Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
It is a sad commentary on our society how far down the path of destruction we have ventured. By allowing such practices as double dipping and pension spiking, many cities will face this same circumstance. Detroit is the largest so far but it is just a ghost of its former self. We all have to ask this question regarding pensions if we have them, do we want someone else to control our pension for us? Most of the time one does not know what that pension is invested in and unable to find out for certain. Call your Human Resources person and ask where your pension dollars are invested.
When I had the chance, I took my pension as a lump sum and placed it into my own account. If something goes wrong I only have to look in the mirror to find the answer.
Whelp, Datwah pensions are actually quite spartan compared to other cities and states. The multiplier is 2.5 and they don't appear to allow spiking like some places. The largest problem with Detroits pension is that it's underfunded and the city shrunk by 2/3. Doesn't compute.
What amazes me is that there are still a lot of cities and states and even businesses that are still offering a Defined Benefits pension. If you're in a hole, the first thing to do is stop digging. You can convert to a Defined Contribution pension without pimping your employees. Michigan state switched with anyone under 5 years (not vested) and all new hires under a DC with 4% from the state and 3% more to match your 3% [read: 3% gets you 10%]. The older employees were given a chance to switch and those that did got slammed by the dot.com meltdown. Cripes, you can even do the same thing with med benefits thru a Med Savings Acct and it can be set up much like a 401K.
If Detroit is the first major U.S. city to declare bankruptcy, Illinois will undoubtedly become the first state to declare bankruptcy. There are a number of highly unfavorable circumstances, laws and politicians in Illinois that have created the Perfect Storm. Their fiscal problems are already insoluble ---- and that is the good news. They will rapidly worsen over the next decade.
I agree that overly generous pension benefits are partly to blame in some cities and states. However, every time employee benefits are increased what is usually also part of that compromise to shut down the legislative session down every single year is a big corporation passing the cost of government to people who don't have lobbyists. Don't lay all the problems of government on employees. Guess what, if government worker salaries go down then private sector middle management salaries will go down too. How about instead of people saying government salaries are too high people turn to their boss and say my salary is too low. The race to the bottom for salaries has to end at some point.
The biggest issue regarding the cost of public employees are the public employee unions. I am biased against unions for a variety of reasons but in this case I do not see any reason why public employees should be represented by unions. The unions are performing the ultimate scam against the American public. We pay the union dues for the workers through our taxes. Union contracts have made it such that when a light bulb burns out, two or three highly paid electricians are called in to replace it. While I do not wish to get rid of all the benefits of the public service workers, it should be clear that they should not make more than one can make on the outside.
Police and firefighter unions may have their place in discussing safety standards and such. The govt. passes laws all the time regarding employee rights so they should be able to respect those laws and regulations when it comes to their own without the help of unions.
I apologize if I came across harshly to some. This is not personal but should be looked into in order to cut govt. costs.
Reply to @DlphcOracl: Oh yeah re: IL. I think the issue becomes I wouldn't be surprised if they started doing things like Chicago did with selling the parking meters. Ooops, that was a really good revenue stream.
"Mr. Rowey holds up the example of Chicago’s 36,000 parking meters that were sold in a 75-year lease to an investor group backed by Morgan Stanley as a success. In fact, Chicago taxpayers, investors and mayors across the country will tell you that not only was it an unmitigated disaster, it is also Exhibit A in the folly of blindly giving up taxpayer control of services.
An after-the-fact investigation by the city’s inspector general concluded that the decision to enter the lease contract lacked “meaningful public review” and neglected the city’s long-term interests to solve a short-term budget crisis. Specifically, it found that “the city was paid, conservatively, $974 million less for this 75-year lease than the city would have received from 75 years of parking-meter revenue.” That’s nearly $1 billion that could have been used for better police and fire protection, longer library hours and many other services that would benefit the public good rather than private profits. By Dec. 31, 2009, Chicago had only $180 million left from the $1.15 billion parking meter deal, forcing the city to consider alternative sources of revenue rather than relying on long-term reserve funds generated by the parking meter lease."
