A misunderstanding.
A gentleman that I call a friend read my post about the $4.9 Billion dollar gap in the Washington State union employees pension plan and took away from it that I “have taken up the cudgels against public employees generally�. I figure that if he was able to gather that out of the post, there are probably others who did so as well and I need to get more specific here.
First off, nothing could be more wrong than the assertion that I was beating up on all public employees.
Not only am I married to a public employee, I am the son of a former one. I hold nothing against those who do the job with pride of purpose, just as I do mine. And although I believe that the majority of public sector jobs could be contracted out to private companies and get the same job done at less cost to the taxpayer, including the job that my wife does, that is another post in and of itself.
There are, however, people who are employed in the public sector who see it as a gravy train they can ride for the rest of their lives. Those people I do have issues with, but yesterday’s essay was not really about them either.
Yesterday’s post was about how the taxpaying public is getting screwed by the Washington State Legislature’s past stupidity and most especially by the union that organizes Washington State employees by making the taxpayer pay for a pension deficit caused by pro-union forces lobbying the legislature in the mid-late 1990’s.
A pension plan is nothing more than a ponzi scheme, as is social security in its current form. That said, if there is a pension plan that is offered as part of the benefits package to employment, either public or private, and you have contributed to it, you have every right in my mind to expect to draw from it. You worked for it, you added to it and you should get your just return for loaning the ponzi scheme your money to invest with for however long you worked for that employer.
However, if a pension plan such as the one run by the Teamsters local that organizes the drivers who work for my employer goes bust because of bad fund management or bad fund rules, I as a taxpayer do not have to fill in the deficit.
But because the fools in the legislature in this state let the union talk them into adding a rule that is guaranteed to give the retirees more money per month than the plan can support and sends the pension fund spiraling into deficit, and because the persons drawing from that pension fund are state employees, it is now expected of me as a taxpayer to fill in the blank spot and not bitch about it.
Let’s run the numbers here:
We’ll say that the base monthly pension payout for a former Washington State employee who retired after 20 years is the nice round figure of $1000.
Under the rule enacted in 1997, if the stock market investments made by the pension fund went up by 10%, the retiree’s monthly payout also goes up 10% and is now $1100.
However, shortly after the pension’s investments peaked at the 10% point, the stock market drops 15% (because of the dot-com bubble bursting and September 11th). You’d figure that the retiree’s monthly payout would drop back to the standard $1000 level because the money to cover the increase is not there. Yes, the pension fund will still be 5% short and that will leave a minor and temporary pension fund deficit, but the stock market always rebounds sooner or later and the deficit will be recovered in either a couple or a few years, depending on circumstances.
But under the Washington State employees pension plan’s rules, it stays at the $1100 level, leaving a 15% deficit in the fund, tripling the potential deficit as well as the time needed to recover the money in the plan’s bank account.
Not only that, but as the stock market investments rebound, going back up, say, another 10%, the employee’s monthly pay out goes up again by another 10%, from the $1100 rate to $1210.
Never mind that the stock market is still 5% lower than it was when the payout was only at the $1100 level and that the pension’s investments are only making enough to pay the employee $1050, the employee gets their $1210, leaving me, the taxpayer, to pay the remaining $160 per month out of my wallet directly into the pension fund because, and only because, these were state employees.
Anyone who can see that as fair needs their head examined. No other pension plan I have ever heard of works like this, precisely because it is a plan bound for deficit and failure.
And don’t forget that the union has vowed to take the state to court if they try to get rid of this proven failure of a pension plan rule.
My post yesterday was a rant on the state legislature and on the unions who now basically run this state. Not the current or former employees of the state and definitely not the former employees want to draw their fair share from a pension plan they contributed to.
But, and this is a big but, if a former employee wants more than their fair share of the pension fund money, then they are gravy-train riders and I guess I was wrong earlier and the rant was about them too. Their fair share should not include these bogus increases that has sent the pension fund into deep deficit. A pension plan should not be a winning lottery ticket.
If they stick with their union and demand to keep the gravy train rolling and to keep this broken fund rule without either:
1. Cutting the past stock market increases out of their check and going back to a base monthly pension dividend, or
2. Making the current employees pay more into the fund, or
3. Making the union take some of the mountain of dues they collect and put that into the fund,
then they are demanding failure of their pension fund and thereby demanding that either the future payees don’t get anything from the fund or that I end up paying directly out of my wallet for the deficit in their plan that was caused by their union’s lobbying efforts.
