Hacker News Reader

Comment by Shivetya | Hacker News Reader

His unwillingness to not solve the state's pension problems should be applauded. the amount of unfunded liabilities is in the hundreds of billions of dollars and approaching a trillion if it has not passed that already. This all happened because the number of public servants who are pulling in over 100k has skyrocketed... 100k+ in retirement.. with millions past 50k! Think about that 50k in pay plus medical.

These pensions and their medical side are the reason why the ACA did not touch golden medical plans because the vast majority are in this area along with certain other larger private pension systems. By the way, the House silently dropped that provision entirely from the ACA in 2019 so they any taxation of them is gone.

My favorite story to fall back on is provided below... and there are other states worse off. This type of largess should never have been allowed nor should the tax payer bail them out. People bemoan the pay of executives at private companies, well guess who is right up there in many cases.

https://www.forbes.com/sites/adamandrzejewski/2018/10/26/ill...

View on HN

To be fair, in SF for example the median income is $96,000. And I think that's take-home salary, so the median cost to the employer with benefits is well over $100k. It doesn't seem at all unreasonable that important city workers should make at least the area median wage. Having all of the local government employees be the lowest paid people in the city doesn't seem like a good thing.

It is also kind of shocking to see how many employees actually work for city and state governments. And of course government workers have a strong reputation for not being incentivized to work very hard or do more than the bare minimum. I would think the bigger opportunity would be to reduce the size of local government payroll rather than lower everyone's salaries.

Related thought - I wonder, why aren't city and state governments more at the forefront of automating menial work away, given the perpetual costs of each worker on the pension system? It seems they'd have a lot to gain from it.

It's great for city workers to make a great wage - just pay for it. Stop pulling shenanigans with pension systems. We just had 11 years of unprecedented growth and pension systems only got worse - expanding benefits and maintaining impossible growth targets.

City and state governments don't pay the bills - that's the problems. Any cuts they make will hurt them in elections, so they just kick the can down the road to the next government.

And another important component is unions. Politician wants to get elected. Unions can help. So politician have to pay back unions later. Can’t break this cycle unless public worker unions are banned.

so why should people in texas pay for the stupid budget decisions of san francisco when they didn’t waste their money?

it’s moral hazard

Texas is a taker state so California has been paying to support texas for a very long time. Why the moral hazard now? I’ll be fine if we distribute federal expenditures based on tax collections by state. Means California could lower taxes.

https://amp.theatlantic.com/amp/article/361668/

Texas was and still is a net contributor to the union.

California is no longer a net contributor to the union[1], since SALT reform.

1. https://www.mercurynews.com/2020/04/23/newsom-responds-to-mc...

I don't think you understand that article or how the new tax bill ripped off a million Californians by making them pay tens of thousands extra in taxes. I paid an extra $30k in taxes this year because of that bill. Only being able to deduct $10k taxes made Californias pay more federal taxes. We didn't get anything in return. Thanks for making my point how California pays for everyone else but get nothing in return.

Also for 4 of the 5 top employers in Texas are oil companies. Oil production is subsidized by the feds. Texas is a taker. They also will all go bankrupt unless bailed out with California tax money.

Any tax break being taken away makes people feel like they're paying "extra" with nothing new in return.

There is no reason for people in other states to subsidize your California state tax payments with a federal tax break.

why should you have gotten a federal tax break in the first place just because your state decided to have high taxes?

maybe think before electing politicians who raise them if youre upset

That Atlantic article is citing an editorial from a personal finance website, written by a journalist. Does that qualify as data?

They aren't paying for pensions. They are paying for a massive lack of tax revenue due to COVID.

Funny I never hear the argument from red states "We don't want your federal money for all the poor, sick, disabled, in our state!" considering CA and NY pay WAY WAY more out than they get back in federal money

These red state takers idea has propagated throughout social media, and become a talking point used anytime some fiscal argument breaks out between left and right.

