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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWhy it is not really taxpayers’ money that funds public employees’ pensions.
Last edited Sat Feb 9, 2013, 07:50 PM - Edit history (3)
What bothers me most about discussions of underfunded public employee pension funds is the lie that it is "taxpayer money" that pays our pensions. It is NOT the taxpayers' money. It is the employees' money.
The taxpayers' taxes fund government functions and services, just as an employer's money pays for the work of his employees. But once the employees do the work and get paid, the money is no longer the "employer's money"; it is the EMPLOYEES' money.
The following scenario might help people understand why it is misleading to say that taxpayers money is used to fund these pensions. That is like saying that the paycheck a worker deposits into his bank account is his employers money. It isnt. Sure, the employers money is used to pay the worker, but once the worker is paid, that money is his money, not the employers.
If the worker does the contracted work, but the employer doesnt pay him his wages, or doesnt pay him part of his wages, the money the employer withholds is still the employees money, and by withholding it, the employer is helping himself to an interest-free loan for however long he keeps that moneywhile depriving the employee of the interest that money would have earned if it had been in the employees bank account.
And if the employer never pays the employee the money at all, then the employer is stealing the employees money.
Here is the analogy:
Say my employer notices that I have trouble saving money or avoiding temptations to spend unwisely, and he worries I might need some savings cushion in the future. Meanwhile, he sometimes has cash flow problems; even though he has money enough to pay my wages, sometimes he must cover other expenses that run him short temporarily.
Imagine also that he has a partner (the story's analogue for the taxpayer) who has a lot of power over but little understanding of the business side of their business.
My boss works out an arrangement with me. He will pay me the agreed upon wages, but not all at once. I accept the idea of being paid only, say, 85% or 90% of the money I have earned in each paycheck, but he promises to deposit the withheld portion in my bank account, though sometimes he will have to TEMPORARILY postpone a deposit if he runs into a serious cash flow problem.
Meanwhile, he keeps his ignorant partner happy by showing that he is getting my work at a below-market price (since he is actually paying me only 85%-90% of what he owes me at any given time), and he encourages his partner to admire and even reward his financial savvy for doing so. For years, his partner accepts the lie and remains ignorant of how much I am contracted to be paid for my work.
But usually, when the cash flow problems are not pressuring my boss, he doesn't bother to deposit into my account the money he still owes me. Since our arrangement has locked me out of my account for a few decades, because we agreed that would help me resist the temptation to blow my money rather than saving it as I need and want to do, I cannot get to my withheld wages until the agreed upon time, but he assures me that when I am finally able to access my account, I will find all the money there. During the years when I cannot access my account, instead of depositing my withheld wages he keeps using MY MONEY, THE MONEY HE STILL OWES ME, to pay for his own stuff and his partner's stuff, even when they have plenty of their own money to use.
In other words, he keeps using as an interest-free loan the portion of my pay (MY MONEY) that he is supposed to be depositing in my bank account (which means, of course, that he is not only using my money, but also depriving me of the interest I would be earning on that money if he were depositing it into my account the way he is contractually obligated to do). Not only is he not paying me the money he owes me, but he is also causing me to lose a lot of money that my withheld pay would have earned in interest over the years and decades if it had been sitting in my bank account as it was supposed to be doing.
Then when it is time for me to start accessing my own money in my own savings account, I am told there is little or no money in there after all, because the portion of my pay that was withheld was never deposited in my account after all, even though our signed and legally enforceable contract promised that it would be.
When I insist I should be paid the money that I earned but that was supposedly only temporarily withheld from my paycheck, the ignorant partner starts screaming about my greedy attempt to get "extra" money out of their business after I no longer am even working for them.
And my other boss, who knows better but who likes having MY money to spend for his own and his partner's purposes, encourages his partner to continue thinking that it is THEIR money I am demanding, not MY OWN money that they have been using for years rather than paying me directly or depositing for me in my temporarily locked account.
Now that interest-free loan that they have been using my money for turns into outright theft, because they do not intend ever to give me that money at all.
The pension money IS NOT THE TAXPAYERS' MONEY. It is the EMPLOYEES' MONEY that the taxpayers have been for years allowing the government to spend for the benefit of either the taxpayers or, even more often, the politicians and their cronies.
I suppose you can tell from my post that I am a state employee.
