Public pension plans will be the ruin of California, and of the County of Humboldt. There are plenty of warning signs, and plenty of people telling our leaders in government that something drastic needs to be done in order to avoid a massive economic catastrophe.
So far, all of those warnings seem to fall on deaf ears, at both the state and local levels. THC guesses that a large part of the problem is that our government leaders just can’t wrap their heads around the dangers of our current public pension system. We expect this kind of idiocy from Humboldt’s Board of Supervisors, but it’s actually a much more pervasive problem.
Take City of Fortuna Mayor Sue Long, for example. Last year, Long was on a crusade pimping a sales tax increase on Facebook when she foolishly decided to bare her lack of financial awareness for all the world to see. (Her utter lack of knowledge on the subject is pretty concerning when you consider that she’s calling the shots in Fortuna and is a bookkeeper for a local construction company. Yikes.)
Here’s a snapshot of the post in question:
Let’s break Long’s response into a couple parts. Clearly, officers’ salaries come from tax-payer money, and so anything they are earning after retirement is at the expense of the tax-payer. (Because we also pay their pensions.) There are no two ways about it. Just because we paid out towards their pensions while they were working does not make it a drain on our resources.
But the more troubling part of her post is this: she has no f***ing clue what the differences are between a defined benefit plan (the type which nearly every public employee enjoys) and a defined contribution plan (what most of us in the real world are stuck with).
Defined benefit plans require employers to set aside a certain amount every month or year for their employees, while defined contribution plans are funded by taking cuts directly out of an employee’s pay. While people who have to set up IRA or 401(k) accounts are using their own money to build a nest egg, public employees are collecting their full salaries and the people they work for – known as the public – are also emptying their wallets to pay their retirement pensions, too.
What is so hard to understand about that, Sue?
You see, it’s this sort of out-of-touch governance that has led us our governments’ to the edge of total financial breakdown.
A groovy THC insider at the City of Fortuna hooked us up with the a look at the details on Fortuna’s financial obligations when it comes to paying down their defined benefit plans.
Check that out here: Fortuna CALPERS ACTUARIAL VALUATION -FY 15-16
Open that up and you’ll see a few things; on top of their normal contributions, the premium rates continue to increase and Fortuna is being forced to pay lump sums to make up for shortfalls in the return on public investments.The document above had Fortuna paying an additional $188,741
Another way to look at is this: tax payers are getting screwed once, and then screwed again, just to pay for public retirements. Those premiums and those lump sum payments are projected to grow steadily higher, too.
So, umm, Sue…defined benefit plans are not similar in any way, shape, or form to 401(k)s and IRAs. And it is becoming increasingly expensive for the tax payers to foot the bill for public employees, like police officers.
Glad we could clear that up for you.
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