You'll likely see more private partnerships, but my concern is that, like the above, they aren't going to be good for the cities/states. It also becomes how the city uses the revenue,as highlighted above...
Oh, and if that wasn't bad enough: "Taxpayers are further harmed by the contract’s fine print, which says that they must reimburse Morgan Stanley and its Qatar-based business partner for any time the space is used for anything other than parking — including parades and festivals. The city is prevented from performing routine road maintenance that would occupy a parking space on all but a few days a year without paying a penalty.
Perhaps most egregious, Chicago cannot build parking lots for the entire duration of the contract because they might compete with the outsourced parking meters.
In fact, the “noncompete” and “compensation” clauses mean the city won’t be able to make, for 75 years, fundamental economic development, land use or environmental policy decisions — anything that would affect the revenue of the parking company. Roderick Sawyer, alderman for Chicago’s Sixth Ward, has called this parking privatization scheme “outrageous for taxpayers, undemocratic, and un-American.”"
It may have been a metaphor but I can definitely say that as a public sector worker I paid union dues, not the taxpayer. When I started work in the public sector my salary was less than I could make in the private sector but my pension was better as was my job security. Basically I made tradeoffs as do most people : remember the grasshopper and the ant. Over the years my benefits did not improve and got worse, my salary raises were NOT competitive, workers hired after me got worse deals then I did but I agree that many others in the private sector may have done worse with even larger reductions in benefits. As suggested by others its the race to the bottom that makes the lot of public workers look better. I will point out that the lightbulb story is a private sector thing and while I do not know enough to defend it I know it has something to do with safety, Wages are set by the market. In NYC state and local governments have trouble hiring computer programmars as wages offered are not competitive.Do we we really want public sector workers, who work for all of us, to be average or below in their skills? As to the best way to cut costs I could certainly produce a balanced budget for the country though perhaps not for Detroit and I am sure Mr. Chisum could too. I suspect that our budgets would be different. It all depends on whose ox is gored
Reply to @jerry: I appreciate your comment. You may have a point technically on your salary since it had traded hands and it was yours at that point. I was thinking of the source of the money which is the taxpayer.
This has been ongoing for Detroit and other cities in the rust belt for 30+ years. Detroit decided to hang onto the auto industry and rather than adapt and we see where that has taken them. In a way I think this is a natural progression. There were cities in the past that were the major trading centers like St. Louis and Kansas City. As people move from the colder rust belt areas to the sun belt portion of the country, these metro areas will continue to decline unless they reinvent themselves. Cleveland has done this by going the healthcare route.
Comments
When I had the chance, I took my pension as a lump sum and placed it into my own account. If something goes wrong I only have to look in the mirror to find the answer.
Whelp, Datwah pensions are actually quite spartan compared to other cities and states. The multiplier is 2.5 and they don't appear to allow spiking like some places. The largest problem with Detroits pension is that it's underfunded and the city shrunk by 2/3. Doesn't compute.
What amazes me is that there are still a lot of cities and states and even businesses that are still offering a Defined Benefits pension. If you're in a hole, the first thing to do is stop digging. You can convert to a Defined Contribution pension without pimping your employees. Michigan state switched with anyone under 5 years (not vested) and all new hires under a DC with 4% from the state and 3% more to match your 3% [read: 3% gets you 10%]. The older employees were given a chance to switch and those that did got slammed by the dot.com meltdown. Cripes, you can even do the same thing with med benefits thru a Med Savings Acct and it can be set up much like a 401K.
Detroit? feh. Watch out for Illinois.
peace,
rono
If Detroit is the first major U.S. city to declare bankruptcy, Illinois will undoubtedly become the first state to declare bankruptcy. There are a number of highly unfavorable circumstances, laws and politicians in Illinois that have created the Perfect Storm. Their fiscal problems are already insoluble ---- and that is the good news. They will rapidly worsen over the next decade.