NOTE: This was originally posted as a comment on another thread, in response to another poster who kept saying that public pensions are paid with taxpayers' money. Here is a link to the original thread:
http://www.democraticunderground.com/?com=view_post&forum=1002&pid=2341841
we can do it
(12,184 posts)Yes, it is deferred, but it was pay earned for hard work, not something to be stolen to further enrich the greedy.
libtodeath
(2,888 posts)for the same for them.
Just idiots
ProgressiveProfessor
(22,144 posts)Using CALPERS as an example, the cities are having to pay more in to the defined benefit programs.
In the case of a defined contribution retirement, your argument would be perfectly correct.
Lordquinton
(7,886 posts)The California teacher pension? The system in place for the state employees who are not allowed to collect SS benefits from their job? These things do not exist in a vacuum, and regardless of the mechanic and wot not, it is all part of the worker's pay. They earned their benefits, and if the cities have to contribute to paying it's employees, I really don't see a problem.
ProgressiveProfessor
(22,144 posts)up for employees who are no longer contributing but are still on the books. That they have to do so (and should) is a serious budgetary concern.
Lordquinton
(7,886 posts)but no longer works there? or that people who have worked there and left are getting paid after the time they are no longer employed? Like, is it funding a pool that includes funds to cover income that was previously earned, or is it people collecting pay checks after they left?
ProgressiveProfessor
(22,144 posts)In principle, the municipal employers and employees paid into the fund at an appropriate amount while the people were working there which would cover the eventual draw on the fund by those employees. For any number of reasons, the funds are now not financially sound. This deficit is being made up solely by the municipal employers, not the retirees.
The municipalities should pay it. It is to cover a defined benefit pension that was clearly earned. However, CA cites are so strapped these days, it is a budgetary concern,
Lordquinton
(7,886 posts)These reasons are very important, and are often left out under "Technical complicated stuff"
Regardless, these are debts that can't just be forgotten about, and should not be discussed under that heading, like SS under the national debit talks.
Also, CA just balanced it's budget (mostly by cutting already bare bones programs) We are a rich state, and there is an easy way to make money. Although, this is now a whole new game now that the state is majority blue in it's administration, so we can get the super majority required by law to do, well, most anything important.
ProgressiveProfessor
(22,144 posts)The cities and municipalities are under a lot of financial stress. New employees are being screwed in terms of retirement plans and everyone is eyeing the retired.
I expect some sort of state bailout of CALPERS/CALSTERS at some point.
Lordquinton
(7,886 posts)This is the same thing that Obama was accused of, that he took office, and everything wasn't immediately better. The budget has been worked out, and further changes can actually happen now. things only just got started again after the break.
If things haven't cleared up in a year, then we can get the pitchforks out, and I'll be right behind you.
ProgressiveProfessor
(22,144 posts)His actions have also decimated cities etc. It will take more than a year.
Lordquinton
(7,886 posts)that left the state in gross debt, which he wanted to get squared away. Like in Iceland, things got really bad, before they could heal. Otherwise we'd still be bleeding and be continuing to do so, while Fox et el. would be shaking their heads saying "There's nothing we can do about it" while taking the payoffs.
At least we got that park situation uncovered...
shanti
(21,675 posts)CalSTRS is for teachers, CALPers is for state employees.
Lordquinton
(7,886 posts)reason I put "Isn't that the..." but the point still stands, it's a debt, not some extra, extravagant cost we can just cut because we feel that it's unfair or something.
shanti
(21,675 posts)i do agree with the OP. i am a current CalPers retiree myself The pension was the MAIN reason i wanted to work for the state.
It is very loaded to talk about these issues using terms like "People who no longer work for the state" because a lot of those people are like you, who have retired, not someone who worked there and quit, as is often inferred.
**edit to add**
Thank you for your service to our country. More than just the military make this state, and country work.
ProgressiveProfessor
(22,144 posts)Many municipalities use it as well.
I have several friends who are retired from municipalities around the state that have a CALPERS retirement. Many of the participating municipalities are having to put in more funds to cover those already retire and it is becoming a tempting target in the lean financial times.
shanti
(21,675 posts)i do know that, and my answer was simplified. i used to work for the city of orange and paid into PERS then as well.
dkf
(37,305 posts)Since it is "our company".
