Local Governments Miscalculate Employee Pay

This article was first published by Maureen Bader on June 10, 2013

Both the City of Cheyenne and Laramie County governments have prioritized government worker pay hikes in this year’s budget. Both governments are rationalizing prospective hikes with employee pay studies, but these studies seem to be undervaluing, or leaving out altogether, the cost of benefits.

These governments are making a major miscalculation if they downplay benefits when comparing government pay to private-sector pay. Government workers enjoy benefits that many private-sector employees can only dream about. Sham studies mean taxpayers might pay even more for government-employee benefits.  

Benefits add a significant amount to the cost of government employees. For example, salary costs at the City Attorney’s office amounted to $314,735 in 2013, but benefits added an additional $99,434 to the total personnel costs of the office. The story is similar at the County Attorney’s office, where salary costs totaled $270,100 and benefits added an additional $100,051 to the cost of personnel.

Benefits cost taxpayers big because at both the City of Cheyenne and Laramie County, employees enjoy gold-plated pension benefits and subsidized health insurance premiums.

Most full-time city and county employees belong to the Wyoming Retirement System, which provides impressive benefits for government workers enjoyed by few in the private sector. According to the Bureau of Labor Statistics, in the Mountain geographical area to which Wyoming belongs, about 84 percent of government workers have access to these generous plans, while only about 20 per cent of private-sector workers do. 

City and county employees contribute very little to their plans, leaving Wyoming taxpayers to foot the lion’s share of the tab. According to Wyoming statute, 14.12 percent of a city or county employee’s salary must be contributed to the plan. The taxpayer burden for both city- and county-employee pension plans is 7.12 percent per government worker. The employee is supposed to contribute 7 percent of which city employees currently pay only 3 percent.

But that’s not all: County employees enjoy an even sweeter deal than their city counterparts. According to Laramie County’s 2012 audited financial statement, county taxpayers fund 100 percent of the employee contribution. When the Wyoming Legislature passed the 2.79-percent increase in pension-plan contributions in 2010, county employees were to pick up half of the employee increase, according to Laramie County Clerk Debbye Lathrop. As a result county employees now pay only 1.39 percent of the total 14.12 percent contribution.

Government-employee health insurance is another expensive perk shouldered by taxpayers. The majority of city and county employee health-insurance premiums is picked up courtesy of the public. At present, city employees pay only 12.5 percent of the cost of their health insurance premiums. Lathrop says county employees pay “approximately 20 percent” of their own health insurance premium.

During a recent KGAB radio interview, Laramie County Commissioner Chair Troy Thompson magnanimously suggested that this year the county “may split the premium increase with employees.” The increase is expected to be 2.5 percent, leaving county workers to pick up a miserly 1.25 percent.

So, when government workers complain they haven’t received pay hikes over the past several years, they should be reminded that they are recipients of gold-plated benefit packages provided by Wyoming’s hard-pressed taxpayers. Consideration of public-employee pay hikes should be delayed until current actual compensation – including health and pension benefits – is presented in an honest and transparent manner.

Conspiracy against prosperity - the radio interview

Maureen Bader and Glenn Woods discuss the political theory that conspires against prosperity. People use collectivism to justify taking what others sow. What to do about it? Watch the video to find out.

More Money for Pensions Means Less Money for Roads

            The Wyoming Taxpayer is Tapped Out

(First published by Maureen Bader on December 17, 2012)

Wyoming’s state pension plan does not have enough money in it to pay bureaucrats their promised pensions. To fix that, legislators may increase contributions to the plan. The question is where will the money come from? State employees, taxpayers or both? Government is looking for ways to strengthen the plan but like so much of government policy these days, it is avoiding a long-term solution, leaving both taxpayers and pensioners at risk.

Pension plans come in two basic types: defined benefit and defined contribution. Defined benefit plans promise a defined payment when a person retires. This type of plan was developed at a time when relatively few retirees took money out of and many workers paid in to the plan. Wyoming state employees have defined benefit pension plans. Defined contribution plans, on the other hand, make a payment to retirees that depends on how much is contributed into the plan and how well the money is invested.

Today, most of the private sector has switched over to defined contribution plans to ensure they are able meet their pension obligation to retirees. According to the Bureau of Labor Statistics, in the Mountain geographical area to which Wyoming belongs, about 84 per cent of government workers have access to defined benefit plans, while only about 20 per cent of private sector workers do. In fact, only 48 per cent of private sector employees have a company pension plan at all. If a company in the private sector has a plan, it is most likely a defined contribution plan.

Pensioners who still have defined benefit pension plans face huge financial risks. For example, one day the City of Central Falls in Rhode Island simply stopped sending pension checks to pensioners because its pension fund ran out of money.

In fact, Wyoming’s state employee pension plan is only about 82 percent funded. That means, should the plan close down today, the government would only have enough money to pay 82 percent of what it promised retirees.

Wyoming’s legislature made a few pension reforms in 2012 that will save Wyoming taxpayers $1.2 billion over 30 years and reduce the anticipated unfunded liability by $2.9 billion. Now, still with an unfunded liability of $1.275 billion, it is looking to increase the amount contributed to the plan each year. Currently, the taxpayer contributes 7.12 percent, or $128.5 million per year to the employee plan, while employees contribute 7 percent, or about $126 million. If contributions increase beyond this by between 2 percent and 4 percent, the plan could be fully funded in 30 years. This means, however, that the taxpayer could be on the hook for an additional $74 million per year to fund the pensions of government employees -- employees whose compensation packages are already more generous than many in the private sector.

