Wednesday, February 23, 2011

How I would Solve the Public Employee Union Pension and Benefits controversy.

I think the Public Employee Union Pension controversy can be problem solved by viewing it as a known percentage of the total city budget. I actually wonder if it is constitutional to promise city pensions without a cost analysis of what percentage of the total city budget those pensions may cost the city 30 years in the future.

There has to be an agreed to percentage of the total city and state revenue that can be applied to city and state employee pensions, vacations and healthcare. I would guess that 10 to 12 percent of total state revenue is the maximum a state can afford to allocate in the form of pensions on an annual basis.

If pension, vacation and healthcare benefits rise over that 10 to 12 percent of a state's budget, the pressure to sustain growing public employment levels (as the population rises) while paying additional benefits to past employees, becomes suffocating.

So now the question becomes, what percentage of a state's budget do pension, vacation, and healthcare presently require? I would guess that present levels are probably closer to 20-33% of a states budget.

If an public employee works from age 24 to 54, then retires, and is retired for 20 years, then basically, they worked 30 years and received a significant percentage of their regular wage for the next 20 years as pension. The math does not add up. Now, if a public employee works from 24 to 64, and then retires for 10 years...that math almost adds up.

I would suggest that a new formula be incorporated in which public employees receive one pension year at 80% of their average pay, for every 3 years they work, and provide a death benefit if they pass early to go to a family member.

My presentation above can easily be tweaked in any direction. But the underlying point remains the same, pension, vacation, and healthcare benefits can only take up a certain percentage of a states budget before the result is a budget suffocation that hurts everybody.

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