Mike Thomas: State pensions are budgetary time bombs - OrlandoSentinel.com

State pensions: Bad deal for public

Mike Thomas COMMENTARY

11:31 p.m. EST, February 13, 2010

If I had my life to live over, I would work for the government.

I would be a bureaucrat, a paper shuffler, a guy who stands behind the counter and gets to you on my own sweet time. Even better, I would be a firefighter. A buddy of mine who has retired from a local department had considered leaving to go to medical school. But because he was smart enough to do it, he was smart enough not to do it.

He decided to stay on, get the pension, start another career, and make just as much money as a doctor with a lot less hassle. Now he's living the dream.

Such is life on a defined pension.

Great deal for the person getting it. Horrible deal for whoever is paying it.

Pension plans helped bring down the auto makers and the airlines. They are budgetary bombs on timers, set to go off on somebody else's watch.

At the end of last year, 92 percent of corporate pension funds were underfunded. And the federal insurer of pension funds was $22 billion in the red.

This is why these pensions are vanishing from corporate America, replaced by savings accounts in which employees take responsibility for their retirement.

But government is slow to change, which is why government is becoming the last bastion of union employees and defined pensions.

The result: California. The Florida Legislature needs to dump our state pension system while there's still time. Government workers can do what the rest of us do: Contribute to a 401(k).

The argument for the old pensions has gone something like this: Our dedicated public servants work for less than what they could get in the private sector. For this sacrifice, the least we can give them is 30 years of carefree living in front of the TV in their bathrobes.

This is laughable.

Most everybody I know in the private sector wishes they worked for the public sector. Why do you think every government-bashing Republican politician out there clings go his government job with a death grip?

Layoffs in the public sector are a third what they are in the private sector, according to University of South Florida economist Chris Edwards. If the people who run this newspaper ran the government, the county administration building would be half empty and production would be up.

Edwards calculates that public sector jobs pay, on average, 34 percent more than private jobs. For Orlando Mayor Buddy Dyer's staff, it's 134 percent.

Workers in the private sector work 12 percent more hours a year than public workers.

Did you get Presidents' Day off? Columbus Day?

For regular Orange County employees, you pay an additional 10 percent of their salary to cover their pensions. For firefighters, deputies and prison guards, you pay an additional 21 percent.

For politicians, you pay 16 percent.

The total pension tab for Orange County taxpayers this year: $45 million.

A regular employee for Orange County can retire after 30 years with about half his salary and an annual 3 percent bump. He can stay with the county health insurance program, and get $150 a month to help pay the premium.

A firefighter or deputy can retire after 25 years with 75 percent of his or her salary.

Do not blame Orange County for this. Its employees come under the state pension fund, which the county is obligated to participate in. Known as the Florida Retirement System, it covers all county employees, state employees and teachers.

Every year, the state assesses the amount of money in the fund. It calculates how much it must pay out, and how much it is making on investments. And then it sets the contribution level for that year and the counties must pay.

With one crash of the stock market, the fund can go from fat and overfunded to depleted and underfunded. At one point in 2008, the fund only held 78 cents for every dollar it was obligated to pay. Rising stock values have made for a better outlook, but this gives you an idea of the vulnerability.

We are sitting on fissionable material. If the stock market went into a long-term funk, the state still would be obligated to pay the pensions. We would be in a multibillion-dollar hole with massive tax increases the only way to plug it.

This is far too great a risk to have hanging over our heads. It's time to spread it out to the individual employees. Let them watch CNBC and learn about the real world.

Some cities, which aren't in the state pension system, have realized this. Orlando used to pay medical coverage for retirees in addition to a lucrative pension. Now the city has moved to more of a 401(k) pension system.

Now it's time for the state to do likewise with all employees, including the politicians.

Mike Thomas can be reached at 407-420-5525 or mthomas@orlandosentinel.com.