Pension purgatory

 

Pension purgatory

 

Date: February 10, 2010
by: Observer staff

 
 

The town of Longboat Key has serious employee pension problems — and they’re not just the $25 million in unfunded liabilities hanging over the town’s taxpayers.

It became vividly clear last week at a firefighter pension board meeting that the town has structural problems with its pension boards and the oversight of the town employees’ pension plans.

Tensions erupted into visible conflict last week between Town Manager Bruce St. Denis and Keith Tanner, chairman of the firefighter pension board and district vice president of the firefighters’ union. Tanner triggered the conflict when he questioned how the firefighter pension plan accumulated its $12 million unfunded liability; called for an audit of the plan’s actuary; and said: “I think the town is trying to shortchange us.”

Talk about fighting words.

St. Denis bristled, in effect saying Tanner’s positions as district union chief and chairman of the firefighter pension board are a conflict of interest. “What I see is you folks as the union asking you folks as the board the questions you want addressed,” St. Denis said. “Now the questions have been answered and because you don’t like the answers, you want to spend a lot more money to find different answers.”

With that, tensions became so inflamed the pension board attorney called for a five-minute recess of the meeting to reduce the boiling.

St. Denis has a point. Although legally permissible, there’s a sour smell to the fact the vice president of the firefighter union is the presiding officer over the board that governs the town firefighters’ pension plans — to which taxpayers contribute most of the money and over which taxpayers have little control. Indeed, to make matters worse, firefighter union members control the board with three of the five seats. As they say, the deck is stacked.

Even this is a contentious issue. When one of the three firefighters’ term on the board expired, board members were to vote to fill his seat. Predictably, the two citizen representatives voted to add a third citizen-taxpayer to the board; likewise the two firefighters voted to retain the third firefighter. Because the vote was split 2-2, the third firefighter remains on the board. This, too, is problematic.

Understandably, the Town Commission and town manager have been preoccupied over the past several months with higher priorities — the Longboat Key Club and Resort’s redevelopment application; erosion on north Longboat Key; and, oh yeah, the Town Commission elections.

But those matters aside, the town’s pension plans are quite similar to the town’s comprehensive plan. All are in need of major rewriting and reform.

Let’s hope, come April 5, at the first regular meeting of the newly seated Town Commission that the commission members unanimously commit to making pension-plan reform one of their top three priorities. Millions upon millions of taxpayer dollars and the retirement lives of more than 100 past and current town employees are at stake.

+ That gargantuan deficit
Lucky Barack Obama. The New Orleans Saints and the Winter Olympics will divert the mainstream media’s attention away from Obama’s proposed massive tax increases and gargantuan federal deficit (see table below).

But that is not going to make Obama’s cataclysmic ideology go away. And, in fact, even as the U.S. economy in the fourth quarter of 2009 and first quarter of 2010 are going to show increasing gross domestic product and an end to the recession, there is a growing body of economic watchers and experts who are predicting with certainty more serious trouble for America’s economy.

Arthur Laffer, of Laffer Curve fame, is forecasting that we’ll experience a worse recession in 2011 than we did in 2009 if the Bush tax cuts are repealed and Congress adopts Obama’s $1.3 trillion deficit spending plans.

Read the excerpts below from a 1991 article by Professor Robert Higgs. He explained 20 years ago what government deficits really are — morally wrong and symptoms of a system that is corrupt to the core.

...

Why deficits are so pernicious
By Robert Higgs

Editor’s Note:
The following are excerpts from a 1991 article authored by Robert Higgs, the Thomas F. Gleed Professor in the Albers School of Business and the director of the Center for the Study of Social Dynamics at Seattle University.

The deficits of the past three decades can be viewed as pernicious for many reasons. Consider just three of the more important ones.

1. The economic case against deficits.

When the government borrows money, it diverts private savings to uses that have a smaller component of investment and a larger component of consumption.

By bidding up interest rates, government borrowing “crowds out” borrowers who would have made investments in the private economy, while the funds the government borrows are used overwhelmingly for consumption. The result is that the nation’s capital stock, the aggregate of all durable resources that enhance the economy’s productive capacity, grows less rapidly.

As a consequence, future standards of living will be lower than they otherwise would have been. Our children and grandchildren will reap smaller harvests because our own generation is feasting on some of the seed corn.

2. The moral case against deficits.

When the service charges on the debt come due in the future, the obligation to make these payments, by suffering some form of taxation, will fall on persons who will have had absolutely no choice about entering into the debt contract and will have received no benefit from it.

Unless the government defaults, which would be morally reprehensible and economically harmful in itself, individuals in the future will be stuck with higher taxes, either directly or via inflation, than they otherwise would have had to bear.

The fact that in the future some individuals will receive the interest and principal on bonds they inherited in no way diminishes the force of the argument. The good fortune of the legatees does not cancel the injustice done to others. And justice has to do with individuals, not classes or generations. The soothing apology for the debt, that “we owe it to ourselves,” is a fallacy. The persons who will owe it are not identical to the persons to whom it will be owed.

To impose financial obligations on our children and grandchildren gratuitously for the sake of our own present enjoyment is moral arrogance at best. It bespeaks a contempt for others well captured by the famous remark attributed to Madame de Pompadour, mistress of Louis XV: apres nous le dêluge (“after us, the flood”), or in today’s terms, the future be damned.

3. Symptoms of a political system gone corrupt to the core.
Notwithstanding all the political rhetoric to the contrary, the government runs chronic deficits because the members of Congress want to run them. They make this choice because they value their re-election more than they value the interests of the public. Even a cursory examination of the evidence shows unmistakably that the emergence of chronic deficits since 1960 has resulted from federal spending growth, not from decreased government revenues.

Politicians are afraid to rein in the runaway spending so that it will match revenues because they don’t want to offend those who receive the benefits financed by the government — goodies paid for sooner or later by taxpayers.

Much of the government’s spending is channeled to well-organized political pressure groups whose support is viewed as essential by incumbents seeking re-election.

The deficits reflect a political system responsive to special interests at the expense of the general interest of the public now, as well as the general interest of future generations …

Unfortunately, given our political system as presently constituted, individual citizens acting on their own can do virtually nothing to remedy these ills. Because people rarely organize for political action except on behalf of some narrow interest, no one is likely to create an effective movement in opposition to continuing massive deficits.

So far as the government’s fiscal irresponsibility is concerned, the immediate future probably will be no different from the immediate past.

BOX

The Obama deficits

Dollars in billions

                            2009        2010        2011       2012
Revenues           $2,105      $2,165    $2,567    $2,926
Spending              3,518        3,721    3,834       3,755
Deficits                  1,413        1,556    1,267         828
Debt held                7,545       9,298    10,498    11,472
by public

As a percentage of GDP
Revenues               14.8%       14.8%    16.8%    18.1%
Spending                 24.7%       25.4%    25.1%    23.2%
Deficits                       9.9%       10.6%     8.3%       5.1%

Source: Pete G. Peterson Foundation
 

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