And it's mostly absurd, because it just looks at net transfers between the states and Feds without realizing who is actually benefitting from that money.

How many small family farms do you think are left in much of the Midwest, who are living high on the hog with government subsidies, as the left likes to imagine?

Is it a transfer to Iowa or Nebraska when the federal government pays out a few billion in farm subsidies, which then goes straight into the pocket of fund managers in Manhattan, sovereign wealth funds, or megacorps who actually own the farms

How bout when Wall Street got bailed out in 2009 to the tune of hundreds of billions of dollars? Do we count that as a subsidy to New York, Jersey, and Connecticut?

Even if the money was paid back, there's no way to calculate the trillions of dollars citizens of other states lost due to perpetually low interest rates or propping up houses in coastal areas at the expense of people living in low COL areas.

There's a dozen other ways we can measure these types of back door transfers, and I guarantee you, it ends up that those blue coastal states are getting a lot of extra subsidies that the silly stats that you guys use ignore.

And why should NY or CA residents fund most of the federal budget?

Because they are richer. This is the very same principle employed by both states for their internal taxation - the idea that the more you make, the less you get from your taxes relatively speaking ("the rich" pay higher tax rates in both states).

It's just progressive taxes applied to the entire country, where NY and CA are "the rich" among the states.

But if the Republican approach is a regressive tax (eg the big tax cut favouring the big end of town) then shouldn’t CA/NY also receive similar treatment? That’s essentially the discrepancy going on here.

I'm just saying that if CA/NY believe in "from each according to its ability, to each according to their needs", as they appear to given their tax laws and public policies, people should be fine with them being donor states.

After all, a staunchly republican poor individual in CA/NY still gets the same benefits as a poor democrat, because need (not opinions) dictates how much you get. Of course, Texas isn't exactly poor, my point is more relevant to states like South Carolina, Louisiana etc.

People need to understand, the value of a 100% of final-salary pension for people earning 100K retiring at 55-60 is likely millions. It's even worse with the games people play with PTO and other benefits (where they bump pay 20-30% in their last year to get that pension benefit for the rest of their lives).

Look at the average retiree's 401(k) balance for comparison and it gets pretty clear how unfair this is. There's a huge political opportunity for someone to tell this story properly and get a restructuring done.

I saw that a hundred times at a small school district in Southern California. As retirement nears (age 55-59), take a promotion from the classroom to the district office, and a $50-75K pay raise. Three years later, that is the salary used to calculate your pension payments... For life.

I live in a neighborhood with two firefighters who were captains, retired at 50, and make over $100K a year. It's totally unsustainable.

It's generational wealth transfer from the young and poor to the old and relatively rich. It should be called fraud and theft, because that's what it is.

While we're throwing rocks at teachers and firefighters, would you consider the trillions of dollars that the GOP made off with during the "Tax Cuts and Jobs Act" smash and grab job fraud and theft?

What about the pensions of workers (many unionized) which were obliterated by corporate restructurings during the financial crisis?

Fraud is fraud. I'll throw rocks at any grifters stealing from me and my family.

Me too man. Tired of this partisan bickering. Parent obviously doesn't like the GOP, fine, but call a spade a spade.

It is absolutely fraud. The whole idea of public service is that you make sacrifices on the front-end, the public takes care of you through benefits and retirement. There were kindergarten teachers making $120K a year for 6.5 hours per day and ~180 days year. True, they had a masters and 15+ years of experience.

EDIT: The often worked much more hours.

Yep. If they paid out the value of those pensions upon retirement at the cost of a similar annuity and an estimate for the health care costs, people would probably be more angry than they are now, as they don't realize just how generous these are.

To buy an annuity at age 55 worth $100k / year with guaranteed health, dental, long term care, etc. for an employee who's estimated to live another 30 years would cost a few million dollars. A quick Google search shows that the media 401k balance at 55 - 65 in the US is under $75k. The amount of non-guaranteed dividends, cap gains, and withdrawals made to ensure it lasts 30 years would probably not even cover the cost of Obamacare from 55 to 65 when they're eligible for Medicare.

