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Public pensions in free fall

Published: Sun, December 18, 2011 @ 12:00 a.m.

By Bertram de Souza (Contact)

As the bill to reform Ohio’s five public pension plans crawls through the General Assembly, the need to deal with the unfunded liabilities only gets more urgent.

A study issued this month by The Buckeye Institute for Public Policy Solutions entitled “Hanging By A Thread” places the total unfunded government pension liabilities at $66 billion.

But Ohio isn’t alone in being threatened by this epidemic. An Associated Press survey conducted earlier this year found the 50 states have a combined $690 billion in unfunded liabilities and $418 billion in retiree health-care obligations.

States are taking steps to deal with this mounting problem. New Jersey has raised the normal retirement age from 62 to 65, while California will attempt to follow a similar path through a state ballot issue next year.

Defined-benefit system

At the heart of the problem is the defined-benefit system and retiree health-care coverage that most private sector workers no longer receive.

With taxpayers contributing more toward a public employee’s pension and health insurance than the recipients, the tension between the two groups of workers is at an all-time high.

“With Americans increasingly likely to live well into their ’80s, critics question whether paying lifetime pensions to retirees from age 55 or 60 is financially sustainable,” the wire service reported.

In Ohio, the Buckeye Institute’s study comes to the same conclusions with regard to the five public systems.

“Ohio’s five defined-benefit public-pension systems are broken,” the study states. “What began as a method of providing decent retirement benefits for public employees has evolved into a fiscal nightmare of red ink, runaway liabilities, and for many government workers, pension packages well north of $1,000,000. Ohio’s public employees and taxpayers deserve public-retirement systems that provide fair benefit levels to retirees at reasonable cost to taxpayers. Neither of those two principles is being fulfilled. Gold-plated pension packages and billions in unfunded liabilities is not what Ohioans bargained for.”

So, what should be done to make the systems financially stable?

The Buckeye Institute study says there are two divergent paths Ohio legislators can follow when they deliberate the pension reform legislation. One aims at minor adjustments, such as increasing service-length requirements, retirement age, and Final Average Salary calculations.

The study contends that while such measures will strengthen the pension funds temporarily, they won’t fundamentally change the structure of the defined-benefit system.

The other path is to move toward a defined-contribution-style retirement system.

“Like those found in the private sector, defined-contribution retirement systems place less risk on the backs of the taxpayers while allowing for significant cost savings,” the Buckeye Institute contends. Government workers would have to take on some risk, but under the current system they bear none. Taxpayers are expected to cover the unfunded liabilities.

Defined-contribution plan

New government workers would enroll in a defined-contribution plan in which taxpayers would contribute an amount equal to 10.2 percent of the employee salary. This 10.2 percent contribution reflects an amount equal to the private sector standard of 6.2 percent Social Security contribution and a 4 percent 401k match, the Institute calculates.

The conservative think tank estimates that such a system would save taxpayers $3.3 billion over the next 30 years.

For current public employees, the institute says, access to pensions should match that of Social Security. Pension eligibility should begin at 62 for those with 25 years of service, 65 for those with 15-24, and 67 for those with 1-14.

“This would better reflect life expectancy and establish greater equality with the private sector,” it says.

As for workers under the defined-benefit system, a sliding scale would be implemented. Thus, for those within five years of retirement, the pension formula would be adjusted to reflect a five-year Final Average Salary.

It is clear that the public pension system cannot be sustained without major changes. The question is whether Republican Gov. John Kasich and the GOP-controlled Legislature will to take on this controversial issue.


1Superman(31 comments)posted 4 years, 6 months ago

The public pension system is broken and first poster does nothing to refute that. You can't allow people to retire at 55 and give them pensions and health care far better than those of us footing the bill for their golden benefits as well as trying to fund our own. Big changes are a must if the system is to survive. I know the public employees will cry about it but the alternative is even worse.

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2NoBS(2762 comments)posted 4 years, 6 months ago

Asking for input from The Buckeye Institute on any subject relating to public employees is like asking Bobby Hagan to come up with a plan to help Clarence Smith invest his money.

The attack on public employees continues . . . . . .

