The Pension Problem

Posted on November 12, 2010. Filed under: Uncategorized |

In case you’re still denying the pension problem is, in fact, a problem, both Yahoo! and MSNBC prominently posted stories today about just how bad it’s about to get – and quickly.

Super-Sized Pensions, and a Doomsday Scenario (MSNBC)

Shockingly, this “Red Tape” blog doesn’t specifically call out Connecticut – the states called out include California, Ohio, and New Jersey. But we are far from off the hook – if you check out an earlier blog post, Connecticut is slated to completely run out of funds by 2019. This decade.  

Just read that first paragraph to start shaking your head:

“In New York, a 44-year-old firefighter retires with a $101,000 a year pension, for life.  Near Chicago, a parks commissioner quits and begins collecting a $166,000 pension – a sum sweetened by $50,000 thanks to a one-time retirement year windfall of $270,000. And in California, a former city manager pulls down $500,000 in retirement checks every year.”

First of all, to retire at 44. Wow. But let’s say that firefighter lives the average life expectancy of a man in the United States, 75. That’s 31 years of collecting that pension. At $101,000, that 31 years will bring him or her $3,131,00. WOW. Yes, there’s expenses, taxes, the like. But where do we think that $3,131,000 for ONE person is coming from?

Here are just a few very interesting tidbits from the article.

  • “U.S. states already are short $1 trillion they should have set aside to pay retired workers, according to the Pew Center on the States.”
  • “In 2000, half of the 50 states had enough money socked away to cover future pension costs, according to Pew.  By 2008, only four states Florida, New York, Washington and Wisconsin could make that claim.”
  • “In New Jersey, for example, the state is obligated to pay pensions out of the general fund when the pension fund runs dry. In 2018, the state will owe $14 billion in pension payouts, or one-third of the state’s annual tax receipts. To put that in perspective, to plug a budget hole like that this year, the state would have to cut all education spending. That bears repeating: It would have to eliminate spending on every elementary school, high school and college from its budget.”
  • “A pension commission in New Jersey found one worker spent 24 years in public service earning less than $10,000, then one year as a prosecutor earning $141,000. That boosted his pension from $3,600 to $70,000 annually.”

Some pretty sobering stuff.

Another hot topic is teacher pensions. Yahoo! posted this one, courtest of TIME.

Teachers’ $500 Billion (and Growing) Pension Problem

This article does, in fact, call out Connecticut as one of the worst offenders.

“Although three states (New York, Florida, and Washington) are currently enjoying funding surpluses for their teacher pensions, the rest have unfunded liabilities, meaning less money on hand than obligations. In New Jersey, Illinois, and Connecticut, for example, these unfunded liabilities – that are just for teacher pensions – amount to more than $3,000 per state resident.”

$3,000 per state resident.


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