In the last few days, I've posted two comments about the questionable practice of elected officials negotiating contracts with the same unions that funded their campaigns. So to my pleasant surprise, and while enjoying a damn fine cup of coffee this morning, I turned to the op-ed pages of the Wall Street Journal to find this

Public Sector Union contract dealings

Highlights:

Quote:... elected officials behind closed doors negotiate labor contracts for 19 million state and local government workers. The result? Skyrocketing salaries, health-care costs and pension benefits are making services like public schools and policing unaffordable for taxpayers. According to the Bureau of Economic Analysis, compensation for government workers nationwide has grown 21% since 2000, compared with only 9% in the private economy.

Quote:...illustration of politicians and union leaders making backroom deals that taxpayers could never afford. Overly generous benefits aren’t the only concern: A conflict of interest exists when elected officials bargain with public unions behind closed doors.

As I've previously posted, I believe that many of these contract negotiations border on fraudulent activities.

There should be no legal reason why a public union contract has to be honored when a new congress or legislature is seated. One congress/legislature can pass a bill, but the next congress/president - state legislature/governor can undo it. There is no reason a union contract cant be undone by the next people in charge of the purse strings. To say that one legislature or congress can tie the hands of a future congress/legislature is completely unconstitutional.

(05-22-2015 11:29 AM)UofMstateU Wrote:  There should be no legal reason why a public union contract has to be honored when a new congress or legislature is seated. One congress/legislature can pass a bill, but the next congress/president - state legislature/governor can undo it. There is no reason a union contract cant be undone by the next people in charge of the purse strings. To say that one legislature or congress can tie the hands of a future congress/legislature is completely unconstitutional.

Yea, but that isn't really the issue here.

The government must honour a contract is enters into. It need not renew it but it must honour it. That isn't curtailing the powers of a current legislative body by doing so.

It bothers me you guys are so nonchalant about theft. If you want to change the rules of the game for new hires I understand that somewhat. These people are entering the system with eyes wide open. Changing the rules for people 20 years in is just outright theft. I wouldn't feel right about people confiscating IRA's? If you want to reform the system don't screw over the people who are already in it.

(05-22-2015 01:07 PM)Machiavelli Wrote:  It bothers me you guys are so nonchalant about theft. If you want to change the rules of the game for new hires I understand that somewhat. These people are entering the system with eyes wide open. Changing the rules for people 20 years in is just outright theft. I wouldn't feel right about people confiscating IRA's? If you want to reform the system don't screw over the people who are already in it.

I've posted dozens of times, at some point, the promises that have been made will no longer be sustainable.

The sooner the union members wake up to that reality, the sooner some real solution can be achieved. If no changes are made, eventually the people who are already in it will get screwed over because the promises will be insolvent.

(05-22-2015 01:07 PM)Machiavelli Wrote:  It bothers me you guys are so nonchalant about theft. If you want to change the rules of the game for new hires I understand that somewhat. These people are entering the system with eyes wide open. Changing the rules for people 20 years in is just outright theft. I wouldn't feel right about people confiscating IRA's? If you want to reform the system don't screw over the people who are already in it.

So how would you propose to resolve situations where the pensions are economically unsustainable?

I don't think they are. I think they used the crisis to put in policies to break the unions. I don't have a clue how someone can say on one hand that things are unsustainable and on the other have no qualms with tax cuts. Every single leader that has cut public pensions can be tied to tax cuts in another arena. That confounds me and I find it very disingenuous.

If I had to do it all over again, I'd get a cushy government job. Great pay, and you can't get fired.

Those people would last 10 minutes in the private sector.

(05-22-2015 03:16 PM)Machiavelli Wrote:  I don't think they are. I think they used the crisis to put in policies to break the unions. I don't have a clue how someone can say on one hand that things are unsustainable and on the other have no qualms with tax cuts. Every single leader that has cut public pensions can be tied to tax cuts in another arena. That confounds me and I find it very disingenuous.

Wow something we both agree on....you don't have a clue.

First, the unsustainablity of public sector pensions and tax rates are two separate issues.

Pensions are unsustainable because the promises made are not supported by the contractual agreements in place. In other words, when the contracts were signed, an agreement was made as to the benefits but an inadequate provision was made to finance them. Why, because the public sector pension managers have used return rates that are in themselves, not achievable. Most plans use a 7% or 8% growth factor, which any financial prognosticator will tell you is overly optimistic. A more reasonable return would be the federal risk free rate of about 3%. Over 30-40-50 years, that difference means unsustainable.

Furthermore, there have been cases where returns exceeded the expected amount in a given year, but instead of banking the excess, the retirees were given special 13th payments. For example this happened in Detroit.

Then there is the "life time" medical benefits provided by many jurisdictions. These generally come out of operating expenses and these are going up every year. Some municipalities now have 50% of their budgets dedicated to medical expenses for current and retired employees.

So when there is no money for pensions and medical benefits, what will the states/counties/municipalities do? They'll have 3 choices: raise taxes, cut services or drop benefits.

So do you raise the property taxes on the retiree living on Social Security and Medicare to pay for the pensions and medical of the public retirees?

