The Empire Strikes Back
Among the many tales of woe that appeared in the media in the wake of the Wisconsin protests was the melancholy tale of two public school teachers from Oshkosh who put in their retirement papers in the wake of the union reforms.
“Not only am I losing salary and benefits and facing a bigger work load, but now they are taking away my rights,” a 56-year-old elementary school teacher named Mary Herricks told the Wall Street Journal. “Retirement was supposed to be something happy. I’m so sad.”
But a quick search of online databases takes some of the edge off the gloom. Herricks earned a salary of $68,423. The paper noted that even though she was retiring at 56, she would be able to collect “nearly her former salary” in pension benefits. It got better. Her husband, the local head of the teachers union, was also retiring from a position that paid him $75,916 a year; between the two of them, they made more than $140,000 a year. When generous fringe benefits are added in, the couple earned more than $190,000 in salary and fringe benefits.
Nor would their decision to retire pinch very much at all. Both of them will receive taxpayer-funded health insurance until they turn 65; as well as a payment worth about $600 per year of service, which would amount to about $43,000 on top of their pensions. They will also be able to earn additional income by working as substitute teachers. “Given that pensions are off-limits to certain taxes,” noted The Journal, “Mr. Herricks says they will bring home close to what they did before.”
During his 2008 presidential run, candidate John Edwards frequently cited what he called the “Two Americas,” a reference to what he saw as the gap between the rich and the poor. But the term applies equally to the gap between average America and the new privileged class of public employees like the Herricks, who enjoy expensive fringe benefits and lavish pensions that increasingly define a growing divide among Americans.
Even as private sector workers struggle to find and keep jobs, and pay their bills, politicians have lavished expensive perks on public employees under the baleful eyes of ever-more-powerful public employee unions.
As a result, one America (generally private sector taxpayers) is now tasked with saving and funding their own retirements while also paying into the pensions of public employees, many of whom can retire in their 50s sometimes with six-figure pensions. In California, more than 15,000 former government workers have pensions that pay them more than $100,000 a year, a number that is growing by 40% a year. To match a pension of that size, a private sector worker would have to accumulate roughly $2.5 million in savings
As he wages his own quixotic war against bloated public pensions, New Jersey Gov. Chris Christie relates the story of one 49-year-old retiree who had paid a total of $124,000 toward his retirement pension and health benefits. “What will we pay him?” asked Christie. “Three point three million dollars in pension payments and health benefits.” A retired teacher who contributed $62,000, says Christie, will get $1.4 million in pension benefits plus $215,000 in health care benefit premiums over her lifetime.
“(There are) two classes of people in New Jersey: Public employees who receive rich benefits and those who pay for them,” said Christie.
As compelling as the anecdotes of excess are, they do not begin to capture the full picture of the public pension tsunami bearing down on taxpayers. The unfunded liabilities for bloated state pensions are generally a mystery, but Joshua Rauh, a professor of finance at Northwestern University’s Kellogg School, sees deficits of between $3.2 trillion and $5.2 trillion — a massive burden that will inevitably be shifted onto the taxpayers and perhaps lead to a new round of bailouts.