This is going to be an ongoing train wreck for several decades:
There’s a class war coming to the world of government pensions.
Who should pay for the trillion-dollar pension gap?
The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever-escalating monthly pension benefits are breaking budgets nationwide.
The have-nots are taxpayers who don’t have generous pensions. Their 401(k)s or individual retirement accounts have taken a real beating in recent years and are not guaranteed. And soon, many of those people will be paying higher taxes or getting fewer state services as their states put more money aside to cover those pension checks.
At stake is at least $1 trillion. That’s trillion, with a “t,” as in titanic and terrifying.***
Mr. Justus, 62, who taught math for 29 years in the Denver public schools, says he thinks it could cost him half a million dollars if he lives another 30 years. He also notes that just about all state workers in Colorado do not (and cannot) pay into Social Security, so the pension is all retirees have to live on unless they have other savings.
No one disputes these figures. Instead, they apologize. “All I can say is that I am sorry,” said Brandon Shaffer, a Democrat, the president of the Colorado State Senate, who helped lead the bipartisan coalition that pushed through the changes. (He also had to break the news to his mom, a retired teacher.) “I am tremendously sympathetic. But as a steward of the public trust, this is what we had to do to preserve the retirement fund.”
I’m sympathetic to the budgetary issues, and I agree that there need to be changes to the pension guarantees for new and current employees, but I simply do not understand how you go back and change the contract you made with someone decades ago. Mr. Justus and those like him did what they were supposed to do- they agreed to work for a certain amount of money yearly with the understanding that they would have a decent pension upon retirement. They have no access to social security, they probably did not save in 401K’s or other programs because they knew they had a defined pension as well as the fact that they probably accepted less annual salary in exchange for the benefits they were promised and as such could not really build an independent nest egg.
And now, when the times are lean, lawmakers think they can just go and screw all the people who kept their side of the bargain. It’s just wrong.
And let there be no doubt that there will be a class war over this. Matt Welch and the glibertarian wingnut welfare recipients at Reason have been beating this drum for a while now.