One of the ladies at church was lamenting the gutting of police and EMT services in her area. It was her perception that every few years the Sheriff pares a few more patrolmen out of the rotation and the 9-1-1 Call response times for every type of emergency grows.
One of the major drivers for what she sees is due to unfunded obligations coming home to roost.
For example, in Eaton County, Michigan there are approximately 30,000 households and for county-level services there is $62M in unfunded pension obligations* which is roughly $2000 of invisible debt per household.
There is another $50M in unfunded healthcare benefits for retirees for an additional $1700 of invisible debt per household. "But wait" you say, "don't they get Medicare?"
Perhaps they would if they were 65 when they retired, but one of the perks of working for a governmental unit is that many of them offer retirement after working 25 or 30 years and that can leave a big gap until Medicare kicks in. If they worked in most private industries, they would be expected to pick up a job...hey, many of them are not even 50...to get healthcare coverage.
It gets worse
There are municipalities within Eaton County. Let's take Eaton Rapids as an example.
The pension fund has a $5.4M shortfall that is shared by approximately 1700 families for an additional $3200 per household on top of the $3700 owed to the county.
But hold onto your shirt, the unfunded healthcare benefits amount to $10.4M which adds another $6100.
Let's see where that leaves us for a family living in Eaton Rapids: $3700 (county) + $3200 (city pension) + $6100 (city healthcare for retirees) or about $13,000...the cost of a used car.
They are making the equivalent of twice-a-year payments of $260 (1/3 of the property taxes they pay) on a broken-down, used car that is parked behind the barn because it does not run, never will run and it cannot be sold.
The typical household in Eaton Rapids kicks in about $1500 a year in property taxes and there is not as much left over after "servicing" the costs of people who no longer work for Eaton County or the City of Eaton Rapids.
The reason the number of cops and EMTs dropped is because administrators short-sightedly broomed out workers before age 65 and sweetened the pot by offering generous post-retirement healthcare and pension benefits. Those tax dollars coming from citizens are not available to pay for current workers.
Is it fair?
Is it legal or fair to reduce a retiree's benefits after they retire?
I never went to law school, but the answer is probably "It depends."
If the post-retirement healthcare benefits (for instance) are contracts granted on an individual-by-individual basis at the time of retirement then the municipalities are locked in.
If the post-retirement healthcare benefits are negotiated as part of the regular employee contracts on a 3, 4 or 5 year cycle then they can be changed with the next contract.
But is it fair?
It depends on who you ask. If you ask the 55 year-old taxpayer making $30k a year and paying $1500 a year in property taxes...and who has crappy healthcare benefits...then they might believe that it is "fairer" to ask the 55 year-old, city retiree to find their own healthcare premiums rather than siphoning it from the taxpayers' pockets.
I don't know how old the lady at church is but I suspect she is in her middle-60s. I do know that both she and her husband, who might be a few years older, are still working full time.
*All costs for unfunded obligations comes from the Unfunded Michigan website.
Number of households was estimated by taking the population and dividing by three.
Signs of the times ahead…ReplyDelete
Perhaps blame lies at the feet of those short sighted politicians..ReplyDelete
Which lies at the feet of the voters.Delete
"or about $13,000...the cost of a used car."ReplyDelete
Have you shopped for a used car lately? $13K
won't get you anything worth owning.
The most expensive vehicle in our fleet has a KBB, Private Party value of $8000. The least expensive, a rusted-out, 2002 S-10 has a KBB PP value of about $2kDelete
Folks drive what they can afford.
I seem to recall reading about this chicken coming home to roost for many many years.ReplyDelete
The same problem undermines our other ills today: accountability.
People and politicians are too insulated from the consequences of their actions. If you had to live in the street, you might stop taking drugs and get a job, but due to social safety nets (paid for by taxpayers!), you do not have to bear the burden of those choices. Politicians never seem to face consequences for bad choices, whether that be at re-election time, or pine tar, feathers, and a rail. They can release criminals and neither get recalled nor be a victim of crime. They can force "green" energy but don't worry about paying their electric bill. Hire 80k tax agents and exempt yourself from audits.
No consequences. This is what Mike Tyson speaks of. People need to start getting punched in the face.