But is not necessarily the actuary's fault. It's also the difference between the expected investment return and the actual return.
ProgressiveProfessor
(22,144 posts)dkf
(37,305 posts)Pension administrators blame the program's financial woes on decisions between 1967 and 2005 to divert $1.687 billion of excess investment earnings from the pension program to fund other public programs.
In 1999, the Legislature enacted Act 100, which diverted $346.9 million from ERS investment earnings to help balance the state and county budgets. In 2007, the Hawaii State Supreme Court ruled that Act 100 was unconstitutional.
In 2005, the administration and Legislature halted the diversion of investment earnings, and none of the excess earnings have been diverted since.
Egalitarian Thug
(12,448 posts)Q: How have the Wall Street brokerages become so fabulously rich and powerful over the last 25 years? How has the financial industry, an industry that makes nothing, contributes nothing, and is purely extractive, come to be almost half of the entire American economy?
A: One of the easiest ways is by trading in accordance with the cash cows. The nonexempt institutional investors. The municipals, insurance companies, pension finds, and so forth that are limited as to how much and how often they can alter their investments. These funds are required by law to notify and limit their movements of the huge amounts of money that they control on the behalf of others.
Starry Messenger
(32,342 posts)tblue37
(65,336 posts)Starry Messenger
(32,342 posts)I haven't had the energy to refute those posts. Great public service.
tblue37
(65,336 posts)gollygee
(22,336 posts)Says someone with two parents collecting state pensions! They earned that money. It isn't a gift, and it doesn't belong to the taxpayers.
annabanana
(52,791 posts)WillyT
(72,631 posts)ReRe
(10,597 posts)It's your money. They used it. And in the end it has to be paid BACK to you. With interest.
DirkGently
(12,151 posts)HiPointDem
(20,729 posts)JDPriestly
(57,936 posts)In case of bankruptcy, employees should get their pension money before any other creditors.
Live and Learn
(12,769 posts)secondvariety
(1,245 posts)This public employee contributes 8% of my pay to my pension. Plus I'll take a hit on my SS because I get a pension (don't ask me why).
timdog44
(1,388 posts)Should be required reading.
tblue37
(65,336 posts)duhneece
(4,112 posts)This is income earned by the worker, DEFERRED to a time in the future.
duffyduff
(3,251 posts)Response to tblue37 (Original post)
Barrett50 Message auto-removed
tblue37
(65,336 posts)and cooks would not have a job or money.
But that doesn't mean that the money the employees are paid still belongs to the restaurant owner after the employees have earned it by doing their jobs.
Furthermore, if it were not for the public employees, the taxpayers would not get the governmental functions and services they demand.
Just as the owner of the restaurant would not have that restaurant to make money with and the customers would not have a place to eat out if it weren't for the restaurant employees and their willingness to work for the pay they were promised when they were hired.
Response to Barrett50 (Reply #23)
Barrett50 Message auto-removed
Gidney N Cloyd
(19,833 posts)Response to Gidney N Cloyd (Reply #27)
Barrett50 Message auto-removed
TexasTowelie
(112,129 posts)earn less than employees in the private sector.
I also avoid company sponsored 401k programs unless there is a generous match by the employer. I prefer to have my assets with as much liquidity as possible and avoid the tax penalties if I decide to cash out when changing employers.
tblue37
(65,336 posts)here on this thread, and all on this thread were pushing the RW claim that employees' earned wages are not "really" their own money, but rather some sort of favor bestowed on them either by their private sector employers or by the taxpayers.
Oh, my! I googled our PPR's friend. I didn't know that a Barrett50 is a type of gun. Apparently there was a poster named "Barrett 50" (space included for that one) who used to post on DU2, but who was tombstoned there.
Maybe it's the same guy, or maybe just someone else who chose the name of a gun as his own user name.
Gidney N Cloyd
(19,833 posts)I can understand people being ignorant of how gov't pensions are funded given the PR efforts to obfuscate things but I can't understand it when you give them a fairly simple explanation and they just dig in like you haven't said anything. It's just not that complicated.
tblue37
(65,336 posts)working an agenda.
But either way, there's a good chance he didn't bother to read my explanation, or that if he did, he didn't care, because he is so ideologically committed to his hatred of public employees, government, and anything he associates with "liberals" that he cannot accept mere facts.