Police and firefighter unions may have their place in discussing safety standards and such. The govt. passes laws all the time regarding employee rights so they should be able to respect those laws and regulations when it comes to their own without the help of unions.
I apologize if I came across harshly to some. This is not personal but should be looked into in order to cut govt. costs.
"Mr. Rowey holds up the example of Chicago’s 36,000 parking meters that were sold in a 75-year lease to an investor group backed by Morgan Stanley as a success. In fact, Chicago taxpayers, investors and mayors across the country will tell you that not only was it an unmitigated disaster, it is also Exhibit A in the folly of blindly giving up taxpayer control of services.
An after-the-fact investigation by the city’s inspector general concluded that the decision to enter the lease contract lacked “meaningful public review” and neglected the city’s long-term interests to solve a short-term budget crisis. Specifically, it found that “the city was paid, conservatively, $974 million less for this 75-year lease than the city would have received from 75 years of parking-meter revenue.” That’s nearly $1 billion that could have been used for better police and fire protection, longer library hours and many other services that would benefit the public good rather than private profits. By Dec. 31, 2009, Chicago had only $180 million left from the $1.15 billion parking meter deal, forcing the city to consider alternative sources of revenue rather than relying on long-term reserve funds generated by the parking meter lease."
http://dealbook.nytimes.com/2013/07/23/cities-need-to-weigh-costs-of-private-partnerships/?_r=0
You'll likely see more private partnerships, but my concern is that, like the above, they aren't going to be good for the cities/states. It also becomes how the city uses the revenue,as highlighted above...
Oh, and if that wasn't bad enough: "Taxpayers are further harmed by the contract’s fine print, which says that they must reimburse Morgan Stanley and its Qatar-based business partner for any time the space is used for anything other than parking — including parades and festivals. The city is prevented from performing routine road maintenance that would occupy a parking space on all but a few days a year without paying a penalty.
Perhaps most egregious, Chicago cannot build parking lots for the entire duration of the contract because they might compete with the outsourced parking meters.
In fact, the “noncompete” and “compensation” clauses mean the city won’t be able to make, for 75 years, fundamental economic development, land use or environmental policy decisions — anything that would affect the revenue of the parking company. Roderick Sawyer, alderman for Chicago’s Sixth Ward, has called this parking privatization scheme “outrageous for taxpayers, undemocratic, and un-American.”"
It may have been a metaphor but I can definitely say that as a public sector worker I paid union dues, not the taxpayer. When I started work in the public sector my salary was less than I could make in the private sector but my pension was better as was my job security.
Basically I made tradeoffs as do most people : remember the grasshopper and the ant. Over the years my benefits did not improve and got worse, my salary raises were NOT competitive, workers hired after me got worse deals then I did but I agree that many others in the private sector may have done worse with even larger reductions in benefits.
As suggested by others its the race to the bottom that makes the lot of public workers look better.
I will point out that the lightbulb story is a private sector thing and while I do not know enough to defend it I know it has something to do with safety, Wages are set by the market. In NYC state and local governments have trouble hiring computer programmars as wages offered are not competitive.Do we we really want public sector workers, who work for all of us, to be average or below in their skills?
As to the best way to cut costs I could certainly produce a balanced budget for the country though perhaps not for Detroit and I am sure Mr. Chisum could too. I suspect that our budgets would be different. It all depends on whose ox is gored
This has been ongoing for Detroit and other cities in the rust belt for 30+ years. Detroit decided to hang onto the auto industry and rather than adapt and we see where that has taken them. In a way I think this is a natural progression. There were cities in the past that were the major trading centers like St. Louis and Kansas City. As people move from the colder rust belt areas to the sun belt portion of the country, these metro areas will continue to decline unless they reinvent themselves. Cleveland has done this by going the healthcare route.
Thanks for being civil.
http://www.municipalbonds.com/news/special-report-detroits-bankruptcy?utm_source=Municipal+Bonds&utm_campaign=e0e0feb45b-Muni_Saturday_7_277_26_2013&utm_medium=email&utm_term=0_d7427882c9-e0e0feb45b-33568345