East Lansing has as similar problem. For years the refrain has been "public sector employees take a pay hit for good benefits and job security." However, many city officials aren't taking a pay hit, get incredible benefits/job security and have functionally mortgaged the future for pay/benefits.ReplyDelete
They have "balanced" budgets today, but massive unfunded contractual obligations in the future. Drives me crazy. Then, when the piper's bill comes due they (as you allude to) go "well it's a contract, so what can we do?". In the case of Police/Fire/EMT at they weren't the ones writing and approving the contracts, but for city officials... I find this excuse rings hollow.
No answer here, just a note that this is a lot of local communities as well. People have been writing checks on the future that only unsustainable growth (that never happened) could have covered.
gubmint in healthcare, and meddling in everything actually is why costs are astronomical.ReplyDelete
I've observed that many people define "fair" as "I got a better deal than the other guy."
I had an attorney advise me once, "We don't use the 'F-Word'. (Fair)."
The woman I had once been married with had worked for county or city all her adult life. (She retired at age 60.)ReplyDelete
On the other hand, I have been self-employed even before becoming an adult.
We fought like cats and dogs about pay rates, perqs, etc until we just didn't mention it again.
My point is she truly believed it was fair for how gov workers scheduled their pay rates and benefits equal to up to 40% of their pay.
(For scheduling purposes, one jurisdiction would call several other jurisdictions they perceived as equal in population, tax base, and a few other metrics. They'd then assign themselves to the top 10% of the samples. For convenience, the same jurisdictions would use each other year after year.)
You can see how each jurisdiction would profit, er, benefit handsomely. That scheme reminded me of the arms race of the 1950s-1960s; each side always trying to one up the other.
The especially aggravating part was noted also in council meetings when the meeting agenda included 'updating' classifications for pay rates. It didn't matter who you asked, they all had a perfectly reasonable rationale for why it was needed to make revisions. Revisions, mind you, that outpaced inflation adjustments (COLA). All are true believers.
Just as much, they poo-poo'd the argument that private business could not afford to do the same. It must be, as they would say, that you are a poor employer.
The wisdom of God dictates that we should not be unequally yoked. I now know that should also apply to one's personal perspective of what is 'fair' in finances.Delete
If you add in state workers who have at least the same or benefits and school district employees you see the load on working people and retirees get to be unsustainable. I believe the Teamsters were considering cutting retiree benefits as the number of working Teamsters can no longer support the cash flow.ReplyDelete
I suspect another reason for services eroding is lack of employees.ReplyDelete
I know that many police departments have openings for lack of qualified candidates, as do many county agencies.
Whether their qualification requirements are reasonable is another question.
I know that some places intentionally understaff so that existing staff can easily justify overtime, occasionally to a ridiculous degree.
A serious problem, always overlooked, is that when public employee unions are negotiating with politicians, neither party is truly representing the taxpayers. Pols will trade future benefits and compensation for political support, or at least less controversy, knowing they won't be there when it all comes crashing down. Unions will take as much as they can, surprise, surprise. The taxpayer is screwed, because both parties think of them as a bottomless wallet.ReplyDelete
That's some stark math ERJ. My first thought, is fedgov could print the money to bailout pension funds. My second was, that wouldn't give them anymore control. My money is on, they HAVE to take over all private pensions in order to do the public pension bailout fund?ReplyDelete
(Unable to sign in Joe, so commenting as 'Anon')ReplyDelete
Is is fair?
I dunno. Workers are sold on the idea of pensions being a guaranteed thing, as if they are FDIC-backed. But they aren't. They're funds managed by people, sometimes people with really bad judgment. Was it fair when faithful, honest Enron employees saw their wealth liquidated? Nope - but it happened all the same. Is it fair when you self-managed 401-K takes a dive in a market plunge, or there is a recession and you lose your formerly-steady income source? Nope - but it happens anyway.
Pensioners have no justifiable expectation that they must be kept whole. If there's an issue, it's their circus to run while they're still working, and when they're pensioners. Isn't that what trade unions are supposedly being paid for? Oh - right.
You forgot to add in the money owed at the state level... I'd at least double what the families are owed! And it IS coming home to roost! California is effectively bankrupt due to monies owed to pension benefit plans, many of which pay out MORE than the top salary people earned when working!ReplyDelete