Taxpayers Actually Contribute Nothing To Public Employee Pensions

[rucky]

We could all do ourselves a favor by getting educated on how pensions work, who pays into them, who manages them, and who borrows against them. This article from Forbes just blew me away that something so basic is just now coming out.

Gov. Scott Walker says he wants state workers covered by collective bargaining agreements to “contribute more” to their pension and health insurance plans. Accepting Gov. Walker’ s assertions as fact, and failing to check, creates the impression that somehow the workers are getting something extra, a gift from taxpayers. They are not. Out of every dollar that funds Wisconsin’s pension and health insurance plans for state workers, 100 cents comes from the state workers.

every penny comes from state workers deferring a portion of their salaries to the pension fund. Every. Fucking. Penny.

How can this be? Read all about it:

http://blogs.forbes.com/rickungar/2011/02/25/the-wisconsin-lie-exposed-taxpayers-actually-contribute-nothing-to-public-employee-pensions/

Do you have any idea how many people are on my list to tell them to fuck off right now?

[slackmaster]

1. That's great information

Just one question if I may:

Where does the money for state employees' salaries come from?

[Curmudgeoness]

11. Where does the money for asphalt to build and fix roads come from?

You pay tax money for something of substance, whether it is asphalt or the labor of a person. You can't build a road without the asphalt, and you can't run government/schools/fire and police departments without people. Does anyone ask what the asphalt company does with the money they earn after it is paid to them for the job they did?

[pintobean]

13. Last summer, I worked a bunch of overtime in one week.

My employer told me that I had made over two grand. My check was a little under 1300. It was over two grand before deductions. The payer doesn't care how much goes to pension, health care, taxes or dues. What they care about is how much comes out of their pocket.

[slackmaster]

15. That is correct.

The payer doesn't care how much goes to pension, health care, taxes or dues. What they care about is how much comes out of their pocket.

And it all comes from the same source, regardless of where it ends up.

[pintobean]

17. It's funny, many coworkers think he's full of shit.

I tell them to look at their stub and they still don't get it. The stub doesn't even reflect the total. Workers comp insurance, the employer share of FICA and other costs.....

[frazzled]

2. Well, we do pay for the deferred compensation ...

So this is a bit of a tricky argument. Public employees' salaries and deferred compensation come from public sources. You can say it's their money, of course, and in that sense it is: but it is government (read: taxpayer) money going into the pension investment funds.

All moneys going into public employees' salaries and benefits (including deferred compensation that is invested in pension funds) is from tax-generated revenues. This does not change the political discussion at all. Just trying to clarify.

[rucky]

3. The larger point is that the money in the pension funds

belong to the workers - not the taxpayers. It's already been passed through as deferred salary.

[eleny]

18. Exactly. I don't want to retype it so her's my explanation from earlier...

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=508851&mesg_id=509003

[City of Mills]

7. Again! PUBLIC EMPLOYEES ARE TAXPAYERS

SAY IT WITH ME -PUBLIC EMPLOYEES ARE TAXPAYERS

PUBLIC EMPLOYEES ARE TAXPAYERS

~ My TAXES PAY MY SALARY TOO ~

The money I pay COMES OUT OF MY SALARY!

If you want to do away with the pension system then kindly send me a check for the roughly $60,000 I have paid in to the fund.

$500 per month, every month, and the more I make, the higher that goes.

[frazzled]

8. That is true, too.

But not all that relevant in this discussion.

I think the difference is: for private sector employees, you don't get an amount in addition to your salary, to invest in your pension fund. And there is no set amount. You choose each year how much to put into a 401(k) or similar plan, and it reduces your total salary by that much. Employers sometimes contribute a defined percentage. These are not, however, taxpayer funds (unless there is some tax advantage to employers for doing so, in which case it would be partially taxpayer supported).

Again, I totally support public employees salaries and pensions, and especially their right to collectively bargain. But I think we have to be honest about the facts.

[City of Mills]

10. My employer does not contribute to my retirement

LOL wait - I don't get an amount in addition to my salary to invest in my pension. It comes out of my hourly pay, it's another itemized deduction.

My employer puts in nothing. Zero. If I choose to supplement my pension income, I may open a 403b deferred compensation account. My employer's contribution to this? Zero. I cannot open a 401K, it doesn't work that way. I won't collect social security.

No matching funds. No additional contribution. I do not receive money above and beyond my salary to 'invest' in my pension, it is deducted from my pay. Simple as that.

