Public Pensions

In something of an over simplification, there are three sources of funding for public pensions.

1. One is the government’s contribution.

2. The second source of income are the investments made with the employee and government contributions.

3. And the third and most reliable source of funds are from the employee who has money taken out of his pay check each month as a retirement contribution.

Let’s take a look at each one of these sources.

First is the government’s contribution to the pension fund.  Time and time again, local governments have found themselves in a financial bind and have made the decision to cut back, or in some cases, just stop making contributions to their employee’s pension funds.

Over the years, this has created huge deficits that are now practically impossible to make up.

These decisions to under fund pension funds have been political decisions made by elected officials, often over the objections of the public unions representing the workers.  In some cases, workers have agreed to cuts in benefits and salaries. But the source of this problem is not with the workers.  The source of this problem is a series of poor management decisions.

The next source of funding for public pensions comes from the interest earned on the money contributed by the employees and the government.  Over the years, some retirement funds have done very well, but in the past few years, many have not done so well.

And why have some retirement funds not done so well?

Well, one reason is massive fraud in the financial industry.  Retirement funds were sold packages of bad loans by crooked investment bankers that were rated AAA by corrupt rating companies.

Retirement funds purchased bonds that were manipulated to return less interest than represented.

Retirement funds purchased stock companies that had little potential for profitability, but were misrepresented by the underwriters to be sure bets.

Even retirement funds that conducted due diligence found it difficult to judge the appropriateness of an investment when the data they were given was basically all bogus.

Again, the source of these problems do not lie with the public employees.

Finally, we come to the last source of income for public pensions.

The employee.

The employee faithfully, every month, gives up a part of his pay check to his retirement fund thinking that this money is being safely invested for his future.

Unfortunately, at some point the public employee discovers that he’s not going to get the retirement he’s been planning on because (1) his employer didn’t fully fund his retirement, and (2) wall street has ripped of his retirement fund, or (3) the government declares bankruptcy.

And, as a final insult, the employee gets blamed for the pension crisis because he gets paid too much or has too many benefits.

Public employee salaries and benefits are negotiated, and if the government made promises that they find they are unable to honor, and decides to allow massive criminal activity in the financial markets, it is not the fault of the workers who negotiated their agreements in good faith.

The employee turns out to be victim of poor management, and criminal behavior on a world-wide scale.

In fact, the employee is the only link in this dismal chain that is actually putting his money away every month without making any misrepresentations, not making excuses for not paying his fair share into the system.

What has happened here is similar to the looting of the union pension funds by corrupt union leaders and organized crime, only this time, it’s wall street and your local government doing the looting.

And, finally, nothing, absolutely nothing at all is being done about any of this.

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