Why pensions are in trouble
To the editor:
Lately, we have all heard the news that police and fire pension programs are in financial dire straits. Ever wonder why the media comes up short on explaining the details of how this came to be? I have. Every pension program out there for public employees was initially set-up with solid financial underpinnings. Usually, actuarial consultants are hired to determine the input-output parameters such that the monies put into the account both by the employees and the employers will meet the monies that will have to paid-out in the future to employees moving into retirement. It appears that every police and fire retirement system across the nation is broke or so far behind in the inputs that future outputs cannot be met. What happened? Let me offer three factors that have contributed to the problem.
Stock and bond market returns aren’t as high as they used to be. Pension fund managers can’t rely on an easy and steady 7-8 percent average return to grow the pension fund. The actuaries didn’t see this coming and didn’t factor it in to the input-output calculations.
When stock and bond market returns to the fund do happen to be above the average, many municipal and state politicians divert these “excess” monies to the general fund to be spent rather than plow them back into the retirement fund. Don’t they understand the concept of “average” or are they just pigs who want to spend these monies on special projects that might get them re-elected? You decide.
Many retired police and fire personnel make more money per month in retirement than they did while on normal active duty. Say what? This can’t be true. Yes, it is. Do you think an actuary could have predicted this one and built it into the forecast model to delineate the inputs and outputs? Unlikely. No retirement system can remain on a solid foundation if its members can game the system and rob the fund. Let me explain. With few expectations (maybe none), police and fire personnel are overtime eligible. Most public professionals are not. But it makes sense to have this benefit because emergencies can’t be predicted and one can’t leave the fire or the bank robbery because his eight-hour shift has ended. But this benefit is being grossly abused during the last years of tenure by police and fire personnel. Why? Because their monthly retirement check is in large part calculated on the highest three year salary achieved during their career including overtime. Employees in many precincts demand, and receive, double-time shifts during their last three years on the job. Starting to get the picture of how someone can game the system to wind-up making more in retirement than they did while working?
So, combine all three factors working together and it’s not a surprise that police and fire pension funds are heading toward disaster. As a citizen you should care about this because ultimately, you will be asked to pony-up in order to correct the situation.
In conclusion, let me say that I salute the work of police and fire personnel; I support collective bargaining and public unions and I believe in honoring existing employee contracts. However, it needs to be said that as much as I and others appreciate the services of police and fire employees, we, as a society, simply can’t afford the retirement pay that many of these people receive and believe they deserve.
Bob Burkett
Bokeelia