[Leica] Government and school pensions

[lrzeitlin at gmail.com (Lawrence Zeitlin)]

Rei is certainly right. Pensions are the biggest burden on state and local
taxes. I've seen how this operates from both sides. I was a union member at
my university for 32 years as my union negotiated for ever higher pension
and medical benefits for retired faculty. The union espoused a defined
benefit plan where the pension after retirement would be based on the
average of the last three year's salary. It was an unfunded pension,
payments to be made from endowment and current income. Fortunately the
legislators in my state permitted faculty to drop out of the plan in favor
of a defined contribution pension where the university would contribute 15%
of annual salary plus whatever I cared to add into a TIAA/CREF retirement
fund. I chose to invest largely in equities, a lucky decision. The Dow was
at 600 when I started. Now it hovers around 12,000.

On the flip side, I was a member of my local school board for 10 years. I
saw our expenditures for student education rise markedly during and mostly
after my tenure. When I started, our budget was about $17,000,000 for an
enrollment of 3,500 students, an annual cost of less than $5000 per student.
Currently the budget is over $50,000,000 for only 2,500 students, an annual
cost of $20,000 per student. While education costs have indeed risen
(computers, mandated busing, special education) the bulk of the increase is
due to overly generous retirement and full medical care benefits paid to
former teachers. Since school districts are prohibited from investing and
can hold only a small amount in reserve, the full budget is paid by
taxpayers every year. One teacher told me that she makes more as a retiree
than she ever did while working. You can imagine my joy at hearing that
since I haven't had a kid in public school for over 20 years.

All I can definitively say is that state and local governments are on the
slippery slope to bankruptcy because of the benefits negotiated in those
golden '90s when it was assumed that the money would keep flowing in. From
my personal experience I suggest that educational and municipal institutions
get off the defined benefit retirement bandwagon and adopt a defined
contribution system. Let the hard working teachers and government employees
take their chances on the economy like the rest of us.

Larry Z