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3badeepster(124 comments)posted 4 years, 6 months ago

Bertie deScumbag continues his assault on public employees to divert attention from his own personal he11 which is the downfall and continued irrelevancy of the Vindy. Ad revenues are in the tank, people leaving are not being replaced, and subscriptions are way down. The paper may not be here in a few years and then where does deScumbag take his ramblings?

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4Stan(9923 comments)posted 4 years, 6 months ago

Our whole economy has been in a freefall so what's new ? . . ..

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52muchtax(895 comments)posted 4 years, 6 months ago

Jimmy Hughes gets 550,000 from the drop program now is trying to double dip becoming sheriff. Dr Wendy Webb robs the taxpayers of 111,000 in sick time after running the ytwown schools in the ditch. Ohio state patrol retires after 20 yrs then double dip, fire and police retire and then work more years while collecting retirement benefits which is double dipping. There is a bill in a ohio to try and stop this legal robbery of the taxpayers. Public servants retiring in their 40's and 50's and we wonder why the private sector is mad

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6kcimes123(1 comment)posted 4 years, 6 months ago

My husband is retiring from a school system ( and no he's not a teacher ) , he's worked for almost 26 yrs, he's 55, and he'll be going back to work almost immediately, under social security.Alot of his retirement check will be going to pay health insurance for himself and 2 children, I will be going back to work to have my own health insurance. Retiring from a public sector doesn't mean you're sitting with your feet up doing nothing, and no we're not all rich

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7mishmash(333 comments)posted 4 years, 6 months ago

speaking of DOUBLE DIPPERS....


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8apollo(1227 comments)posted 4 years, 6 months ago

At least 2 of the above posters are public employees in Boardman.

Chief Nichols retired last year after inflating his last 3 years of salary and is getting around 60K in pension and then was rehired at 60K. I don't know what his accumulated sick and vacation time take was yet but I'll have that early in 2012 posted on my website.

Another poster above retired and is now rehired in Boardman. Double dipping.

Not only are these double dippers slopping at the trough, they are preventing new employees from getting jobs and double dippers strain the pension funds.

Residents of Boardman passed the recent levy. I keep hearing of crime in Boardman and was surprised that the new levy didn't completely rid Boardman of crime. But, I'm real glad they got the new terrorist vehicle and feel much safer with it.

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9Silence_Dogood(1670 comments)posted 4 years, 6 months ago

In regards to your "CHALLENGE" , I can't help but notice that you failed to list who you work for or your source of income. If you are going to go around giving out "challenge's" you could at least have the marbles to take the challenge yourself.

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10sue(179 comments)posted 4 years, 6 months ago

Bertram must have a lousy pension, or perhaps no pension, at the Vindy.

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11badeepster(124 comments)posted 4 years, 6 months ago

If you're an attorney, you've spent a lifetime screwing people so you have no right to complain.

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12thamedaeous(2 comments)posted 4 years, 6 months ago

The ruse of a Defined contribution plan replacing defined benefit programs is
criminal. It will cut a pension in half and if the amount put in declines, like the article suggests, retirees will end up with less than 50% of what they are now getting. Just because the non-union private sector of our economy hasn't been able to stop the rape of their retirement should not lead to public employees having to suffer too. I remember when, as a state employee, Iwas getting 12 cents/hr raise, when it did happen at all, the private sector was getting $1.25hr raises regularly.The tables have turned. and the only reason it is now a high priority is becasue the republicans want any and every opportunity to raise people's ire against the current crop of public employees so they can whittle away at government and end up with their true goal satisfied-that is---the elimination of any obstacle to their greedy, self centered, approach to their position in society--me, me, me first! and the H...with everyone else. Not to be too paranoid, but that is why groups like the Buckeye Inst. Tea Party, and American Legislative Exchange Institute have been plotting for years to terrorize their way into positions of authority (be writing the legislation you see throughout the US these days) so they can destroy any semblence of the good life for average Americans; Then the country is theirs. We have voter suppression laws, antipathy against public employees programs, intimidation by tea party radicals with guns, elimination of concealed carry laws. Every thing to send us back into the 19th centruy when government was a flea and the rich were the elephant that couldn't be penetrated. If we don't wake up , the country will be thrown back to 1880 when no one could count on any security at all.Even Russia and the middle east have finally gotten fed up with such totlitarianism. We shouldn't let it be imported here.

