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As debates heat up in states across the country over budget shortfalls, more and more focus is being placed upon the runaway growth in health and pension benefits for state and local government workers.
These excessive benefits are a major factor behind the exploding costs of government in many states. It is time to bring these costs under control before they completely overwhelm state and local budgets.
Setting aside partisan rhetoric, it is clear that the pension and health benefits actually being paid out to state and local workers and retirees have steadily grown more generous relative to those in the private sector. This has been happening for at least two decades because negotiations between governments and public sector unions lack transparency and accountability.
Taxpayers are rarely made aware of the costly promises that public-sector unions are able to extract from state and local governments. Politicians often find it easier to reward unions with deferred payments for pensions and health care instead of offering salary or wage increases that appear immediately on the budget.
Thus they are able to buy peace today by selling out the future. So far the unions have been happy to oblige them. Without fundamental reform, this pattern is bound to continue year by year with devastating consequences for public budgets, taxpayers' pocketbooks, and economic growth.
Consider these facts:
The pension benefits paid out to retirees by state and local governments have more than doubled from 11.1% of payroll in 1990 to 23.8% of payroll in 2009. By contrast, pension payouts in private industry grew only from 6.1% of payroll in 1990 to 9.8% in 2009.
The growth in state and local pension payouts relative to current payroll has been driven by steady increases in the generosity of pension agreements rather than by the aging of the state and local government workforce.
In 1993, retirement benefits paid out to state and local government retirees averaged $10,812 per year per beneficiary nationwide, or 35% of the $30,870 in wages and salaries paid out to the average full time employee. By 2008, average retirement benefits per public retiree had grown to $23,225, or 45% of the $52,058 in wages and salaries paid out to the average employee.
The growth in state and local pension payouts has continued year after year in good times and bad. In the wake of the dot-com crash that exposed pension funding problems everywhere, state and local governments nationwide added $1 trillion to the actuarial value of their pension promises.
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Posted By: SomeUSCitizen(210) on 5/4/2011 | 2:07 AM ET
Another case of attacking unions out of envy. Instead of trying to destroy the better plan, how about trying to match it? Why have businesses gone all out to make sure that stable, secure work is only available when they purchased the government? Reducing the US to slave labor (so that we are "competitive" with places like China) is about the only reason why.
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Posted By: Vicki Speer(700) on 5/3/2011 | 11:54 PM ET
Time to do some retroactive investigation and go for bankrupt protection. And politicians should be held financially and legally liable. In California our prison guards will live like millionaires at age 50. Same for our police and firefighters. These unions are sucking the blood out of taxpayers.
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