Wednesday, February 17, 2010

Boy, Did I Miss the Boat

As most of you know, I am a retired, field-grade military officer. I left active duty just over seven years ago and since then, Uncle Sam has been kind enough to send a retirement check once a month.

My retired pay is a matter of public record; as a retired O-4, I receive $2900 a month, or just under $35,000 a year. Do the math, and you can see how much I'll earn over the next 30 years --assuming I live that long. By most standards, my pension plan is generous, particularly when you factor in cost-of-living increases and other benefits, including medical coverage and BX and commissary privileges. It reaffirms my belief that joining the military was the smartest thing I ever did (aside from marrying Mrs. Smiley, just in case she reads this post).

Of course, I would submit that I did earn my pension. The United States Air Force owned my a--- for more than 20 years, allowing them to deploy me as they saw fit, and restrict my individual liberties to conform with the demands of military service. I spent long stretches away from my family, and pulled a few hazardous duty tours. Still, I never faced the hardships endured by today's heroes in uniform, and I would never compare my sacrifices to theirs--or those of today's military families.

However, when it comes to retirement benefits, I apparently missed the boat. While the combined pay and benefits package of many retired service members is worth more than $1 million, it pales in comparison to those of other workers. And we're not referring to Wall Street investment bankers, or folks who get rich in the entertainment business. If you want a really great retirement package, you need to work for the state of New Jersey.

In fact, the Garden State's retiree plan is so generous, it has helped push the state to the edge of bankruptcy. Newly-elected Republican Governor Chris Christie laid out the facts in a recent speech on his state's fiscal crisis:

Let's tell our citizens the truth -- today, right now -- about what failing to do strong reforms costs them. One state retiree, 49 years old, paid, over the course of his entire career, a total of $124,000 towards his retirement pension and health benefits. What will we pay him?" and I had this yesterday "$3.3 million in pension payments over his life and nearly $500,000 for health care benefits -- a total of $3.8m on a $120,000 investment. Is that fair? A retired teacher paid $62,000 towards her pension and nothing -- yes, nothing -- for full family medical, dental and vision coverage over her entire career.

"What will we pay her? $1.4 million in pension benefits and another $215,000 in health care benefit premiums over her lifetime. Is it 'fair' for all of us and our children to have to pay for this excess? The total unfunded pension and medical benefit costs [in New Jersey] are $90 billion. We would have to pay..." Hello, public employee unions! The day of reckoning has arrived for you in New Jersey. This is not going to be pretty, folks. This is not going to be pretty. "We would have to pay $7 billion per year to make them current. We don't have that money -- you know it and I know it. What has been done to our citizens by offering a pension system we cannot afford and health benefits that are 41% more expensive than the average fortune 500 company's costs is the truly unfair part of this equation. ... Suburban districts will sacrifice. Urban districts will sacrifice. Rural districts will sacrifice. Some, both inside and outside this chamber, will urge you to retreat to the corner and protect your own piece of turf. Our state is in crisis. Our people are hurting.

"Now is the time when we all must resist the traditional, selfish call to protect your own turf at the cost of our state. It is time to leave the corner, join the sacrifice, come to the center of the room and be part of the solution. I urge all of us to come to the center of the room voluntarily, to stand up to the special interests, to fix our broken state -- together. ... In total, I am cutting spending in 375 different state programs, from every corner of state government. I doubt that many will be popular. I will use my executive authority to implement them now, because I must. ... I am not happy, but I am not afraid to make these decisions, either. It is what the people sent me here to do."

Rush Limbaugh has the entire transcript of Governor Christie's speech; read the whole thing, it's well worth your time.

To be sure, Mr. Christie faces an uphill battle in taking on his state's entrenched public employees union. But at least he's willing to fight. Unlike his predecessors, Governor Christie understands that New Jersey is on an unsustainable path; the state's unfunded pension and health care liabilities are now approaching $90 billion. As Christie told state legislators the other day, the state would have to spend $7 billion a year for a decade to close that gap--money the state simply doesn't have.

And New Jersey isn't the only state facing a pension crisis. Across the country, feckless politicians bought off the state employee unions by promising gold-plated retirement packages, knowing the bill would eventually come due.

Here's another example of benefits gone wild. Listening to Bob Brinker's Money Talk program a few months ago, we were stunned by a caller from Michigan, another state teetering on the edge of insolvency. The man that spoke with Mr. Brinker was a retired state worker who was enjoying a comfortable retirement, and looking for advice on passing on wealth to his heirs. But the real kicker came in an casual remark from the caller, who volunteered that Michigan allows state retirees to pass on their health benefits to one of their surviving family members, no questions asked (emphasis ours).

Sadly, that's typical of the lunacy that exists in state and municipal pension plans around the country. It's the mindset that has left California with more than $100 billion in unfunded liabilities, and no way to pay for them. According to various analysts, runaway pension costs are the biggest factor in the state's deepening fiscal crisis. And no wonder; one reform group learned that 3,000 retired teachers in California collect pensions of more than $100,000 a year.

No one is saying that educators don't deserve a decent benefits package, but when teachers collect a bigger retirement check than most cops, firefighters (or former members of the armed forces), something is definitely wrong.

3 comments:

Captain Ned said...

Guess I work for the wrong state. I work for 30 years to earn a pension of 50% of my last 3 years average with a COLA of 1% under the CPI. Post-retirement I pay my 25% share of health care and the state pays its 75% until I'm eligible for Medicare, then there's no state health care benefit.

Despite the austerity of our plan compared to NJ and CA, we're still underfunded because the redistributionists infesting our Legislature always have more pressing needs for $$ than fully funding the actuarial obligation. After all, why fully fund the plan when there are "deserving refugees" wandering our streets without state-funded cell phones.

owr084 said...

Here's another example of governments gone wrong. The Federal government was closed last week for 4 straight days. The overwhelming majority of workers told to stay home were PAID their full salary and benefits for doing nothing. I am a contractor to the government and I can't be paid without providing a service. So, why doesn't the government expect the same from its own employees? As a taxpayer, I think they should not be paid.

There is also the government's overly generous leave policy. A government worker with over 15 years of experience gets one day of leave per pay period (26),one sick day for every two periods (13) plus Federal holidays (not counting bonus days like the day after Christmas, etc.) for around 50 days of leave per year. What's the private sector equivalent around here? 30 days total. A government employee gets essentially an extra month of leave...

Paul G. said...

You're absolutely right that pensions are a problem. I only wish I had a defined benefit pension plan like yours.

I understand why you value your service to the country higher than that of teachers. (due to the restricted liberties, time away from family, hazardous duty) However, don't worry, you did make the boat: Assume you get the same healthcare as teachers (who don't have a PX or the VA system for better or worse), the future value of your $2900 payments with a 1% cola is $1.2 million over 30 years. With 2% cola= $1.4 million. That might make Governor Christie's list.

By the way, Obama has requested a 27% increase for the VA's budget for next year to take care of our veterans. Is that under shame on him for increasing government spending or what took him so long?

owr084: the reason such benefits are provided is because the government can't compensate with salary to the extent the private sector can.