Sunday, January 2, 2011

One More Thing To Worry About: Flint's Looming Pension Crisis

The city of Flint faces a looming public employee pension crisis — a totally separate issue from the ongoing budget battle with police and firefighters — and it's not alone.

Michael Powell of The New York Times reports:

Across the nation, a rising irritation with public employee unions is palpable, as a wounded economy has blown gaping holes in state, city and town budgets, and revealed that some public pension funds dangle perilously close to bankruptcy. In California, New York, Michigan and New Jersey, states where public unions wield much power and the culture historically tends to be pro-labor, even longtime liberal political leaders have demanded concessions — wage freezes, benefit cuts and tougher work rules.

It is an angry conversation. Union chiefs, who sometimes persuaded members to take pension sweeteners in lieu of raises, are loath to surrender ground. Taxpayers are split between those who want cuts and those who hope that rising tax receipts might bring easier choices.

And a growing cadre of political leaders and municipal finance experts argue that much of the edifice of municipal and state finance is jury-rigged and, without new revenue, perhaps unsustainable. Too many political leaders, they argue, acted too irresponsibly, failing to either raise taxes or cut spending.

1 comment:

  1. It’s a shame that incomes and property values have fallen so much that we can’t meet our promises to retirees. Add the demographic shift, and the situation stinks!

    On a local level, Flint City Council recently rolled the defined contribution plan into the defined benefit plan. The argument from Council was this action would save the General Fund $4m this year because the defined benefit plan was dangerously underfunded. All this was on the third add-on resolution, i.e. a resolution not on the official agenda, at the 11/8/2010 meeting.

    What I don’t know is whether the city simply pooled the money together in an accounting arrangement or whether the city functionally eliminated the defined contribution plan. Does anyone know more of the details?

    Good luck out there,
    Brad

    ReplyDelete

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