They take my contributions, combine them with other public employees and these are the funds that provide the benefits for those who came into service and retired before me (and sometimes state budgets when they feel the need to dip into it for unintended purposes).

Those are the facts as best I can describe them.



You're a taxpayer, you contribute to my salary (a portion of which goes to my pension fund). Thank you!

I'm a taxpayer and a consumer of goods and services produced by private companies. I'm contributing to your salary and retirement. You're welcome!

You can say I have the option of whether or not to spend money on your company, where you have to pay taxes. Well, I have to choice to pay taxes either, it's not like I get some kind of reduced rate.

BTW sorry for the shouting, I feel better now. I get the feeling some may believe I don't pay income tax or something.

[frazzled]

14. I don't work for a company

I am self-employed, as a freelancer. Thank goodness it is a second income in the family, because there is no way I could earn enough to keep even a small roof over my head. (I work mostly for nonprofit institutions, and sometimes for individual authors, so there's no way I can charge them a normal fee or for every hour I put into a project.) There's simply not enough for me to invest in retirement separately from my spouse. But I'm not complaining about that.

What I do complain about is my lousy boss-- Me! I've (thank goodness) had a good number of projects come my way lately. But they've been killers: from November through the end of February here, I've spent an average of twelve to eighteen hours a day working nonstop, and that has included weekends and Christmas and New Year's Day as well. (I'm in publishing, so deadlines simply have to be met, no matter how much others involved are late.) The good news is: I can work in my pajamas if I want to, and don't need to dress up. And my work is very interesting (to me) and (hopefully) benefits society a little, even if it is not well compensated.

My spouse and I made promises to each other just today that we are going to be better bosses to ourselves. In addition to his regular job, as a teacher (not union, unfortunately: he's at a private college, nonprofit), he has been taking on a lot of writing projects lately, meaning he gets up at five on weekdays and writes for several hours before work, then again at night and on weekends. We want to start limiting the number of hours we allow ourselves to be stuck at our desks, especially since the OSHA guys never come to check for the proper safety issues. Life is important to us, and we just need to find ways to fit it in.

Retirement is more than a little scary: and it's coming up pretty soon.

[City of Mills]

19. Nice reply

And you bring up a very good point - as a part-time self-employed businessman myself, I can relate to the ebb and flow of that income. I've been asked before why I don't just go into business for myself since my earnings potential is so much higher, but that's only a small part of the equation.

It goes way back to when I was first hired - no, I don't know a Senator or Governor, I didn't bribe someone or know someone to get my foot in the door. I took a part time grant-funded position within the public sector and in addition worked multiple other jobs (including pizza delivery and video rental clerk) to earn a living wage. But I used that 'foot in the door' to prove myself, my talent was recognized, and eventually a full-time position was offered to me.

Some years ago when the IT sector was heating up, several of my colleagues went to work for startups which were offering $80K and up to start. They thought I was nuts to stay! The sector was booming and there weren't enough techs to fill all the positions. Who needed job security? Well, I admit I considered making the jump myself, but ultimately decided to stay - out of loyalty to my employer for giving me a shot, and because I enjoy my job and the people I work with. I felt taken care of there, despite my salary being somewhat modest. The money just didn't seem to be the most important factor.

I've run into one of those job jumpers only a few months ago, and he asked if we had any openings. His hot startup company went bust, and he's working for the Geek Squad.

Sure, I could still walk away and pour myself into my business full time. I built a very strong reputation over the past decade as the 'go to' guy, and I could live off of the work sent my way by my colleagues and their families. But you just can't predict the future. It's entirely possible that technical advancements over the next few years could render my skill set obsolete? Who knows?

Like you mentioned, working for yourself is seldom a 9-5 proposition. You stay until the job is done. I'm appreciative of the opportunities I've had, and continue to have. But i'm not sitting around doing nothing. My chosen profession requires constant schooling, throughout the entirety of my career. The technology changes and I'm responsible for staying on top of, and ahead of it. I love my work and I consider myself very lucky.

You sound like you have a pretty good gig yourself!

[frazzled]

25. Job security is a valuable benefit that's hard to put a price on

Sounds like you made a smart move. And that you like your work makes it all the better.

I have a feeling a lot of people would trade a certain amount of income or benefits for the knowledge they are secure in their jobs.

[Drahthaardogs]

9. AWESOME!

How about we follow it up with

YOU USE GOODS AND SERVICES PROVIDED BY PUBLIC EMPLOYEES! YOU DO NOT OFFER SERVICES FOR FREE, WHY SHOULD THEY BE EXPECTED TO!

