accounting principles. But the legislature created a second system to determine payout which is based on the last 2-3 years of pay rate. In other words an employee could work 25 years as a clerk and thanks to a friend in the legislature or management get promoted to a managers position for the last three years and retire at twice the rate they should get. A nice gift but it comes at the expense of everyone else in the system who paid in as required and didn't have a friend at the top.

Fix these things and you can fix 90% of the problem. If they simply add more money at the expense of the taxpayer the problems will still be there.