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13Superman(31 comments)posted 4 years, 6 months ago

As samlam says, it's an easy fix. In fact, countries in Europe are doing exactly what he suggests, cutting public pensions in half. That will be the wave of the future here too. The private sector will eventually say enough is enough and force it. We can't fund our pensions via 401K's and then fund public sector pensions King Midas would be proud of.

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14300(573 comments)posted 4 years, 6 months ago

I have to laugh at formerytown. He's pretty smug for someone who obviously is low down the latter.

The vast majority of those who work at large firms are worker ants for the select few who are made partner. Normally, I say good job to someone for working and making relatively decent money. But in his case, he's trying to portray himself as this successful attorney, yet he works for someone else. Furthermore, if he's the one actually doing all those "billable hours" then he's not much more than a paralegal.

My friend, you need some self-actualization.

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15300(573 comments)posted 4 years, 6 months ago

"Ladder" sorry for the typo.

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16notgvn(6 comments)posted 4 years, 6 months ago

Don't be fooled. Some Ohio legislators and certain vulture capitalists are salivating to get their hands on the pension funds. The current administration in Columbus would love to be able to "borrow" from the pension fund to pay for more useless non-job creating corporate tax breaks.

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17HSG(185 comments)posted 4 years, 6 months ago

There is a book called "Retirement Heist". Everyone should read it. Especially the gullible fools who believe what the buckeye institute is spewing. That includes you Bertram.

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18Superman(31 comments)posted 4 years, 6 months ago

mjnovaksr tells it like it is. The public sector pensions and health care are impossible to maintain and will be cut eventually. Earlier cuts are the best and least hurtfull. My guess is they wait until the cuts must be drastic and painful.

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19cjgmath(1 comment)posted 4 years, 6 months ago

I recently read your column regarding the state of public pension plans and the benefits afforded to teachers, firemen, and policemen. While stunned that you were only able to find one conservative think tank source to quote, I was more amazed at your apparent comfort with assigning yourself the task and title of "Worth Assignment coordinator" for the world.

Using skewed statistics and propagandized opinion, you comfortably espoused the conclusion that the very people who protect your property, save your life and teach your children are undeserving of the retirement income they paid for and that the general public is pouring money down a rat hole when they pay for these pensions.

Given the choice, I would a million times rather spend my money to take care of the health needs of a fireman who has breathing problems because he was trapped in a burning building than pay for the care of a congressman who puts political influence above ethics, human compassion or good common sense.

And I realize that the people who receive these pensions contribute twice - the money withheld from their pay and the exact same taxes on property, income, and purchases that everyone else who lives in the state of Ohio pays.

When residents question why others don't see this state as a place for the future, they should be given a copy of Sunday's column.

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20Education_Voter(1167 comments)posted 4 years, 6 months ago

Far from "exposing the truth", Bertram was feeling lazy, and so lifted his entire column from the "Buckeye Institute", a propaganda organization.

Now really. The Buckeye Institute's staff must be toasting their appearance in an Ohio newspaper.

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21NoBS(2762 comments)posted 4 years, 6 months ago

"Don't you think it is funny that all the posts since my #7 above fail to own up to the fact that their nose is in the public trough?" - formerytown

So your 'challenge' is really a mandate, and anyone who has anything to say counter to your opinions is obviously a public servant. Do you make similar broadly sweeping assumptions while earning those "billable hours?"

Very few people on here reveal any personal information, and one's place of employment is personal information (unless you're one of those 'lower-than-low' public servants you so obviously despise -and that's not an assumption. The proof is in everything you write).

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22Superman(31 comments)posted 4 years, 6 months ago

The day of reckoning is fast approaching. Todays pension promises are based on 7% growth in the pension funds year after year. That growth is not happening so the alternative is one of these 2.

1. Higher taxes to make up the shortfall.
2. Reduced benefits.

I doubt the taxpayers who are severely underfunded in their own 401K's are going to want to also fund the overly generous public pensions.

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23300(573 comments)posted 4 years, 6 months ago

formerytown, I'm not saying that you should be embarrassed by what you do for a living. You just shouldn't be very smug about it. Until you're made partner, you simply not that important. Be proud of what you do, just realize where you actually are.

