The main problem of public pensions is the following. Unfortunately, it is hardly ever explained by the media. If it were, the taxpayers would be truly aroused.
If the employer, or locality, funded by taxpayers gives a 5% contribution toward pensions to a union member and does it as a 401 (k) as would most private employers today, that employee would invest it. That same contribution is given to the public employee, but with a major difference. He gets a defined benefit. He does not invest it. The state or locality must do it.
And because of one-sided, pressured negotiated terms, the negotiator is in a position of getting favors from the union he is dealing with; that is, political contributions.
But that is not the whole story. The taxpayers’ side must also assume the defined benefit; earning as much as 8% on retirement funds today, when that is impossible these days and will be, perhaps for the next 50 to 70 years.
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