The
main problem with public pensions is, unfortunately,
hardly ever explained by the media. If it were, taxpayers would be
truly aroused.
If
the employer, or locality, funded by taxpayers gives a 5% contribution
toward pensions of 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 must also assume the
defined benefit; the public union retiree earning as much as 8% on retirement funds when
that is impossible these days, and will be, perhaps, for the next 20 to 50
years. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)
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