Excellent report on Public vs Private sector compensation...

The move by the Fayette County Commission to ditch their award winning employee retirement system to move to a defined benefit system has caused a lot of those in the know quite a bit of heart burn. Across the state we hear about governments being unable to fund their retirement plans or facing huge problems as a result of attempting to fund their defined benefit systems. Everyone has heard the horror tales from Delta Air Lines, General Motors and many other companies regarding their unsupportable retirement plans.

The Cato Institute put out an outstanding bulletin which focuses on "Employee Compensation in State and Local Governments". The topics include: Public Sector vs Private Sector Compensation, Excessive Retirement Benefits and others.

Here's the opening sentences under "Excessive Retirement Benefits": Table 1 indicated that state and local workers have very generous defined-benefit (DB) pension plans compared to private sector workers. These plans have been overpromised and underfunded, which has created huge long-term gaps in government budgets...

I was at a local Fayette County meeting tonight that covered, in part, Fayette's move to a DB plan for its employees. One thing that stuck in my mind was a chart showing the under-funding of the plans by 5 or 6 Georgia counties and/or cities. Scary.

Taxpayers are on the hook for unsustainable pension plans and I find it scary to think about the future in my county, and in many communities across the country. When I think about the large numbers on the verge of retirement in the near future it highlights how short-sighted so many of our politicians are these days (and always I suppose). No one is willing to make hard decisions today simply because it could result in the loss of their political seat (aka power).

Huge problems are on the horizon. Fayette County and those who implemented defined benefit pension plans are going to be in a world of hurt when the bill comes due. In Fayette, since it's a fairly new db plan, the bill won't come due until the current batch of Commissioners have moved on to other to other things. If they don't leave the county they'll still be kicking when the higher taxes hit and the quality of the county plummets.

The report is a real short read and a big eye-openers. Hope you'll take the time to at least scan through this one: http://www.cato.org/pubs/tbb/tbb-59.pdf