Public Sector Pensions Are A Problem

The New York Times has a great story on how government pensions are a big problem that are crowding out spending. The article discusses a retired college president who has a $76,000 a month pension as an example, but the problems go far beyond the top 1% of government employees.

Consider Scranton, PA. This small city has a serious pension funding problem, like a lot of cities in Pennsylvania. Aside from the usual problems like not making enough annual contributions and subpar stock market performance, Scranton illustrates how poorly designed pensions can be. In Scranton 58% of police and firefighters are on a disability pension, which means they were able to retire before the mandatory minimum age. In 2012, the average age of retired Scranton police officers was 44.9 years old. Some of these "disabled" cops go on to get second jobs as cops in nearby areas.

While there should be obvious agreement that retiring at 44 is a problem, it seems like an under-appreciated problem to me that the standard retirement age for many public sector jobs is 55. I understand that we don't want senior citizens kicking down doors and chasing down robbers, but it's a big logical jump to go from there to saying that we should just pay them to do nothing. Maybe everyone out there claiming it would be easy for the government to create a Jobs Guarantee program should first focus on putting 55 to 65 year old police officers to work instead of letting them simply retire.

Another problem is pension spiking, which pays pensions according to the highest annual incomes rather than average incomes. This leads workers to log tons of unnecessary overtime for a few years to boost their pensions far above what their base salary would command. In fact it can lead to pensions that are actually larger than a worker's salary was. This is a big problem in Philadelphia, which has a pension system that is underfunded by more than $5 billion. A recent article reports that 80% of recently retired state police had spiked their pensions with overtime hours.

Many liberals look around and see schools struggling to pay for books and give teachers raises and they blame conservatives who won't raise taxes. In many places, however, lucrative and poorly designed pensions that public sector unions have bargained for are crowding out spending in a significant way.

These pension problems are just one issue where public sector unions have bargained for bad policies. In a sane world, there would be a bipartisan movement of black lives matter, libertarians, and small government conservatives to ban police unions.
