Finally, reality is setting in on the world of public pensions. When trying to understand this mess, the discussion typically devolves into emotional, angry, rhetoric. Never has a solid solution been found under such discussion atmosphere.
But a solution must be found soon. A few weeks ago, a Federal Bankruptcy Judge finally stated that federal contract law trumps any state’s Constitution or promise.
Last Sunday, I found this article in the SF Chronicle. It avoids the easy blame game and rhetoric seen all over the media on this issue. It points out this issue is all of ours to solve because we all created it.
Politicians made easy choices over difficult ones. Voters didn’t punish the pols for such choices. Unions grabbed what they had to know could never be affordable. Wall Street and bond buyers bought the bonds supporting these over-sold promises hoping some other government entity would bail them out if the whole house of cards collapsed.
For many years now, we’ve told our personal clients here in Santa Rosa and Sonoma County that receive pension income that this gravy train may one day run dry. We’ve even lost out on a few potential clients who didn’t like my opinion that this State’s Constitutional promises would one day be trumped by math.
For our financial planning clients, we’ve moved to help them plan accordingly. We’ve urged them to save some of their often generous income streams. To learn to live off of less than they are receiving from the State or County in order that one day, if that payment is reduced, their pain would be less severe.
We do not hate police, fire, teachers, and other public employees. Quite the contrary. Nor do we begrudge the pension benefits they’ve accrued over the years. We simply see the math as insupportable long-term. No matter what side of the aisle you stand on this issue, the math is unemotionally clear. Cities, counties and states have promised their workers future payments knowing full well those payments were not affordable. That math is now supported by Federal Court. The first domino has been tipped.
Watch as Chicago, San Bernadino, Stockton, the state of Illinois, California, Puerto Rico, and so many more run to the courts to restructure past promises. There is no joy in my writing this. Nor any sense of “I told you so.” I’m simply hoping this discussion can move forward now on a more functional level.
The benefits so many public workers have been counting on are a mirage. The poor leadership of politicians and unions is coming home to reality now. It would be best if we all discussed this more rationally and acted more quickly. The longer we all wait and bicker, the worse this challenge promises to become. The deeper the pain on retirees, tax payers and the country.