Monday, February 22, 2010

Sorry, No Band For You

My local school board wants the county supervisors to raise taxes -- not to pay for increased student costs, but to pay for teacher pensions...
Fairfax County officials are about to run head-on into the same public sector pension funding crisis that is spreading across the entire country, as detailed by the Pew Center on the States' recent report about the "trillion-dollar funding gap."

The issue is being drawn with razor-sharpness in Fairfax in the choice now facing local school board officials: They can either ask the Fairfax County Board of Supervisors to raise taxes to fund lavish teacher pensions and other retirement benefits properly, or they can reduce current teacher and administrator salaries by eight percent and use the money saved instead.
I understand why current teachers wouldn't want an 8% cut, and why retired ones may not consider their pensions lavish. As a taxpayer, though, I could care less. I always enjoy seeing when they threaten to cut band and sports if they don't get a tax hike --that's not a bluff taxpayers won't call. Plus, my memory of high school sports teams and band is that they did end up raising some money for themselves anyway. However, back on the point regarding pensions, Nick Gillespie explains that this is just the beginning of a trend...
As we've noted here, this is a story that is only going to gain in regularity as the gap between public-sector and private-sector compensation grows (public-sector already has a 70 percent advantage!) and as private-sector workers increasingly fund their own retirements via 401(k)s.

The basic bargain about public-sector work, hammered out decades ago in a very different world, is supposed to be: You give up status, upward possibility, and compensation now for job security and payoffs later in retirement. That has never really been true and is certainly less so now. Yes, public-sector jobs ofer more security than their private-sector counterparts, but compensation is also higher on average and the benefits, especially in retirement are gold-plated to the nines. That bargain, which is unsustainable economically, is going to hit the rocks. The only question is: Who is going to pay? Taxpayers or the public-sector workers?
My guess is that the public eventually revolts against big pensions for the public sector, because the tax hikes will be massive otherwise. We can only borrow so much money (although the federal government seems determined to test that point).

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