If they do not support one or a combination of the three options offered (I personally like a combo of #’s 1 & 3), then they are not honest and they are pigs at the trough.
I detest nothing more than people cheering for me to be legally robbed at the point of a gun for their benefit.
It’s not personal, AK. You’re as straight a shooter as I know (and have shot with). So straight, in fact, that you have made my highly-coveted list of Curmudgeons, even though you are well off in years from attaining that rank.
Now, let’s look at the “Ponzi Scheme” you list. Your main complaint seems to be that the pension fund doesn’t “float” with the stock market, it is instead guaranteed by the taxpayers of WA. Yes it is.
SO IS EVERY OTHER PENSION IN THE NATION!!!!
There’s a Federal program called the Pension Guaranty Trust that backs up all pensions that apply to it’s insurance program and pay the small premiums. ALL EXCEPT GOVERNMENT PENSIONS, WHICH ARE NOT INSURED.
So, the taxpayer pays in their state to insure their state pensions, and again to the IRS to insure ALL OTHER pensions, including that of the Teamsters, I’m sure.
Let’s look at this floating business.
What other “Ponzi” schemes might use it? The insurance industry, check. Wall Street, check. Local equities exchanges, check.
Here’s how they do it: it’s called OPTIONS or FUTURES. In betting organized by bookmakers, it’s called “laying off”, but it’s all the same thing. Ever since Biblical times, those who speculate in the fortunes of others have had some way to protect themselves from the downward effects of the “float”.
The system that the Washington Public Employee’s Pension Fund uses is duplicated all over the country. One of the reasons that it exists, in Blue State and Red, is that the citizens of all states have made a promise to their public employees that when they retire, their retirement will not be subject to the whims of Wall Street or the Federal Reserve.
That’s all, a simple promise. Sort of like the oath I took, several times, to protect and defend the Constitutions of the USA and of my State of Oregon.
The reason that the unions are so adamant is that a promise has actually been made, and signed, just like our forefathers signed the Declaration of Independence, then fought and died for their cause in the Revolutionary War, then drafted, published and proclaimed a Constitution.
They’re all promises, AK. In this nation we keep our promises. You and I have dedicated ourselves to that creed, and that’s a good thing that we do.
Sorry RD, you’ve got me wrong again.
The reason that has my hair straightening on this one is not that the fund doesn’t “float” with the market, it is that it only has a high water mark. And not even that, but a false one. One designed to lie to everyone who reads it
I could care less if the plan paid a ‘bonus’ when the funds investments do well. But this plan just says “Well lookee here! Your fund manager did well, here’s some extra cash this month and for the rest of your lives whether the money is here or not. BTW, I’m going to make the Washington State Taxpayer fill in the blank on this check if you get a new fund manager who can’t even count to potato. And do you know why, because you used to work at the check out stand of a state liquor store”
Do you see where I’m coming from here? Of course they’re entitled to a base salary. And of course they’re entitled to bonuses if the plans they’ve contributed to do well. But they are not entitled to pick my pocket.
And now there are enough of them in this state that it is almost personal. It used to be one on 12 and then 1 in 10, but it is now approaching 1 in 7 persons is a state employee. Why not just have me bring them dinner one night a fucking week?
I don’t mind insuring them against criminal actions (embezzlement, etc) but I am trying to feed me and my own and that does not entitle them to stop by my house and steal from my table when the stock market goes all bouncy. What happens if the market drops 25% and their fund is 40% below what they’re getting paid?
As for my Teamster’s, you’re wrong there.
They actually did have fund problems shortly before I arrived with some really bad investments killing a good chucnk of the fund. It was a major sticking point in the local and the guy who screwed up still has his name cursed.
Guess what, they got back what they were able to sue for, about half of what was lost, and it was tough titties for the rest.
As it should be.
The guys who were still working paid more in and the guys who were drawing took less out.
How is it that the Washington State Employees Pension Fund is more dysfunctional that the Hoffa’s boys?
All the more reason to get rid of defined benefit pension plans and replace them with defined-contribution plans like 401Ks or the federal Thrift Savings Plan.
Oh, and as for the existing pension plan, why not just pass a law to transfer authority over and responsibility for the public employee pension plan to the union(s)?
They want these fantastic benefits for their members, let them figure out how to pay for it, without using my money.