A regular wag with whom we converse writes that he recently was perusing the American Greatness website and “tripped across” an article that not only “is tangentially applicable to Allegheny County’s current pension mess, it has a nugget that explains how pension funds work for the financially illiterate.”
To wit, from author Edward Ring’s “Public sector pensions break more than government budgets”:
“[A] pension fund is like a large shrub in a garden. The mass of the shrub represents the assets, and the annual growth represents the investment returns those assets generate. Regular pruning that reduces the size of the shrub represents payments the pension funds make to retirees.
“Visualizing a pension fund in this manner makes it easier to see how a pension fund can get into trouble. If you increase the payments to retirees, you risk shrinking the shrub faster than new growth can replace what’s been cut away. And the more the shrub shrinks, the less mass it can add through new growth.
“If it shrinks too fast, it cannot recover without adding, to sustain the metaphor, a great deal more water and fertilizer, and that water and fertilizer come from only two sources—either through payroll withholding from public employees enrolled in the pension plan or from taxpayers.”
As the Ring article succinctly notes, as but one example:
“California’s public-sector unions have turned public servants into a privileged class, forcing taxpayers to finance pensions they could never afford themselves.”
You can thank the cartel that is organized labor for that – and the pols they have conscripted in equal measure.
Our friendly wag says that he, as most thinking people would, “think that governments everywhere should switch over to the defined-contributions model, if for no other reason than to prevent these underfunded liability issues.”
Exactly. As most private-sector businesses did decades ago — and to the clear, demonstrable advantage of employer and employee alike.
How tragic it is that the ingrained political establishment in Allegheny County, fully beholden to the union label, lack the courage to take command and begin to take the steps necessary to exit off this road to defined-benefit pension perdition.
But, then again, they know full well who butters their moldy bread, don’t they?
And as Jake Haulk, president-emeritus of the Allegheny Institute, put it:
“Public-sector unions are the enemy of frugal government. But the voters are guilty because they are mostly in league politically with the government workers.”
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