It's one thing to "restructure" the comp package for future employees, and something else to change compensation arrangements retroactively after your employers have upheld their end of the deal.

I don't think it's quite that black and white.

The deal that was struck was between the government workers and the voters at that time. That deal, more or less, said that future tax payers would pay for their pension. As a group, those then future and now present tax payers don't have much of a moral obligation to follow a deal that they never agreed to. And the workers don't get to act indignant that their pensions are in question. Their unions negotiated the agreement and chose to let the buck be passed instead of insisting on pensions being fully funded.

The bargain was, at least in part, corrupt. The various public unions would campaign for and help elect those that would give them more money. An obvious conflict of interest that raises questions on why a shady deal should be upheld.

The pensioners are, in general, gaming the system. They artificially inflate earnings at the end of their career to pump up their pension. Nepotism is rampant and there are plenty of positions with absurd salaries for what they do. They've sold out new entrants in their field to protect their own pensions. In general they're a bag of dicks. Fuck them.

> where they bump pay 20-30% in their last year to get that pension benefit for the rest of their lives

I've heard this claim many times before. Is there data supporting this or did a handful of people do it and word spreads like it is far more common that actual.

This one is a bit old:

Pension spiking could cost CalPERS nearly $800 million

https://www.latimes.com/business/la-fi-pension-spiking-repor...

The thing is, this can only happen federally because of the Contracts Clause, and fixing certain states' problems isn't a national issue.

This is just crazy to me, this public servants takes unprecedented risks and take lower pays so they can take stable retirement.

Now it comes time for due, we don't want to fund these anymore.

The entitlement in HN is just too much.

What risk is an accountant sitting in SF City Hall taking? High risk positions - sure give them more security. Otherwise, treat them like everyone else. Also, people goto govt jobs because of job security as well - which is also a factor in lower income.

if you are going to cherry-pick, then so be it.

what about the police, fire department?

Read my comment. Don't be ignorant. I literally said that for high risk positions, give them more pension.

I don't think the police or fire are taking "unprecedented" risks.

Perhaps not, but I don't think it's unreasonable to ask for a risk premium in your compensation. If you're more likely to die or be critically injured earlier than someone else of the same age solely because of the work you do, and your family depends on your income, it's not unreasonable to expect to be paid more to make up for the lost expected lifetime income.

(This is true for all dangerous professions, BTW - not just law enforcement and medical personnel.)

Would you say that to the police or firefighters who responded to 9/11?

There are outsized risks involved in both occupations.

The days where gov workers traded high private sector income for stability and retirement was finaihed sometime in the late 80s, when offshoring, immigration, and massive amounts of productivity started being squeezed from labor to capital.

I live in DC, and at my age many professionals who don't really have any lucrative skills or degrees are now hitting the 6 figure club in late 30s as GS13s. They'd be making less working at some private company without any pension, longer hours, less vacation, and worse benefits, and no guaranteed promotions.

In this town, a lot of people would be more than happy to get a nice office job working for the Federal Government, but it's not that easy anymore unless you're a certain special minority or other who gets pushed to the head of the line.

Other then police and firepeople... what city jobs are high risk? I think most city jobs are paying in the median and giving well above average benefits. it doesn't make sense.

> This is just crazy to me, this public servants takes unprecedented risks and take lower pays so they can take stable retirement.

I didn't realize I was signing up for an "unstable retirement" by working in the private sector.

Perhaps you mean "stable jobs", which indeed was historically supposed to be biggest selling-point of govt jobs, and the trade-off for lower pay. Though now when you count benefits, apparently they get the best total compensation too.

The whole thing is so nakedly corrupt. In Illinois, where I'm from, guys like JB Pritzker (governor) and Mike Madigan have made whole careers out of getting elected on the back of organized labor (e.g. AFSCME), and once elected, give them sweetheart deals.

