Oh, Mama, can this really be the end?
To be stuck inside of Mobile
With the Memphis blues again?”
-Bob Dylan
To be stuck inside of Mobile with the Memphis blues again is to describe the bankruptcy filing in 2009 by Mobile suburb Prichard, Alabama. The city’s lawyer said it was forced to file Chapter 9 bankruptcy because it “simply ran out of money to pay its pension obligations.”
“Right now we are looking at a major squeeze on municipalities, and I would fully expect more cases to be filed than traditionally have been,” says law professor David Skeel of the University of Pennsylvania Law School. He advocates that states should be allowed to file for bankruptcy, which is currently not permitted under Chapter 9.
Beginning in 2012, Rhode Island taxpayers will be on the hook for a $620-million annual payment to the state’s unfunded pension liability of $6.8 billion. This year, 20% of what taxpayers contribute to the entire state budget will go toward paying for vacuous promises politicians made to get elected.
Teachers and state workers will continue to contribute only 9.5% and 8.75% of their salaries, while taxpayers will see their liability increase to 35.35% and 36.34% of teachers’ and state workers’ salaries. Meanwhile, most private-sector workers had their tough pension changes made the old-fashioned way—by force. httpv://www.youtube.com/watch?v=aZ9LDBEtKK4
In 1985, 80% of employees participating in retirement and capital accumulation plans at medium and large private establishments were in a defined benefit or pension plan. But companies wanted a retirement plan where both employer and employees shared in the retirement risk.
As a result, since 1985, the percentage of defined benefit plans at medium and large companies shrank to 30% while defined contribution plans like the 401(k) grew to 54%.
In contrast to the rapid change in the private sector, at the state and local government level reform has come slowly. The percent of employees enrolled in defined benefit plans has fallen from 93% to 87% since 1987, an improvement of only six percentage points.
Former Rhode Island House Speaker William Murphy publicly endorsed the idea of changing public employees to a 401(k)-style retirement plan and created a commission for further study. Unions wanted nothing to do with such a move. According to The Providence Journal:
[Robert Walsh, Jr.], of the National Education Association Rhode Island, wanted to focus on the massive unfunded liability, perhaps through refinancing. He argued that current benefits weren’t the problem; the lion’s share of taxpayer payments into the retirement system was going toward the unfunded liability.
You would think Mr. Walsh would care more about the retirees depending on the unfunded liability than about keeping benefits the same. It appears he’s more concerned about the gravy train of dues from the current workers that keep his union boat afloat.
E.J. Smith - Your Survival Guy
Latest posts by E.J. Smith - Your Survival Guy (see all)
- Counterproductive Foreign Aid Should be Cut - July 25, 2017
- A Hidden Tax in the New Illinois Budget - July 24, 2017
- 50,000 Factories Lost: A Scar on Rural America - July 21, 2017