(05-22-2015 11:51 AM)HeartOfDixie Wrote:  

(05-22-2015 11:29 AM)UofMstateU Wrote:  There should be no legal reason why a public union contract has to be honored when a new congress or legislature is seated. One congress/legislature can pass a bill, but the next congress/president - state legislature/governor can undo it. There is no reason a union contract cant be undone by the next people in charge of the purse strings. To say that one legislature or congress can tie the hands of a future congress/legislature is completely unconstitutional.

Yea, but that isn't really the issue here.

The government must honour a contract is enters into. It need not renew it but it must honour it. That isn't curtailing the powers of a current legislative body by doing so.

Interesting, I found a document that limits (it appears to be military) contracts to 5 years. Are public service contracts longer than that? Thats the issue I have (if its a real issue) I would want congress to vote to approve a contract every 2 or 4 years.

(05-22-2015 03:16 PM)Machiavelli Wrote:  I don't think they are. I think they used the crisis to put in policies to break the unions. I don't have a clue how someone can say on one hand that things are unsustainable and on the other have no qualms with tax cuts. Every single leader that has cut public pensions can be tied to tax cuts in another arena. That confounds me and I find it very disingenuous.

Whether they are in fact unsustainable is a different question from the one I was asking. The intent of my question was to clarify your position. So I will ask it somewhat differently. So, is your position that you would accept changes if the current provisions were not feasible but you don't agree that they are not feasible, or is your position that a contract is a contract is a contract, regardless of feasibility

I think the state should do everything in its power to honor their side of a contract. It's a sacred trust. It's not something that should be trivialized or used as a political pawn. I would also try to offer options where a person could contribute more to be able to retire under what they thought they were going to retire under when they entered the system.

(05-22-2015 08:45 PM)Machiavelli Wrote:  I think the state should do everything in its power to honor their side of a contract. It's a sacred trust. It's not something that should be trivialized or used as a political pawn. I would also try to offer options where a person could contribute more to be able to retire under what they thought they were going to retire under when they entered the system.

First I do agree that the states/counties/municipalities should try to honor the contracts. Regardless that the contracts were negotiated under fraudulent conditions, a deal is a deal and the poor shlubs should have some protection.

Now the "everything in their power" and "sacred trust" are hyperbole and reflect the hysteria which prohibits a rationale discussion. When it comes to teachers in New York, the pensions and retiree medical benefits are funded by property taxes, no general fund taxes. So when the property rates go up, the fixed income seniors are having to cut into their incomes to pay for the teachers consistency of benefits. I hate to sound like a liberal, but is that fair?

I previously noted about the 13th check but there are cases of other shananigans. For example, in New York, under a Democratically controlled state house and legislature, in years when investment returns exceeded the expected, the state waved annual contributions to the plan, when they should have taken normal contributions.

Finally, there is nothing that prohibits any public sector employee from setting up their own retirement savings plan.

Public employee unions shouldn't exist.

Here's some more news about public pensions:

Quote:... as recently as this week New Jersey’s chief budget analyst deemed it not “fiscally or physically possible” for the state to make its nearly $3 billion full pension contribution this year.

Quote:New York state plans to defer $1 billion in pension contributions over the next five years. Pennsylvania’s school-employees retirement plan last year received less than half its full contribution.

Keep kicking the can

(05-22-2015 08:45 PM)Machiavelli Wrote:  I think the state should do everything in its power to honor their side of a contract. It's a sacred trust. It's not something that should be trivialized or used as a political pawn. I would also try to offer options where a person could contribute more to be able to retire under what they thought they were going to retire under when they entered the system.

Look at my state, Illinois, and the state pension system. It is a mess. In a conscious decision, it was repeatedly underfunded, kicking the can down the road. Illinois is a strong Democratic state, with unions providing much political muscle to get these Democrats elected. You should ask yourself why voters kept working to put people into office that would promise, but underfund, the pensions. We are in this mess in this state because, simply, the pensions were not funded.

(05-22-2015 08:45 PM)Machiavelli Wrote:  I think the state should do everything in its power to honor their side of a contract. It's a sacred trust. It's not something that should be trivialized or used as a political pawn. I would also try to offer options where a person could contribute more to be able to retire under what they thought they were going to retire under when they entered the system.

If you are responding to my questions, this is a wishy-washy answer that doesn't respond.

So I will repeat, there are two possible bases for your position:

1. You believe the state's pension obligation is absolute, a contract is a contract, regardless of thins like feasibility and affordability, or

2. You recognize that events may force modification of a contract, but in this case you do not believe the events justify that.

Which describes your position?

I think it's murkier than either of your suggestions. It's a thing that should be negotiated.

(06-01-2015 12:08 PM)Machiavelli Wrote:  I think it's murkier than either of your suggestions. It's a thing that should be negotiated.

Well then look at it from the options POV. The municipality can either,
a) raise taxes
b) file for bankruptcy

because we aren't just talking about one or two pension plans that are insolvent within the city, but 4-5 depending on the jurisdiction. A renegotiation would be great, but lets be honest, if the employees were truly concerned about the solvency of the retirement plans then such talks would already be underway. Most union members appear to be taking the 'f**k that, pay me' approach, which will result in option (b) being implemented.