On one hand, it's just part and parcel of politics, but there needs to be some kind of counterbalance to this. Maybe a taxpayer revolt would fix it?

> Now it comes time for due, we don't want to fund these anymore.

The people who agreed to this never wanted to fund them in the first place. If they had, they would have increased taxes or reduced benefits. Instead, we are seeing guaranteed 3% pension increases annually when inflation is <2% and rosy projections about 8% stock market returns when in practice it's more like 5%.

Literally no one is asking for the fed government to pay for those pensions, this is a GOP talking point.

They are asking for help due to hundreds of millions lost in tax revenue.

Police, Fire Department, transit workers yes but the vast majority of public servants are not taking "unprecedented risks" when they are at work. They're inspectors, judges, teachers, budget analysts etc.

I ran across that Forbes article yesterday as well... amazing data:

"71,000 public employees at every level of Illinois government received six-figure paychecks. Additionally, 23,000 retirees pulled down more than $100,000 in annual pensions."

Consider also that alot of retirees don't stay in Illinois as well. So other states are benefiting from the discretionary spending funded by Illinois taxpayers

Why would that be a problem? The salary & pension are compensation for the career of labor. No part of the pension that person _earned_ is owed back to the original state. That doesn’t make any sense.

When the pension is an unfunded liability, it does change the calculus if everyone receiving it will be spending it off in Florida and not back into the local economy that's paying for it.

Illinois also guarantees a 3% COLA regardless of inflation which leads to a doubling of direct pension benefits within 24 years. Not to mention the pension spiking among many administrators in the last four years of employment. It is criminal.

What about this seems wrong or strange? That seems completely and utterly reasonable to me.

Unfunded pension obligations have seemed to be a ticking time bomb for quite a long time now. Some of the per household pension debt ranges are really quite spectacular[1]. If you look at the figures for places like Alaska, California and Connecticut it's hard to imagine them getting out from underneath it.

[1] https://us.pensiontracker.org/

You can easily patch the state revenue holes without fixing the pension obligations. You basically give the states the difference between what they were projecting and what the reality is. By doing this, you fix part of the economy keeping up employment until the private sector can come back online. If you let states fall down right now you are going to turn this into a depression. It just means the beginning of Lyft’s troubles.

There is nothing to applaud with his actions or statements. It’s just malicious and gives the rest of the world a chance to out compete America.

IMO the issue is pensions are worked out by elected officials who will be long out off office when the bill is due. This encourages dishonest accounting wrt needed present day finding levels.

One fix would be to require that all future obligations be funded up front. Make the pension as generous as you like, but deposit the cash now. If you invest the money and do well, the state can just keep that, but don't assume positive returns.

So, I've thought about this a lot and concluded democratic governments (democratic, not Democratic) just can't do this. The incentives to cheat are just too strong. Problem is accounting standards? There's always a legal-by-the-letter-of-the-law way around these rules (loophole) you can find if you work hard enough (just look at Illinois -- "pension ramps", "pension obligation bonds", etc), and even if there's not, most voters won't care enough to dig into the discount rate and other assumptions being used to forecast pension liabilities.

Perhaps our political culture has changed and people used to be more honest, or far-sighted. But, given the world we live in today, especially given the pressure state and local governments are under, I think there really is no other option than a fully-funded 401(k)-style defined contribution plan, to finally force the issue into the open. There are plenty of well-managed 401(k)s and it's the only way to get "cash on the barrelhead" that keeps everyone honest, and doesn't allow the sort of absurd can-kicking so many governments (and their electorates) have favored for the past 30 years.

I don’t think you meant what you said in the first sentence.

https://en.m.wikipedia.org/wiki/Double_negative

Seriously? We're going to blame old people for not wanting to live in poverty while the heights of the economy sequester trillions of dollars in a power law curve?