It's like many university graduates. Be proud, but don't go and receive your degree from Ohio State or Kent, and then act like you're high performing. Nobody should be smug, but at least be from a elite school if you're going to try. Just as in your case, if you work for a large firm, don't pretend you're something you're not.

BTW, there's no jealousy from my side. Also, due to my line of business, I deal a fair bit with large firms who process and file my paperwork. You're not making anywhere near what you claimed, especially not when you're doing the paralegal work. I might be paying something in range of what you quoted, but that's going to a handful of different people. If you're familiar with the sector, you should come over to the investment side and start working with your own money instead of just seeing what others' are doing with theirs.

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24southsidedave(5189 comments)posted 4 years, 6 months ago

Retirement will be only for the wealthy...so don't worry about your pension.

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25candystriper(575 comments)posted 4 years, 6 months ago

U.S. public state and local pensions declined 8.5% in the 3rd quarter...the most since 2008.

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26Osiris1886(3 comments)posted 4 years, 6 months ago

formerytown, if you are indeed a lawyer, I surely hope you research subjects better in your practice of law before you go spouting off about things you obviously know little to nothing about.

These 5 pension funds are NOT "union" pension funds. Unions have absolutely nothing to do with these pension funds other than there are union members who contribute to them. Frankly, there are just as many, if not MORE NON UNION public employees who contribute than union members. (anyone who is a supervisor is not in a union and uses the SAME retirement system) Unions have absolutely NO control over these funds what so ever. Also, unions have absolutely ZERO power to change these funds. ZERO.

Why? (go look this up in your law books to confirm this formerytown)

These funds were created as an act of law by the legislature back in the 30's. They were created over 50 years BEFORE collective bargaining (unions) was even legal in Ohio.
They were created by the legislature and can ONLY be changed by the legislature themselves...neither the pension funds themselves, nor their managers can legally change the structure of the funds...it MUST be done by the legislature...the funds and the process to change them are written into law and any changes needed are legally bound by the legislative process...all 5 pension funds submitted proposed reforms back in 2009 and the legislature is needlessly stalling the reform that the pension funds themselves are desperately trying to effect....the past legislature did nothing about it and now the current legislature is doing nothing but stalling....Keith Faber's (R Celina) insistence that an additional actuary study the proposals of the 5 pension funds is redundant and unnecessary because the pension fund proposals for reform were written after actuaries studied each of the pension funds...so he wants an actuary to study the findings of actuaries that have already studied the pension funds and recommended the necessary changes to bring about reform...someone needs to light a fire under Keith Faber and tell him to stop this ridiculous waste of time and money...they have stalled long enough...get on with it!...the entire mess in now under Keith Faber's (R Celina) control, he is the chairman of the committee charged with control of these funds and it is HIS responsibility to act on the proposed reforms...and no one else...and ESPECIALLY NOT UNIONS!!

Those spouting hate towards unions need to read up on this subject before demonstrating to everyone that you really don't understand what you are spouting off about....

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27Osiris1886(3 comments)posted 4 years, 6 months ago

Yes, I am a beneficiary of one of these plans. This has no bearing what so ever on my above post, because none of it is opinion, it's all fact and a matter of public record so it is quite easily verified... I notice that you did not try to refute anything I said....because you can't...every bit of it is public record...the fate of these 5 pension funds rests in the lap of REPUBLICAN Keith Faber ...unions did NOT create these pension funds, nor did they create this mess, the LEGISLATURE did. Unions have absolutely NO power to change these pension funds...ZERO...

Now, are you going to apologize for your inflammatory and completely erroneous remarks and admit that you were wrong?

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28Osiris1886(3 comments)posted 4 years, 6 months ago

Well wanna be lawyer boy, I see that my time is wasted on you. You and the rest of your ilk would not even be happy if we worked for minimum wage with no benefits. You would still be beating the FauxNews drums of hate while cheering on the ALEC/Koch/Kasich regime. You cannot refute a word that I said above. Can't be done.

At the end of this, I am still right and you are still completely and totally WRONG.....

Case closed.

Wanna Be Lawyer Boy exposed and proven WRONG....you are DISMISSED....I shall say no more....

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