August 22, 2010
A Show of Pension Reform
As you read the article, your mind is just beginning to recover from this:
In a theoretical case of a 20-year-old firefighter hired today, retiring in 2030 on a base pay of $100,000, and collecting a pension for 30 years, the difference between compounded and simple is $41,129. At age 70, in the year 2060, the firefighter’s pension would be $181,000 on a simple 3-percent COLA and $222,129 on a compounded COLA.
When reporter Donita Naylor hits you with this:
[Providence Councilman John] Igliozzi, who also serves on the boards that oversee retirements and pension investments, said that with 30 firefighter positions going unfilled and 250 firefighters becoming eligible for retirement in the next two or three years, "almost half the Fire Department is going to be new" hires.
One reels. The first paragraph presumes a person retiring at forty years old and doubling his annual income — while doing nothing — by the time most of his contemporaries will actually begin considering retirement. On the compounded scale, the firefighter will have received $4.49 million dollars in pension payments by his seventy-first birthday. On the simple scale, he'll have received $4.13 million. And this is presented as pension reform?
Sure, the numbers add up. On the compounded scale, those 250 folks soon to replace proximate reitrees would cost $1.12 billion by 2060, while on the simple scale, they'd cost $1.03 billion, savings of $90 million ($3 million per year), but that's still $1.03 billion for 250 people for 30 years of no work, after only 20 years of work. And who's to say what life expectancy will actually be by that point.
It appears that, after decades of politicians' making pension promises with which they wouldn't have to deal, the current crop is promising reforms that won't take effect until most of them are dead, and still won't amount to much by way of savings.
Want more? As far as I can tell, these numbers don't include benefits like healthcare.
As soon as possible, pensions should be shifted to 401(k)s. At the very least, they shouldn't begin to pay out until a certain age, no matter when the person opts to retire.
And when if's and buts are candy and nuts, every day will be Christmas.
Base salary of $100,000? Not in my lifetime. New hires can't retire until 23 years, not 20 and a bunch of other things that the Projo conveniently left out.
Posted by: michael at August 22, 2010 1:22 PMYou don't think $100,000 is plausible by 2030? Even if it's only $90,000, by then, the 30-year pension payment is still around $4 million per retiree.
As for the extra three years of work, fine. Adjust the scale to be somebody retiring at 43 instead of 40. I can't imagine that matters much to folks who don't think they'll ever be able to retire, let alone that age, and let alone with a set-for-life-and-then-some pension.
I'd note, too, that your point is, essentially, "that'll never happen." But then why insist on it, during negotiations? Then, over the coming years and decades, whenever anybody tries to change the terms, all we'll hear about is "broken promises."
No time like the present to get the necessary change done.
Posted by: Justin Katz at August 22, 2010 1:33 PMAll I know is if I work 20 years I can retire with half of my pay. They throw in a 3% cost of living adjustment. Now and then it's compounded, every now and then some city Homerule ordinance is passed and they take it away. Nothing is set in stone. Firefighters have retired with no cola since 1994, except for 3% on the first 10,000, which is a fancy way of saying a 300.00 a year increase in the pension.
It's all smoke and mirrors until I cash the first check. I don't believe a thing about any of this. We are nothing but political pawns to the people pulling the strings. And so are the taxpayers.
Posted by: michael at August 22, 2010 1:41 PMJustin:
Great points the City of Warwick has over $800 million in future unfunded obligations, fast approaching $1 billion without real reforms.
The purposed pension and lifetime healthcare reforms mirror what Providence is doing and basically will not realize any savings for at least 20 years. Well before that time Warwick will be bankrupted.
Why isn't the Dems on the City Council, who have 8 members to 1 so called Republican, opposing Republican Mayor Scott Avedisan's bankrupting of the city - copy this link to see why:
http://www.warwickonline.com/view/full_story_columns/9205448/article-The-Taxpayers--Spin--Warwick-Republican-s-hypocritical-attack?instance=lead_story_left_column#cb_post_comment_9205448ixzz0xMwKvZTg
"Show" is the appropriate word. They have passed 4 "reforms" without any real reforms.
Look for another several "reforms" over the next decade without moving the boulder more than inches.
The answer is real simple-teachers/state and municipal employees work till 67 (like the rest of us), cops and firemen till 55. COLA's of half the inflation rate. Plus the END of the fake disability pension scams.
Oh, and let's make the per capita employees equal the national average NOT the double or more they are now.
Cranston, 3 miles long, has 160 firemen. We need, at most, 50. At most.
I was actually involved on a rather long thread on RIFuture about this...
Rhode Islanders pay 3rd highest in the nation for fire protection, we pay about $230/year compared to the national average of $106 (If I recall correctly). We also the second safest state in terms of fire fatalities.
This is a different story from the teaching situation, where we're paying top-dollar and getting something less, we pay top-dollar for fire protection, and we have -lots- of it.
The problem I see is that we actually do so -good- with fire protection that we're well past the point of diminishing returns. The government has limited resources, the $124/person/year cost of 'extra' fire protection saves lives, for sure, but at a cost so high that it drives residents and businesses from our state.
It might not be good politics to say, but lives -do- have dollar values when it comes to policymaking. That's what our legislators are supposed to really be doing, looking at the $X millions they have to work with and allocating it where it does the most good. Right now we're so heavy on firefighting that we're spending over twice the generally accepted amount to save each additional life. What that means is that other programs are starved-out by the firefighting budget, or taxes are unnecessarily high, which weighs heavily on our local economy.
I really don't understand why public sector employees aren't being switched over to 403b plans. Personally, I -like- knowing that my retirement isn't subject to the whims of politicians, at least not -as- subject, at least.
Posted by: mangeek at August 23, 2010 2:18 AMCranston, 3 miles long, has 160 firemen. We need, at most, 50. At most.
In reality, you're one of the more understaffed large departments in the state. 2 firefighters on a ladder truck, with 4-5 simultaneous responsibilities at a fire scene? Please. 3 is understaffed. 2 is pathetic.
If you were even close to knowing what you were talking about, this would be worth the bandwidth.
Posted by: EMT at August 23, 2010 8:01 PMIf you were even close to knowing what you were talking about, this would be worth the bandwidth.
Posted by EMT at August 23, 2010 8:01 PM
Hey rocket scientist-
go check up on what staffing other municipalities of 29 whole square miles and 70,000 people have.
How the hell do you think most of America pays a third of what RI, firmly in the 76 year grip of "da party of da workin' people" pays in property taxes?
mangeek,
You were involved in a long discussion on RIFuture regarding this but you still haven't learned a thing. You're still spouting the sames misrepresentative stats.
[[[[ Rhode Islanders pay 3rd highest in the nation for fire protection, we pay about $230/year compared to the national average of $106 (If I recall correctly). We also the second safest state in terms of fire fatalities. ]]]]
You've already been told that the cost offire protection in RI includes EMS which is not the case in most other states.
Also, how can we be the 2nd safest concerning fire related deaths after losing 100 people in the Station Fire? Was your stat from prior to that? Believe me when I tell you that a great number of those victims died as a result of serious UNDERSTAFFING in the WWFD.
Tommy Cranston,
[[[[ Oh, and let's make the per capita employees equal the national average NOT the double or more they are now.
Cranston, 3 miles long, has 160 firemen. We need, at most, 50. At most. ]]]]
Mr. Cranston, you know nothing about staffing for emergency services. You simply quote stats which are meaningless without the proper context.