Miele’s Musings — ARE PENSIONS FOR PUBLIC EMPLOYEES BANKRUPTING US?

BY PUBLISHER EMERITUS ARMAND MIELE

Here we go again. On Tuesday, February 27, the New York Times reported Rockland County as sixth among the state’s top 25 borrowers from New York’s pension fund (Danny Hakim, “Cities Borrow From Pensions To Pay Them”, citing a report by the Office of the State Comptroller). The New York Times, graphing pension layouts for the 25 top borrowers, reports Rockland’s contribution to the state system to be about $30 million, to support pensions for a payroll of just under 3,000 employees, and estimates Rockland’s borrowed portion at between one-quarter to one-third of its contribution.

What bunk this is. Once again, the politicians have put something in place to take care of themselves, and forget about the non-government, taxpaying workers. Government workers have a bonanza. Thank ex-Governor Paterson for the latest scheme. Thank Comptroller Thomas P. DiNapoli too, while you’re at it. He approved the plan.

Blame these DROP plans for public employees, too. DROP, or Deferred Retirement Option Plans, reward government employees and screw the taxpayers. The idea is to offer bigger pensions to government workers eligible for early retirement, to make up for salaries that are (get this!) less than they could earn in the private sector. In other words, a government worker should make more than a private sector worker! This is supposed to be the way to keep so-called hard-to-replace teachers, policemen, firemen, engineers and other public workers on their jobs as they near retirement.

DROP is supposed to work this way: a government employee eligible for early retirement agrees to stay on for, say, five more years on the same pay. In the meantime, the pension that he would have gotten paid if he had retired is put into a DROP account, bearing interest. In five years, when he retires, he can opt to take the value of his DROP account as a lump sum, or leave the principal untouched and take the interest payments. He also receives his pension check, calculated at the rate he would have begun receiving five years ago.

It sounds good—until you find out that these DROP accounts have been set up to earn more than double the earnings of private-sector investment accounts, such as the typical 401(k)! Who thought this up? Some DROP accounts in the country have been set up to earn as much as 9 percent interest! Where did the politicians think that kind of interest was going to come from? They didn’t have to think at all—they knew they’d do what they always do, which is to raise taxes to pay the difference. In 2010, DROP retirees in cities like San Diego, Philadelphia, Milwaukee and Houston were taking monthly DROP payouts up to 1-1/2 times their salaries! The San Diego Tribune, for example, reported in 2010 that an assistant city attorney who earned an annual salary of $153,000 took a $235,000 pension.

This is why New York had to put this crazy pension system into place, where municipalities are borrowing from the same fund to which they contribute. The politicians locked our government into big pension offerings when the money was rolling in, and now need a sneaky way to pay them. How do local governments meet their commitments to the fund? By socking it to the taxpayers, of course. I believe that voting for the party only makes these political gangs stronger. We are in this position because voters are discouraged from voting for the person. Remember, once they are elected, party politician do nothing for the people, only for their party. The proof is in programs like DROP, where a politician promises the moon and stars to his most loyal constituency, government workers, to make himself look good, then leaves the taxpayers holding the bag.