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Rhode Island’s Pension Cliff

Rhode Island’s Pension Cliff

I know you know about Rhode Island’s public sector employee pension problem, because I’ve posted about it so many times.

But take a look at this chart which shows how household contributions to public sector pensions (state employees and teachers) is expected to climb to just over $2000 per household by 2018 unless there is drastic reform now:

[Material removed at request of Providence Journal]

This is devastating, and will drive people out of the state, continuing the death spiral of fewer and fewer people paying a higher and higher debt burden.  As reported by The Providence Journal:

[Material removed at request of Providence Journal]

Guess which public sector employees place the highest per capita burden on taxpayers.  Judges.  While the overall judicial pension burden is not high relative to the total state burden, judicial pensions are straining the court system budget, with fully 10% allocated to judicial pensions, with many judges retiring on six-figure annual pensions.

Yet the unions are fighting tooth and nail to prevent reform, even obtaining a judicial ruling that they have a contractual right to prevent changes to pensions for employees who are not yet retired but are vested in the system (10 years of service).

It’s so far beyond out of control it’s unimaginable.


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This is a clear example of why public sector unions should be illegal (as they used to be nationwide).

The unions finance the political campaign of a politician (almost always a Democrat). Once he’s in office, the union bosses then negotiate with this same politician for their union’s contract. The politician needs to make budget while he’s in office, so the salaries don’t get too far out of line. But, pensions and health benefits, on the other hand, go through the roof. The politician knows he’ll have moved on before the bill comes due.

No one is looking out for the taxpayer.

The politician, entrusted with the care of the public fisc is the creature of the union that put him in office.

IMO, this fact alone should be sufficient to legally invalidate the union contracts. They were never negotiated in good faith to begin with.

This corrupt system also results in one-party rule in blue states. The unions know that their future is tied to the continued dominance of Democrats in political office. This is why AFSCME and teachers unions are huge contributors to Democratic politicians. They also make enormous GOTV efforts that are not counted as political donations (and they do much of this on the taxpayer’s dime, getting paid for ‘union time’ when they’re actually out rounding up voters).

This is the vicious cycle that R’s are trying to break in WI, IN, OH and elsewhere. The most effective tactic I’ve seen is to simply stop the state from automatically deducting union dues from paychecks of state employees. In IN, union dues dropped by over 90% in a single year as a result of this.

I had a lot to say about this, but Aarradin seems to have said it all for me. Thanks.

As a retired lawyer who spent 35 years being abused by judges (not all of them of course) I’m not surprised to see that even into retirement they will go on doing mischief and causing trouble.

    Aarradin in reply to TeeJaw. | October 10, 2011 at 1:12 pm

    I wouldn’t be surprised if you’re still on the hook to pay their spouses after they die. They’ll come for a big chunk of your net worth after you die as well.

    That reminds me of one of my favorite lawyer jokes:
    “What’s the difference between a Lawyer and a Prostitute?
    A Prostitute will stop screwing you after you’re dead!”

Apparently they believe that the money fairy will fly down and sprinkle cash all over for people to pick up.

Watch the next move they make; taxing people who try to leave.

Think it can’t happen? Ask Boeing.

All aboard! The pension gravy train leaves in 2011! Next stop: Vallejo!

What can’t last, won’t. The truly sad thing will be the expressions on all those retired Union people when they find out that their pension fund is broke, and they’d been lied to for all those years by their union officials and the politicians who they elected.

I live in California, and the best thing that happened to Orange County was that they were the first to go bankrupt, so the Unions didn’t have in place special terms in the contracts preventing changes to union pensions.

I just hope things there go bankrupt quickly, so that the taxpayers get hurt less rather than more.

Actually, on the contract claim, the Unions have a point. Any new administration cannot simply come in and undo the prior contract by writing a new contract if rights have vested.

However there is nothing preventing the municipalities (or the state, for that matter) from declaring bankruptcy under Chapter 9 of the Bankruptcy Code and seeking to have the contract set aside.

That’s the problem with a “pension” and why I advise my negotiation clients on the employee side to NEVER take one. It’s just a contract claim, and an unsecured contract claim at that. In a Bankruptcy proceeding, it can be set aside, reduced, or subjected to the reduction as an unsecured creditor. The Pension Benefit Guarantee Corp will try to ride to the rescue and call it a “preferred” claim, but that often fails. If there are insufficient assets after the secured parties are paid, you only get what the PBGC pays, which is something like a paltry 30% of your claim.

Much better to have a 401(k) which the employee owns himself, can directly monitor and control it, and be making tax deductible contributions.

    Sorry. Forgot a paragraph –

    Further, there’s nothing stopping a new administration from coming in and negotiating a new contract with those individuals who’s rights have not yet vested (no contract claim of consideration by performance).

Vanity Fair has a very good article by Michael Lewis called “California and Bust” which discusses, among other things, the pension problem in Vallejo. Here’s what ended up happening when Vallejo went through bankruptcy:

“In August 2011, the same week that Standard & Poor’s downgraded the debt of the United States government, a judge approved the bankruptcy plan for Vallejo, California. Vallejo’s creditors ended up with 5 cents on the dollar, public employees with something like 20 and 30 cents on the dollar.”