Many pensions are not the "have $27k/yr starting at age 67" kind, but the "have $100k/yr + benefits starting at age 55" kind. Its the latter that people find upsetting - nothing close to poverty level.

Sure, but people took those jobs in large part because of those pensions. It is part of the entire compensation package. They often times took less money up front in return for better pensions.

The problem is that this was not properly budgeted for when funding the pensions.

When you take a job and its benefits are not properly funded or the funding assumptions are insane (8% growth). That's on you.

How is a worker supposed to know if the benefits are properly funded? Even if they can know, some of these used to be funded correctly (when they were hired) but later cuts made them underfunded.

Are you serious? You expect a 22 year old firefighter to know how well funded the pension system is?

Give me a break.

Yes. Stop absolving adults of responsibilities they’re well capable of owning. You don’t get to hide being big dollar signs and claim ignorance.

So they should comb through auditor's reports, and recognize when the funding entity has been improperly seconding pension contributions over to the general fund such that it will run dry in 23 years instead of the mandated 42?

If we're lucky, we find out about these things when a government changes hands and an audit is conducted - typically years after the fact. Also, one can start one's career under a sound system that is eroded through mismanagement.

It's in the news all the time - it takes a minute to do a google search. Also, you have a union - if it screws you, well that's on you for being in the union.

It's in the news years after the pensions are granted. A lot of people choose the jobs before the news started coming out.

A lot of the people who have these pensions took the jobs before google even existed, so telling them they should have googled this is ridiculous.

I don't blame workers for taking a good deal. I do blame the folks making crazy promises that have no way to fund without being bailed out.

That blame seems misplaced given the end state.

When the folks making crazy promises are dead and/or gone by the time their promises are broken when the funds come up short, the workers who took the good deal are left holding the bag.

We must retroactively assign blame to the worker who was lured into accepting obvious false promises. It is perversely the most compassionate thing we can do: blame and shame past workers for making stupid deals. We do this so that future generations will learn the hard lesson that governments cannot be trusted with their investments. There is no power in investment.

Blaming past politicians for their malfeasance is exactly how we enable today's politicians to keep kicking the can down the road.

There's lots of proposals in this thread to inflict the consequences on the workers.

"They often times took less money up front in return for better pensions."

That is no longer the case when compared with comparable private sector jobs since at least the early 2000s in many parts of the country.

I have never seen this to be the case. Do you have any data?

Should the Federal government return tax money it took from the people of New York to give to the people of Kentucky? Why or why or why not?

The Federal government can easily tax /discredit those wealthy pensioners to fund unemployment insurance, if they do choose.

It's amazing that the US Federal government seems to be able to provide trillions of dollars in liquidity on a moment's notice to anyone and everyone - except the states.

Airlines? Of course. Junk bond investors? Sure, why not? States? "We're not going to bail out Democratic-run states."

Don't forget Carnival Cruise Lines... which doesn't even pay any taxes in the US as a corporation since it flies a flag of convenience and doesn't employ many Americans.

Carnival did not get a bailout: https://thepointsguy.com/news/carnival-did-not-receive-bailo...

You're right that they did not specifically bail out Carnival. They bailed out the entire junk bond sector, which allowed companies like Carnival to raise money much more easily.

The president and leader of the GOP wanted to give cruise lines, who are NOT paying federal taxes and fly foreign flags to dodge US taxes a giant bailout but give US cities some help? Hell no!

I mean that's easily explained. The Saudis just purchased 8% of them. Wouldn't want the Saudis to lose money would you? /s

It would be immensely helpful to see uniforms with all of the campaign contributions each has like a race car driver so you know who butters their bread.

I would vote for that constitutional amendment.

I'm down, we need a catchy name to start a movement. I'm totally ready to throw this up on a website, there's got to be a place that shows donors and maybe cross reference which bills they support with some sentiment analysis "68% Favorable to Hollywood" and make it like rotten tomatoes.

Reply on news.ycombinator.com