No More Golden Parachutes for Firefighters! Why Are Pensions Always the First to Go?

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An article in the New York Times this week entitled “When ALEC Takes Over Your Town” examines the financial problems of a town in Rhode Island. This town could be just about any town in the United States.

The article discusses the demise of a proposal to increase taxes to boost the local economy in the town and highlights the fact that one of the two legislators in the House of Representatives who blocked the proposed increase is on the on the national board of the American Legislative Exchange Council, or ALEC.

While ALEC is a blog post topic for another day, anyone who is unfamiliar with this group should simply know that this is a highly conservative lobbying group posing as a non-profit, which promotes some of the most mean-spirited state legislation you can possibly imagine.

One of their pieces of model legislation, which they shop around to state legislators around the country, is the infamous Stand Your Ground Law that was the subject of much conversation in the Trayvon Martin case.

ALEC also devotes significant energy to working to shrink the size of government. But again, I have no doubt that I will write a post another day on ALEC.

But what interested me in this article is something that also came up in the comments section from yesterday’s post about the European Financial Crisis. The issue that I would like to explore today is the issue of what many call “bloated” pensions and what impact these pensions are having on budgets around the world.

As one of my brilliant readers noted yesterday, many say that pensions play a significant role in the financial problems in Europe today. We know that this is also an issue here in the United States, especially on the state and local level.

But it is important to remember what we are talking about here – the people who will be receiving these pensions are people who have served their country in one way or another, be it as a teacher, a fire-fighter, a police officer or some other sort of public servant. These are not people with golden parachutes and corporate bonuses.

I would imagine that firefighters and teachers plan for their financial future just like the rest of us. So, what happens when the legislature or local government slashes these benefits? What is the human impact on the people who depend on these benefits?

I understand that the math is complicated when it comes to talking about pensions. And I also understand that we have an aging population which creates complications on a number of levels, with significant fiscal consequences.

But shouldn’t we be focused on finding solutions to the problems that arise with an aging population? And why are the pensions of hard working individuals the first thing on the chopping block?

What do you think? Why do you think there is so much attention right now on pensions? Do you see other ways that a government could address the aging population that could actually help save money? What do you think people do when their pensions are slashed? Are there other areas of the budget where you think states and localities could find savings? Have you, personally experienced a reduction in the benefits you were expecting to receive? How has that impacted you and your family?

I would love to hear your thoughts. Thanks so much for reading

24 Comments

Filed under Career Planning, Economy, Education, End of Life, equality, Ethics, Health, Income inequality, Politcs, Poverty, Relationships, Role of Government

24 responses to “No More Golden Parachutes for Firefighters! Why Are Pensions Always the First to Go?

  1. I’m noticing the pension issue for future active duty military personnel. They want to have them put money into a 401k and make it that you have to serve a longer period before qualifying for a pension. I guess for folks like my brother-in-law who’s separating after 4 years it’s not a bad thing to have a 401k started. Normally they leave with nothing after leaving before 20yrs. For teachers, fire department folks and police – considering how low most of their wages are when they are working…that pension really helps offset that. It does seem like wages and pensions for these folks are the first to be cut when putting budgets together. Without decent wages, benefit packages and pensions how do you encourage folks to take on these sorts of jobs?

  2. I don’t agree with them gouging the common workers pension. If they must tax someone, tax the bloody government and corporate pensioners whose incomes run into the millions per year!

  3. My husband has a pension and a annuity with his Union. He paid into it throughout his years of employment…it’s his money. Back off is what I say to slashing! I know I can come up with plenty of things that could be slashed, long before a working man/woman’s pension.
    My husband’s Union played around with their pension years ago and he lost a significant amount of money, then his annuity took a hit because they invest it in the market….enough.
    If they continue to chop away at the bottom, they are going to fall. Got the old blood pressure going today!

    • Thanks so much for sharing your experience. It sounds frustrating to say the least. I think you are right. There have to be better ways to cut budgets and there are going to be long-term consequences if we don’t work through some of the solutions. Sorry to get the blood pressure going – go get a cup of tea or for a walk – I don’t want to be responsible for causing stress!! Thanks again for your comment! And for reading!!

  4. I wold think that pensions, as a rule, are money that the worker has put away out of his or her paycheck each week — or the company puts it away for them. I honestly don’t understand how this money could be taken away at the end when the person needs it most. But then I don’t understand much of what goes on in this world — as my blogs will attest! (I have blogged about the tendency in Rhode Island to want benefits without paying for them. It’s an old story.) But I look forward to your upcoming blog on ALEC.

