The Magazine

The New Fat Cats

The indefensible pensions of public-sector employees.

May 3, 2010, Vol. 15, No. 31 • By FRED BARNES
Widget tooltip
Single Page Print Larger Text Smaller Text Alerts

John Edwards was right. There are two Americas, just not his two (the rich and powerful versus everyone else). The real divide today is, on one side, the 20 million people who work for state and local governments and the additional 3 million who’ve retired with fat pensions. On the other, the rest of us, roughly 280 million Americans. In short, there’s a gulf between the bureaucrats and the people.

The New Fat Cats

Governor Chris Christie of New Jersey puts his fight with teachers and their union in roughly those terms. He says there are “two classes of citizens in New Jersey: those who enjoy rich public benefits and those who pay for them.” The teachers want to keep a pay raise and continue to pay a minimal share of their retiree benefits.

According to the U.S. Bureau of Labor Statistics, state and local government salaries are 34 percent higher than those for private sector jobs. Okay, that’s partly because government workers tend to have white-collar jobs. Benefits, 70 percent higher for these workers, are the real rub. And benefits for government retirees are the most flagrant. They’ve become a national scandal, a fiscal nightmare for states, cities, and towns, and an example of unfairness of the sort liberals routinely complain about but are mostly silent about just now.

Let’s start with horror stories of pensions run amok. If these tales of wretched excess at the expense of taxpayers don’t infuriate you, you’re jaded from decades of overindulgence by governments large and small:

• In Contra Costa, California, the final salary of one fire chief, 51, was $221,000. He was given an annual, guaranteed pension of $284,000. Another chief, 50, whose final salary was $185,000, got a pension of $241,000. Credit the Contra Costa Times with uncovering this.

• Christie cited two tales in February when he declared a state of fiscal emergency in New Jersey. One retiree, 49, paid “a total of $124,000 towards his retirement pension and health benefits. What will we pay him? $3.3 million in pension payments and health benefits.” A retired teacher paid $62,000. She’ll get “$1.4 million in pension benefits and another $215,000 in health care benefit premiums over her lifetime.”

• In New York, a pensioner in the state retirement system received $641,000 in state payments in a single year. He was a triple dipper. He had a pension of $261,000, the highest in the state. He had a post in the state university system in which he made $280,000. And he was paid $100,000 a year as a consultant for the agency from which he’d retired, the teachers’ retirement system.

• Except for new hires, state workers in New York can retire at 55 with guaranteed benefits to which they contribute only in their first 10 years of work. They pay no state income tax on their pensions, and overtime is counted in computing the size of pensions. “Compared with the average New York worker, state and local government employees receive the gold standard of pensions,” the Syracuse Post-Standard said last year.

• Also in New York, the retirement system is riddled with lucrative pensions for retirees who were fired or convicted of crimes related to their state jobs. Former comptroller Alan Hevesi, who once ran the state’s $154 billion pension fund, was found guilty of defrauding the state. Yet he’s got a pension of $104,123.

• In California, 9,111 retired government workers have pensions of more than $100,000. One retiree draws an annual pension of $509,664. Among retired teachers, 3,065 receive more than $100,000. One gets $285,460. Pensions for retired state workers and teachers will rise 2 percent this year, though Social Security recipients aren’t getting any cost-of-living increase. The hike in California isn’t tied to inflation.

• The city of Vallejo, California, declared bankruptcy in 2008, largely because the payroll for police, firefighters, and their pensions and overtime consumed three-fourths of the budget. City employees could retire at 55 with 81 percent of their last year’s salary guaranteed as pensions. In bankruptcy negotiations, however, Vallejo officials declined to reduce current pensions.

• In San Luis Obispo, California, the county spends more than five times more on pensions than it does on prosecuting criminals, the Sacramento Bee reported. Pensions are 11.2 percent of the budget. “The old joke is that General Motors is just a health insurance company that makes cars on the side,” county supervisor Adam Hill said. “My concern is that the county government is becoming a pension provider that provides government services on the side.”

Recent Blog Posts