We have repeatedly seen that the RW rejects verifiable or even self-evident fact when it challenges their prejudices, and recent research shows that offering clear, verifiable evidence that challenges someone's beliefs doesn't convince them, but just makes them dig in their heels and defend their beliefs more vehemently.
freshwest
(53,661 posts)The only reason other than conservative billionaire-owned media that this is not being stopped, is transparency. All public expenses, salaries and benefits are just that - public information to be babbled about by the woefully uninformed or deliberately misinformed.
People in the private sector can do what they want - both the employers and the employees, but it's private, NYOB time there. If Americans want transparency in their governmental operations, they'd best learn how things work with an open mind at least and get involved in saving the public sector instead of buying the lies from the aforementioned media.
The other conservative billionaire-owned media talking point is it'll be sooo much better when these public employees are of a job and their pensions stolen. People need to learn things will be worse. Your tax money will still be going somewhere - and when it's private, you'll have no say about how much it costs, who will be served, or what is being done, since surprise, surprise - it'll be NYOB.
That this simple logic escapes the many who are lapping up the conservative billionaire-owned media sources, all of them, is tragic. When they turn off the teevee owned by the same entities who are telling them to hand them the keys to the entire nation, it'll be too late.
It'll be - NYOB.
tblue37
(65,336 posts)"Is it okay for your boss to take your pension for his expenses?"
That question doesn't work with RWers, because they would say yes, it is okay, because (according to them--as you could see from Barrett50's posts if they had not been deleted when he was PPR'd) the money in the pensions--or the money that was supposed[/] to be put into the pension fund--really belongs to the employer, not to the employee.
As long as they believe the money in pension funds is the "taxpayers' money," they will be sure that it is perfectly fine for the "employer" (i.e., the taxpayers--and by extension, the politicians they elect) to use that money for their own purposes.
freshwest
(53,661 posts)dkf
(37,305 posts)Pension administrators blame the program's financial woes on decisions between 1967 and 2005 to divert $1.687 billion of excess investment earnings from the pension program to fund other public programs.
In 1999, the Legislature enacted Act 100, which diverted $346.9 million from ERS investment earnings to help balance the state and county budgets. In 2007, the Hawaii State Supreme Court ruled that Act 100 was unconstitutional.
In 2005, the administration and Legislature halted the diversion of investment earnings, and none of the excess earnings have been diverted since.
http://m.civilbeat.com/topics/hawaii-employees-retirement-system/
alarimer
(16,245 posts)To my mind, this argument only happens because people who work for private employers have been royally screwed and the argument that public employees are screwing over the taxpayers resonates with them.
These pension plans also exist in part to compensate public employees for lower wages overall. It is a myth, very easily busted, that public employees make more money. They don't, generally, except among certain, narrow demographic groups.
In any case, I think you are correct.
duffyduff
(3,251 posts)Festivito
(13,452 posts)We pay for the retirement, other benefits, the salary and the FICA, or, RE-NEGOTIATE.
Don't accept the work of someone you refuse to pay as promised. And, don't hire someone for a price you cannot afford to pay.
Simple.
bigapple1963
(111 posts)it is unconstitutional in some states to "renegotiate" these pensions plans after the state employees have already earned these benefits.
FreeJoe
(1,039 posts)I absolutely agree that a person's pension is part of their compensation. It is paid in return for their service.
My "but" is to make it clear that I'm not copacetic with the state of today's public pensions. When we reformed the private pension system with ERISA, we did not make public entities live up to the same standards. As a result, we have some public entities that are "paying" people today with pensions that they are not adequately funding. They are getting the services now, but they will be paid by future taxpayers. That is neither fair nor prudent. We should require government agencies to have similar pension funding standards that we require of private companies and they should be required to use similar expected rates of return. Failure to do so is going to cause a lot of trouble in the future when the bills for promises made but not funded start mounting.
SHRED
(28,136 posts)Response to tblue37 (Original post)
KristaM Message auto-removed
RoccoR5955
(12,471 posts)hfojvt
(37,573 posts)because ultimately, it obviously takes taxpayer money to fund these pensions. Money that the taxpayers often do not want to pay, especially the taxpayers who make far less money and have far fewer pension and other benefits than those public employees.
Although, for myself, THIS public employee worked incredibly hard over the last two days.