Monday, January 30, 2012

Zone of Reality - Public Employee Benefits

By Rich Kozlovich

Everyone knows pension funds are really supported by those paying into them. Really? There is no way that the public sector working employees could even begin to pay for the benefits of their retired members with the current retirement plans of those unions.

Ohio has five public pension systems. All of them will go broke as it stands right now. All of them are unsustainable. All of them have huge unfunded responsibilities that will fall on the taxpayers. Currently they are unfunded by 67% and are on the brink of collapse. These are unfunded responsibilities that will not ….and cannot….. be paid.

How much is that in dollars and cents right now? Sixty Six Billion dollars! That is $66,000,000,000. Right now that is a cost to every Ohioan (not just working Ohioans) of $5726. Remember; this liability will fall on the heads of the taxpayers! All public expenses fall on the head of the taxpayers; we need to get that.

The government has no money. It produces nothing! The only source of money for any government is that which it can extort from its citizens. Extort is a strong word, but I use that word for a reason. The money is not the governments, and that money is extracted by force, i.e. if we don’t pay our property is confiscated or even worse, we go to jail. That makes it extortion.

Albeit this is a legal form of extortion, and it a necessary form of extortion to maintain a stable and civil society; it is nonetheless extortion. This liability doesn’t belong to the state. Remember...the state is not real. Only people are real. The state is merely a legal instrument that functions as the practical application of the people's needs. How practical is of course debatable, especially when you read about people like Governor Jerry "Moonbean" Brown and this dealings with the public employee unions. But after all is said and done there is one absolute incontrovertible truth that we need to get. This liability belongs to the state’s taxpayers.

I am also amazed at those I have talked to over the years who are completely conservative in their philosophy. Except when it came to Issue 5 in Ohio! Because they had family members that would be effected they made a complete turn about. I guess it really does depend on whose ox is being gored. We need to stop being foolish and see this clearly.

Below are two articles that deal with this issue. The first deals with Ohio. You need to read the whole thing and view the charts. If that doesn’t cause some serious level of concern to you…. well then … need help.

The second article is to show that this pattern is replaying all over the country….actually the world. It is even worse in the Euro countries because everyone is getting, or expecting to get, these unsustainable benefits from the socialists that rule there.

HANGING BY A THREAD Big Payouts and Promises Leave Ohio Pension Plans on the Brink of Collapse—
A deep fiscal hole is engulfing Ohio taxpayers. No one disputes that a fulfilling and financially stable retirement is something that every Ohioan should be able to enjoy. Ohioans in the public and private sectors alike should expect a level of retirement that allows them to comfortably live their remaining years without fear of financial hardship. But guaranteeing that public employees receive a level of retirement far beyond that of private-sector employees, especially when financed by taxpayers, is unfair and has proven fiscally unsustainable.

If every Ohioan received a pension similar to the Ohio Public Employee Retirement System (OPERS) career pension of $39,780, it would cost current workers over $123 billion per year, which equates to 25 percent of Ohio’s Gross Domestic Product ($483 billion).On a per capita basis, it would cost working Ohioans $26,851 per year to fund the pensions of retired Ohioans. Such a cost would crush Ohio’s economy. If changes are not made to public pensions, the required tax hikes to bail them out would be equally crushing.

Ohio’s five public-pension systems are tasked with providing retirement benefits to Ohio’s public employees at a reasonable cost to taxpayers. But as time has shown, Ohio’s pension systems have produced retirement benefit levels that frequently exceed those of private-sector Ohioans. And to finance these generous benefits, Ohio’s pension funds have run up unthinkable amounts of unfunded liabilities for which, in the end, taxpayers are legally responsible.

Local Governments Face Bankruptcy Quandary, San Francisco Examine
Bankruptcy is the boogeyman haunting governments across America. It’s not a question of whether more cities will file for bankruptcy, but how many. The culprit is a decade of over-spending by governments, especially on pension guarantees, and an economic slowdown that refused to flip into a robust recovery. The money just isn’t there. And it’s not going to be there even if local governments raise taxes while cutting employees and services to the bone. Things are just going to get worse for municipal finance. Most states, counties, cities and school districts have spent their cash reserves down to the legal minimum. And they have not made contingency plans for another 15 percent decline in revenue in the next year. Consequently, there is the potential for thousands of defaults in the 50,000 municipal bond issuers in the United States. Most cities can cut spending, but they cannot cut principal and interest payments without default and bankruptcy.


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