[Foo Fighter]

23. Oh c'mon now. Public employees are nothing but leeches.

Those snowplow drivers that put in some damn long days after a big storm in order to get the roads plowed as quickly as they can so that we can get to work, school or the doctor? Just a bunch of deadbeats.

Those bus drivers that drive us to work and/or get our kids to school? Parasites living off the public dole.

The office people answering the phones at the county government center that tell us which department could best handle an issue we have or answer a question for us? They need to go out and get a real job instead of freeloading off the taxpayers.

The IT people that take care of the city, county, and/or state databases and webservers so that we can renew our license tabs online, buy a fishing license, and find out what city park is nearby and what facilities it has? Nothing but a bunch of geeks collecting welfare.

Unfortunately, I have to add this --> :sarcasm: because a lot of people seem to think that "public" employees don't actually work. They just collect paychecks at the expense of the taxpayer. Public employees get up every day and go to a job, the same as everyone else does. The only difference is who their employer is. Well, that and the fact that they usually get paid less (sometimes significantly less) than those doing the equivalent job in the private sector. To make up for the lower salaries, they get better benefits. It's a way of keeping costs down as the direct $$$ outlay in salaries is lower and the cost of the benefits can be cheaper when you're negotiating with, for example, health care providers, to insure a HUGE group of people.
And yes, public employees pay into their retirement plans, often with zero matching from their employer.

Hell, not only do we use the services of public employees, very often we DEPEND on them. With this winter's crappy winter, everyone (in the northern climes anyway) has depended on the snowplow drivers to keep the roads open. I can't comment on the experiences of others but in my area, the plow drivers have done a great job. And the bus drivers? During a big snowfall, somehow they all manage to get to work and keep their buses on schedule despite the onslaught they face all day from Mother Nature. They know that they're going to have a really tough day ahead of them and yet they still show up for work in order to provide us with public transit so WE can get to work. I can't always depend on the private contractor to get my driveway plowed out but I can definitely depend on the buses.


Drahthaardogs, welcome to DU! Great post!

[StarburstClock]

4. Odd how the topic of retiring always gets misdirected into an illogical healthcare debate

If the health care system is a rotten, for-profit scam, then it should be addressed rather than a particular segment of the population that is also forced to pay into the corruption. Of course, the misdirection is purposeful misinformation and lies but that sure doesn't stop people from accepting the false premise and then building entire false paradigms around it.

The same goes for banking and finance in the U.S., both criminal fields full of corruption that need to be directly addressed via regulation, enforcement and arrests.

[Mac Adams]

5. What? Hold on......

Are you saying the people in the private sector that get employer contributions to thier 401K are actually contributing less then state employees? Maybe they should get a union.

[The Velveteen Ocelot]

6. And nobody seems to have noticed that public employees are also taxpayers.

So they are contributing to their own wages and benefits through their own taxes.

[slackmaster]

26. Yes, and as taxpayers they deserve as much say as every other taxpayer on how tax money is used

A public employee is empowered with the right to vote once in every election, just like the rest of us.

[Curmudgeoness]

12. This is huge. I cannot believe that this is not being said,

not anywhere....but Forbes. Forbes? That is almost as incredible as what the article is saying.

[MichiganVote]

16. K&R

[spooky3]

20. In OH, state pays 14%; employees pay 10%.

[rucky]

22. I guess there's room for some collective bargaining on that point, then.

But Gov. Douchebag from Wisconsin is out of line by suggesting that pensions are contributing to his state's budget defecit.

[spooky3]

27. of course you're right. It's just that each system is different. Also, I shouldn't

have implied that the 14-10 contributions are the same for all of OH. There are several different systems. The 14-10 is for the state teachers' retirement system, which the Faux Governor has demanded be cut back further (several years ago COLAs were reduced, even for retirees who had paid in all their lives and who generally don't get Social Security, even if they had paid into it for some time). As someone else said, AIG and Wall Street contracts are sacred no matter what, but not so for "peons."

[eleny]

21. A nice way to perhaps get more matching funds, too

Government entities get matching funds from the state and the fed. As a caseworker in NYC and a state worker here in Colorado I know that my salaries were partly paid by matching funds from the state and/or feds.

I bet you dollars to donuts that Wisconsin saved money by using this deferred comp method of financing the pension plan. Perhaps if they negotiated less salary and had to put some of the states money (from a different pot) towards the pension plan, that pension contribution might not be eligible for matching from the feds.

