Public pensions, on the chopping block in Detroit and Illinois We’ll look at the future of public finance and public pensions across the country.
If you have a public pension, perhaps you felt a chill last week. Big pension cuts were approved in Detroit and Illinois. A once sacred social contract with workers now teetering. Blown up. With millions of retirees, owed trillions of dollars now facing a dicey retirement and very uncertain financial future. The whole country is watching this play out. Pension holders and Baby Boomers wonder where the cuts will come next. What’s the solution if the money just isn’t there anymore? Can these promises really be broken? This hour On Point: Unpacking America’s pension pandemic.
Tim Jones, reporter for Bloomberg News in Chicago.
Alicia Munnell, director of the Center for Retirement Research at Boston College and professor of management sciences at the Carroll School of Management. Author of “State and Local Pensions: What Now?”
Andrew Biggs, resident scholar at the American Enterprise Institute.
John Day, retired police detective for the Detroit Police Department.
From The Reading List
Chicago Tribune: Illinois lawmakers approve major pension overhaul — “Supporters hailed the bill as a solution that would ‘ensure retirement security’ for current and retired state workers, public school teachers outside Chicago, university employees and state public officials. They also said it would end the squeeze on state tax dollars that increased pension costs have placed on education and social services.”
Bloomberg News: Pension Threats in Illinois, Detroit Rattle Government Workers — “For generations, public employees accepted modest wages for the promise of a secure retirement. The decisions, coming after efforts to curb public-employee power in states such as Wisconsin, Indiana and Michigan, may embolden other municipalities, leave workers more vulnerable and prompt unions to new tactics of opposition. Retirees are already seeing reduced benefits in cities such as Central Falls, Rhode Island, where a judge last year approved cutting pensions to help it emerge from insolvency. In California, San Jose Mayor Chuck Reed is leading the push for an initiative that would let cities cut benefits already promised to employees.”
New York Times: Pension Cuts Must Be on the Table – “It’s easy to point to low average benefits for public employees, but these averages include workers who spent only a few years in government employment. In reality, public employee pensions are typically much – I repeat, much – more generous than those paid in the private sector. or instance, a full-career Detroit city employee would receive a traditional ‘defined-benefit’ pension equal to two-thirds his final salary, for which he contributed nothing. Detroit workers could voluntarily contribute to a 401(k)-styled ‘defined-contribution’ plan, on which the city guaranteed 7.9 percent annual returns even in bad times. In good times, both the defined-benefit and defined-contribution pensions received bonus payments. Add in Social Security, and it’s possible to earn more while retired than while working. It’s hard to argue that the typical Detroit taxpayer is doing as well.”