    • I think that how it works is that people get to keep the portion of the money that they put in directly, but the matching amount that the government has promised is reduced. But if people, most of whome had low salaries to begin with, find this amount unexpectedly reduced, what does that do to their ability to have a secure financial retirement? On another note – don’t get me started on ALEC!

      • Thanks for helping me figure this out. I read Karen’s comment and she’s spot on, isn’t she? It all comes down to the greedy few who want to have it all. Unfortunately, those are precisely the ones who control the decision-makers in Washington. In fact, many of those decision-makers are themselves among the greedy few. It’s a Catch-22. (I’m with you: we need more ranting along the lines of Karen’s!)

  5. It annoys me too that so many people who are counting on pensions to offset years of lower wages are now wondering if their public pension will be there for them.
    Of course, this is happening in corporate America too. I’m not so sure that my pension dollars that I earned at IBM will be there or the social security dollars that I had taken out of my paychecks for so many years.
    I can’t help but think that there are some groups in America that are ultimately greed driven benefiting only a privileged few, or have some deep seated need to make the lives of most people more difficult.
    It’s amazing to me that we can’t come together as a country and raise taxes on the wealthiest Americans to the levels they were in the Eisenhower days or even the Reagan years.
    This whole idea that taxes on the rich will destroy our economy has no basis in it based on empirical data. There is plenty of recent data to show that tax cuts put in place by Bush did not result in better incomes for most Americans. Just look around us.
    Yet, somehow no one is looking at the reality of the effect of the tax cuts and two expensive wars. Return taxes to historical levels and stop fighting wars we cannot win, and perhaps our fiscal responsibility will “magically” improve without so much austerity for the people who deserve to receive their pensions.
    Well, that’s enough of my ranting . . .

    • I love the ranting!!!! And wholeheartedly agree. It seems that politicians are trying to make us think this is so complicated, but once you start to understand it better, it is actually fairly simple and you can’t help but get frustrated! Thanks for your comment!

  6. I have a friend who says when we as individuals are struggling with our budget we re-work, cut the fat out; and the governments should do the same. (I whole-heartedly agree) Are there too many people in government? are there redundancies? Cut your own fat first so to speak!

    • Thanks for your comment! I hear you and know many people would agree. In fact, I may have agreed with you 10-15 years ago when the economy was strong. But I can tell you that, on the state and local level, at least in the area I work, which is social/human services, there is really no more fat to cut!

  7. Jennifer, thanks for raising the issue. The pensions and retiree medical benefits pose a problem, yet how they are dealt with makes all of the difference. The government can choose a heavy handed approach or they can work openly to discuss the issues and how we can get to a better place economically for all. You correctly mentioned the early legislated benefits in lieu of raises (or bonuses) that have occurred over time in the government ranks. This occurred within unions as well. So, employers made long term commitments that had a building obligation to save money today. So, legislators punted the financial problem down the road. Then along came accounting changes that made employers account for these benefits promises now. And, with the aging environment, less healthier public and declining active work forces, the budget pressures have become too much. We must address these issues now, but we need to do it in a transparent way. And, I continue to advocate, we cannot solve our problems alone with spending cuts – we have to raise revenue as well. Thanks

    • Fantastic explanation, as usual. I understand how his happened much better now. Thanks so much for that. And I agree wholeheartedly that we have to raise revenue in addition to cutting where appropriate – and most importantly, w have to stop politicizing this and have a real conversation about viable options! Thanks for furthering my education, as always! 🙂

    • Astute comment, as usual. And you are abolutely correct: we need to balance cuts with tax hikes — especially among the wealthy. But since the wealthy pretty much own the government I can’t see tax cuts coming in the near future. It doesn’t bode well for critical social programs (or education!), does it?

  8. Take a peek at the post I wrote called “What kind of tea is the tea party drinking?” I cite an ongoing analysis of the Paris based, well-thought-of organization called the Organization for Economic Cooperation and Development. Looking at all taxes, we are one of the least taxed countries in the world – 3rd from the bottom in a survey of 34 countries and almost 10% below the average tax per GDP rate. In 2000, when we last had a balanced budget, we were still less than the average by about 6%. I will let you draw your own conclusion.

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