Why, I wonder, are so few of us complaining about the demise of the retirement pension, one of the great innovations of the 20th century?
Within the past 20 years or so, the practice of an individual putting in 25 or 30 years for a company and retiring with a comfortable monthly pension check has vanished for a large majority of Americans.
One day it was there and the next day it was gone. Or so it seemed.
In place of the pension, we got the 401(k) — a meager substitute that takes a lot of the weight off employers but eliminates the guarantee of stress-free golden years.
Remnants of the pension era remain, however. Many union members and public sector workers still have generous pension programs. As someone who expects to be working well into my 80s, I marvel at the local police officer or firefighter or teacher who is eligible for a healthy retirement pension after 25 to 30 years on the job. In some cases, this means a guy could “retire” in his 40s, then launch a second career to supplement the pension. This happens fairly often, actually.
On the one hand, I’m envious. That guy’s got it made, good for him. On the other, I’m a little ticked off about his great good fortune.
The fact that public employees represent a large percentage of today’s pension beneficiaries naturally draws the wrath of the political right. Forking out tax dollars to pay retirement pensions for hated “bureaucrats” is the kind of thing that really gets under their skin.
But beyond this feverish rhetoric, public sector pensions are a real issue for all of us, not just government-bashing conservatives. When handsome pension plans are funded at the expense of education and other immediate needs, I wonder if we’re doing the right thing.
Nevada’s public employee retirement is considered to be quite generous compared with other states. One local critic called it the “Rolls-Royce of public employee pension plans.”
In theory, it’s fine with me if Nevada takes care of its pensioners — except that the state can’t seem to afford the system anymore. The pension system has an estimated $6.3 billion unfunded liability, and this is expected to worsen in the coming years as more young retirees join the pool.
There are 104,000 state and local government workers in the system, plus 37,000 retired workers receiving benefits. In order to remain in the black, the system must invest its assets in the stock market. This worked pretty well until the stock market roller coaster following Sept. 11, 2001.
As a result, the state is dedicating significant resources — $250 million this year — to keep the retirement system afloat. Maintaining the current system is becoming financially difficult, and analysts think it will get more expensive as higher-paid employees retire over the next decade.
Something’s gotta give.
I say that with regret. As I noted, I lament the demise of the traditional retirement pension. I’m saddened and infuriated when I cross paths with an elderly man or woman who can’t afford to retire in modest comfort. We all should have the opportunity to turn hard work into an anxiety-free retirement.
For the record, comparing Nevada’s retirement system with a Rolls-Royce is not apt. The benefits may be generous by comparison with many other states, but they aren’t catapulting any of these retirees into the lap of luxury. Instead of a Rolls-Royce system, let’s call it an Oldsmobile.
What’s distressing, however, is that the state’s enduring commitment to the retirement system seems to come at the expense of other public services. We can’t blindly feed and protect the retirement system while neglecting education, public safety, mental health and other vital programs.
The retirement system should not be a sacred cow. It can’t be off the table, politically protected, insulated from the wider debate over Nevada’s future. During this time of profound and growing crisis in the state budget, everything must be on the table, including reforming the pension program.
That said, I can’t support changing the rules in the middle of the game for current public employees. That, to me, is morally repugnant. But we might institute significant reforms for new employees. They would know from the outset what the new deal is. Instead of an Oldsmobile, maybe we could offer them a sturdy Honda Accord.
Nevada Democrats are undoubtedly skittish about the idea of revamping the retirement system. After all, public employee unions are very influential. Alienating them would be a political risk.
But Nevada is in dire economic straits. Cutting spending in most areas is counterproductive in a state that ranks at or near the bottom in a vast array of quality-of-life categories. Substantially more dollars are needed for schools and universities, in particular, and compelling cases can be made to expand other public services.
If legislative Democrats want to take the lead in straightening out the state budget crisis, as they should, they would earn considerable credibility by opening the door to pension reform. Thousands of public employees will curse and howl, of course, but their self-interest should not take precedence over the state’s long-term well-being.
Politics is the art of give and take, not just one or the other. And you can’t credibly call for increased spending without offering concrete ways to pay the bills.
Democratic presidential candidate Barack Obama talks incessantly about the need for a new way of doing business in Washington. He’s right, and what he’s saying also applies to Carson City.
Geoff Schumacher (gschumacher@ reviewjournal.com) is publisher of Las Vegas CityLife, an alternative newsweekly owned by the same company as the Review-Journal. He also is the author of “Sun, Sin & Suburbia: An Essential History of Modern Las Vegas” and “Howard Hughes: Power, Paranoia & Palace Intrigue.” Check out his blog at www.howardhughesblog.com. His column appears Sunday.