I've been mulling all this over and got to thinking of how there was a time when the City of New York transferred me into a different job title so they could get more federal matching funds for my salary. So this method of financing the Wisconsin pension plan sounds like a creative budgeting

And hey, the state wanted it this way. Now they have to live with how it appears.

[customerserviceguy]

24. Well, if we're talking about how pensions work

The assumptions that go into actuarially determining defined benefit pensions rely on interest and investment return rates that haven't been consistently seen since the 1950's. Sometimes, the returns on investments really lurch upwards, then contributions get shortchanged, and if you don't make up for that when investment returns go way down, you have a pension system that is out of whack eventually. It's why many employers have switched to defined contribution plans, especially where the employee has a say in what his/her contributions get invested into.

We all know healthcare costs are going up rapidly, and that's another thing that's knocked public employee benefit programs for a loop. Add in the coming retirement of the baby boom generation to the mix, and you can see why we're coming into a fiscally dangerous period for the states.

We don't need to deny the problem in order to make the case that collective bargaining of wages AND benefits should not be abolished. We can acknowledge the challenges pension and health insurance systems face, and still retain the right to negotiate wages, pension contribution amounts, and health insurance premiums and terms.

That's taking the high road in the debate. We don't need to have the taxpaying public hear us say that there is no problem, or that it's somebody elses problem, if we're going to prevail in this.

[spooky3]

28. Wrong on many counts.

1) Here are is an easy to read chart re: stock market returns since 1950.

http://www.dailymarkets.com/stock/2009/08/05/historical-returns-of-the-sp-500/

The Bush years were very bad overall for the market, but it's not correct to imply that returns were substantially greater in the 1950s than most of the time since then.

2) Actuaries are well paid to review recent rates of return, funding obligations, ages of covered employees, etc., and determine the levels of over- or under-funding and contributions needed. They do not simply use the 8% that pundits talk about on TV.

3) The whole point of defined benefit plans is that the risk of investment losses is borne by the employer and that the employer is obliged to increase contributions if funding is substantially below targets. If the market does well, the employer saves money by making a lower contribution in that year. Employees don't get a "bonus" as they would in a defined contribution plan.

Employees trade off salary for these plans, particularly if collectively bargained or under individual contracts. (This is one reason why the total pay package for the WI public sector employees is lower than that for comparable private sector employees). Reneging on these agreements after the fact is not permitted in the private sector, governed by ERISA and other laws. If employers want to curtail or terminate the programs, they have to get approval from the IRS and DOL. Ethically, you can't fairly reap the benefits of DB plans but then when times favor DC plans, refuse to pay the piper. And in the private sector, there are legal restrictions on your doing this as well. ERISA (etc.) is stricter on private sector plans than on public sector plans.

4) In many cases, states have gotten themselves into trouble by not making the mandated contributions even when flush. Whose obligation should this be?

5) The primary reason that private sector employers have dropped DB plans is not that there is anything inherently wrong with their design. They existed for many years in many organizations before the Congress began permitting the cheaper 401(k) plans that put less of the burden on employers to bear the risks of poor investment years. Because many employees don't really understand how deferred comp. plans work, or may have changed jobs too frequently to benefit much from DB plans, employers figured they would get more bang for their benefit buck by offering a 401(k) which the employees might have mistakenly thought was "just as good."

6) The aging of the baby boomer cohort is completely irrelevant in the case of defined benefit plans that have been properly funded. You don't seem to understand what actuaries do or how DB plans work. They are paid to anticipate the outflow of benefits given the ages, salary levels, etc., of the workforce, as well as inflows based on these data, and to advise what needs to be added to the fund to keep it fully funded. DB plans aren't "pay as you go." The problem occurs when the needed contributions have not been made over the years including upward adjustments when investments do poorly.

7) Health care costs are certainly an issue for all US employers. But this point and all of the above and your post sidesteps the major issue. In WI and in other states, employees have already agreed to accept reduced benefits and/or that they will also have to make greater contributions, and in many states the pension plans have bounced back from the pits of 2009 (though clearly they are far from regaining the returns they should have enjoyed in the 2000s). But the WI dispute and the dispute in other states is about union busting and demonizing public employees. When governors are giving tax breaks to businesses and making other decisions that further imbalance their budgets, they have no credibility.

I was in this industry for some time. If you don't believe me, do more research.