Wyoming legislators are developing a bill to increase contributions. At the moment, the plan is for state employees to pick up the tab for the increase. However, government workers are a savvy group with easy access to legislators, so expect amendments to any bills presented to the legislature in January that have employees picking up the bill.

If government forces taxpayers to put at additional $74 million per year into state employees’ pension accounts, that means it has $74 million less for priorities such as road maintenance -- or to leave in the pockets of taxpayers to fund their own pension plans. Everyone must save for his or her retirement, but the government’s solution is based on a reality that no longer exists. To provide security to current and future government retirees, and to ensure that taxpayers are also able to save for their retirements, the state must move to a defined contribution plan in parity with private sector pension benefits.

Bureaucrat pension plans create false security and violate taxpayers’ rights

This is the first article I posted, back in 2012, on the problem with the public sector pension plan in Wyoming. I will publish more in the days, weeks and months ahead.

(First published by Maureen Bader on February 17, 2012)

The Wyoming legislature failed to consider HB0091, a pension reform bill, and is bad news for Wyoming taxpayers. In many states, the plans that are supposed to pay government workers their promised pension do not have enough money. But taxpayers, many of whom do not even have a pension plan, are taxed to put more money into the bureaucrat retirement kitty. HB0091 attempted to lessen that risk. It would have closed the current pension system to new employees and provided them with the type of pension plan now common in the private sector.

Pension plans come in two basic types: defined benefit and defined contribution. Defined benefit plans promise a defined payment when a person retires. Defined contribution plans, on the other hand, pay out depending on how much is contributed into the plan and how well the money is invested.

Defined benefit pension plans were the norm in days gone by. They were developed at a time when relatively few retirees took money out of the plan and many workers paid in. These plans held a gold-plated promise of retirement security that Bernie Madoff would have been proud of. In fact, they are nothing more than Ponzi Schemes creating big financial risks for organizations, retirees and taxpayers.

Today, the private sector is moving away from defined benefit plans. According to the Bureau of Labor Statistics, in the Mountain geographical area to which Wyoming belongs, about 84 per cent of government workers have access to gold-plated plans, while only about 20 per cent of private sector workers do. In fact, only 48 per cent of private sector employees have a company pension plan at all. If a company in the private sector has a plan, it is most likely a defined contribution plan. Organizations that still have defined benefit pension plans face huge financial risks.

General Motors is a case in point. In the past, General Motors gave mostly unionized workers gold-plated defined benefit pension plans as a perk to maintain labor peace. In 2009, General Motors’ pension plan was short about $17 billion dollars. When the U.S. government bailed out General Motors, it saved the pensions of more than 120,000 retired salaried employees and 400,000 retired hourly workers with taxpayer’s money. If the government hadn’t bailed out General Motors the pension cupboard would have been left empty those pensioners could have been left without a pension.

Defined benefit pension plans now mostly exist in the government sector and these create financial risks for taxpayers and both current and future pensioners. For example, when the pension fund in the town of Pritchard, Alabama ran out of money in 2010, the town stopped sending pension checks to pensioners. Not even government workers are safe when government runs out of money because there will be no bailout.

In Wyoming, the shine is off the state’s gold-plated pension plan and people running the retirement system know it. The state’s Retirement System Director Thom Williams, in a presentation to the Joint Appropriations Interim Committee, told legislators the existing defined benefit pension plan was short more than $1 billion and it would take decades before the fund was back in the black. To close this gap and make sure the pension plan has enough money to pay the pensions of retirees, Mr. Williams proposed creating a new tier of benefits within the existing defined benefit plan for new employees. However, this means new government employees will be forced to fund gold-plated benefits for current retirees and get less of a benefit in the future. It also does nothing to remove the financial risk to taxpayers and ultimately, the retirees themselves.

                                                                                                

HB0091 was set aside this time, but it will be back. Not only are government sector defined benefit pension plans leaving a legacy of debt and higher taxes to current and future generations, they may not even fulfill the promise of paying retirees.  To ensure the financial sustainability of these plans, new government employees must be placed in a defined contribution plan, as called for in HB0091, just like employees in the private sector. Many taxpayers face an uncertain retirement future. Taxing them to fund bureaucrat retirement bliss, however illusory, is nothing more than taxpayer abuse.

On the Naughty List

The American Spectator reported on December 23, 2016, that my articles on the public sector pension issue in Wyoming put Wyoming Liberty Group on the National Conference of Public Employees Retirement System's “naughty” list of organisations because I highlighted" the problems that public employee pensions are causing for state governments and taxpayers."

You can read that article here:
https://spectator.org/public-pension-defenders-make-naughty-list-a-whos-who-of-conservative-organizations/

What were those articles? I will start posting them here in the days ahead for your reading convenience. 

Young and Trusting

I was thinking about calling this one "Don't Go There!" or Government Data Collection but decided to go for something more marketable ...

Young and Trusting
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Oil on Board

Stampede

On the run in Wyoming

Pals
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Oil on Board

Moving in on the Run
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Oil on Canvas