Let’s score one for more transparency in government. Perhaps the Governor and General Assembly will pay more attention to the problem.
The problem, not sufficiently funding the retirement system, caused by many Kentucky Governors and legislators who would have rather short changed the employee’s pension plan instead of engaging in meaningful dialogue on Kentucky taxes.
From The New York Times:
Moody’s Investors Service has begun to recalculate the states’ debt burdens in a way that includes unfunded pensions, something states and others have ardently resisted until now…..
Under its new method, Moody’s found that the states with the biggest total indebtedness included Connecticut, Hawaii, Illinois, Kentucky, Massachusetts, Mississippi, New Jersey and Rhode Island. Puerto Rico also ranked high on the scale because its pension fund for public workers is so depleted that it has virtually become a pay-as-you-go plan, meaning each year’s payments to retirees are essentially coming out of the budget each year.
Thursday, January 27, 2011
State Retirement - Only Part of the Issue
The real issue here is the total compensation package for a public employee compared to equivalent positions in the private sector.
The core problem is not that state employee’s retirement benefits are so rich they are bankrupting the state. The problem is that legislators and Governor’s both past and present haven’t held up their end of the deal. They have not made the contributions needed to fully fund the plan.
If the legislature wants to make the public employee retirement like the private sector then they need to step up and look at the entire employee compensation package.
This won’t happen because it would cost more than the current system.
From the National Institute on Retirement Security:
Public and private workforces differ in important ways. For instance, jobs in the public sector require much more education on average than those in the private sector. Employees in state and local sectors are twice as likely as their private sector counterparts to have a college or advanced degree.
Wages and salaries of state and local employees are lower than those for private sector workers with comparable earnings determinants (e.g., education). State employees typically earn 11 percent less; local workers earn 12 percent less.
Over the last 20 years, the earnings for state and local employees have generally declined relative to comparable private sector employees. The pattern of declining relative compensation remains true in most of the large states we examined, although some state-level variation exists.
Benefits (e.g., pensions) comprise a greater share of employee compensation in the public sector. State and local employees have lower total compensation than their private sector counterparts. On average, total compensation is 6.8 percent lower for state employees and 7.4 percent lower for local workers, compared with comparable private sector employees.
This recession calls for equal sacrifice, but long-term patterns indicate that the average compensation of state and local employees is not excessive. Indeed, if the goal is to compensate public and private workforces in a comparable manner, then the data do not call for reductions in average state and local wages and benefits.
So to Senator Williams and the rest of the Kentucky Senate that voted for a defined contribution plan, I’ll believe you are serious about this problem when you address the whole issue of employee compensation. Don’t just try to balance the budget on the backs of the employees while you fail to live up to your promises.
The core problem is not that state employee’s retirement benefits are so rich they are bankrupting the state. The problem is that legislators and Governor’s both past and present haven’t held up their end of the deal. They have not made the contributions needed to fully fund the plan.
If the legislature wants to make the public employee retirement like the private sector then they need to step up and look at the entire employee compensation package.
This won’t happen because it would cost more than the current system.
From the National Institute on Retirement Security:
Public and private workforces differ in important ways. For instance, jobs in the public sector require much more education on average than those in the private sector. Employees in state and local sectors are twice as likely as their private sector counterparts to have a college or advanced degree.
Wages and salaries of state and local employees are lower than those for private sector workers with comparable earnings determinants (e.g., education). State employees typically earn 11 percent less; local workers earn 12 percent less.
Over the last 20 years, the earnings for state and local employees have generally declined relative to comparable private sector employees. The pattern of declining relative compensation remains true in most of the large states we examined, although some state-level variation exists.
Benefits (e.g., pensions) comprise a greater share of employee compensation in the public sector. State and local employees have lower total compensation than their private sector counterparts. On average, total compensation is 6.8 percent lower for state employees and 7.4 percent lower for local workers, compared with comparable private sector employees.
This recession calls for equal sacrifice, but long-term patterns indicate that the average compensation of state and local employees is not excessive. Indeed, if the goal is to compensate public and private workforces in a comparable manner, then the data do not call for reductions in average state and local wages and benefits.
So to Senator Williams and the rest of the Kentucky Senate that voted for a defined contribution plan, I’ll believe you are serious about this problem when you address the whole issue of employee compensation. Don’t just try to balance the budget on the backs of the employees while you fail to live up to your promises.
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