How many towns and cities have the same problem as the MBTA?
I know in 2 suburban towns, where I have poked around looking at their financial health, I was told that they do not even calculate, let alone record on the books as a contingent liability, their deferred pension or retiree health plan future costs because that would “blow up the budget.”
In the private sector, the law requires these liabilities to be calculated and carried on a company’s balance sheet.
Multiply the pension and health care promises made to every police officer, firefighter, DPW employee and town clerk, and I bet many towns will be looking at financial meltdown as their staff retire and age.
I assume at the state level, too, many quasi-autonomous authorities, like the MBTA, are careening towards insolvency. MTA, Massport, the Convention Authority … these are political bodies, first and foremost, and are not restrained from lavishing economic benefits on their employees.
To whom are they fiscally responsible?
The very entity that created them: The Massachusetts legislature.
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It really is amazing, the avarice and greed that comes out of Beacon Hill.
… and it is massive.
My understanding is that GASB regs had changed and that cities/towns/the state would no longer be able to hide it’s pension obligations. These entities will have to provide accrual accounting for retiree health and pension benefits. I think this is supposed to touch down next year…which should cause a significant amount of panic.
GASB-45 should be taking effect within the next year or so. This is the analogy to fAS106 (which was the reason so many companies moved away from retiree medical plans back in the 90s). In essence, towns and cities will no longer be able to account for retiree health costs on a pay as you go basis. Rather, actuarial principles will need to be used and certain levels of prefunding requirements will need to be taken into account annually, or at least disclosed. Will be some very interesting town meetings in the next few years for sure.
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BTW, government plans when compared to private sector ERISA plans have always been significantly worse off. I still remember back in the 80s the grand pronouncement by then Gov. Dukakis that the problem would be solved because the UAL would be amortized over 40 years (assuming that the actual payments made it into the funds instead of accumulating in the treasurer’s desk for months on end). Contrast this with the PPA which will require private sector plans to fully fund UAL (unfunded actuarial liabilities) over a 7-year span.
I think with the new regulations forcing cities and towns to calculate future health benefits toward their UAL will force local government to make the important decisions they were elected to make. People will only put up with a certain level of property tax increases before the rebel and I think we are at the tipping point.
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Unions will have to understand that they have three options, reduction in benefits, change in plans, or a reduction in work force.
Why does this come as a surprise to anyone?
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Obscene benefits for public retirees are at the heart of the fiscal woes plaguing towns and cities throughout the country, but they are truly off the charts here. The MBTA is, by far, the most parasitic of the lot, but virtually every group and its union now faces the dual prospect of dramatically reduced benefits for both existing and new retirees and significantly higher individual contributions for things like healthcare etc.
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It’s taken some time for the rest of the citizenry to wake up to this rip-off by the public sector, but they’re getting it rubbed in their faces now, and they’re not all that concerned about what the retirees seem to “expect” or what the unions “demand.”
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Pity it had to come to this, but the public retirees can only blame their unions for letting it slide out of control. Greedy and stupid.
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blockquote>Pity it had to come to this, but the
public retireesTAXPAYERS can only blame their unions for letting it slide out of control. Greedy and stupid.<
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Fixed.
Point taken.
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Touche!
And generally lower salaries, for which those benefits are supposed to compensate.
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This is the next problem towns will be dealing with – like Stoneham this Spring there will be others in the future. I believe there are several metro west towns that already know what their liability is and it is massive. I will search for the data.
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I am commenting here because of the fallacy of “generally lower salaries” that benefits should compensate. Please provide some, really any, documentation of this fact.
The “lower salaries” argument is an anachronism. It used to have some validity until the late 80s when “corporate America” decided to torch its rank and file in the interests of “globalization” and opened up a jaw-dropping gap between the compensation of average workers – blue or white collar – and the so-called executive ranks. It continues to widen to this day, as we all know.
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Public employee unions have been milking that one for some time now…usually comparing their workers salaries with the top echelons of the corporate ladder. (Gee…no wonder it looked uneven.) The schtick has pretty much run its course as well.
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There are far too many people in the corporate sector just getting by with lower salaries, no job security, lousy self-managed 401Ks (rather than traditional pensions) and…ahem!…no retirement health entitlement. The public sector simply cannot expect the towns, cities, and taxpayers (most of whom are in that other corporate-side situation)to keep lavishing these insane entitlements on retirees at the expense of key services and ever higher taxes that are driving people out of their homes, towns, and the state.
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The good news for public employees is that their defined pension plans are actually in pretty good shape now and their payouts won’t take too much of a hit in most cases. But they’ll have to give up entitlements to keep it that way.
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Change is on the way.
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I can’t offer you documentation of salary information, which is generally confidential. I can only offer anecdotal evidence from the dozens of public employees I’ve known over the years. Many of them loved the public sector, but if they left, the same thing always drove them to the private sector: money.
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I agree that corporate salaries are down from their peak, but they’re still better.
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I also agree that the problem has to be addressed.
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But it simply does not follow that public sector employees must renegotiate their deals because private sector employees are getting screwed. You mentioned CEO pay — that’s a good place to look, if you’re a private sector employee wondering why you don’t make enough.
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Point taken JimC!
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BUT…the plight of the corporate rank and file is not the reason WHY public retirees will be giving up some of their sweet deals. The reason is that the deals are putting municipalities out of the business they’re supposed to be in…and turning them into something that exists largely to funnel money and perks at retirees. (I overstate…a little. ) That’s going to change now, because it HAS to. There’s no longer a choice.
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The disparity between corporate and public retirees IS a factor in addressing the validity of the public sector’s traditional SOP of claiming poor mouth. The claim is now largely invalid.
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Not just in my opinion BTW…its now the undercurrent across the state, on Beacon Hill, and especially in town halls. People…average folks…are getting really angry when they understand what’s been going on, and how they’re getting screwed. Just read the paper. The only thing holding back action now is the traditional fear of unions. And THAT’s about to be completely overrun by widespread outrage at the community level.
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It happening already in some towns, and its inevitable everywhere.
I’m not sure fear of unions is the only hindrance, though — it’s going to be a painful process no matter what.