Friday, March 8, 2013

Unfunded Pension Liabilities

Retired UCONN Coach Calhoun
2012 CT Top Wage Earner

Unfunded pension liabilities are the root of the financial problems facing virtually every level of government today. The US Postal Service, for example, would be solvent today if it were not for pension obligations. A number of cities are approaching bankruptcy because of pension liabilities.  Stockton, California is already in bankruptcy, and the Governor of Michigan has just put the city of Detroit under an emergency manager.

My own state of Connecticut is facing a billion dollar deficit in the next fiscal year and the governor is desperately trying to seek new revenues after his recent massive tax hike failed to produce the needed revenue. Closer to home the town of Fairfield has recently been presented with a proposed budget increase of over 6.5%, much of it due to town pension obligations.

The Yankee Institute for Public Policy has recently reported that 1223 Connecticut state employees currently make more than Governor Dannell Malloy’s salary of $150000 per year. Topping the list in 2012 was UCONN’s legendary basketball coach Jim Calhoun who made $2,865,769. Geno Auriemma, the women’s basketball coach, was second on the list at $1,829,052. At the bottom of the top ten was Warde Manuel, UCONN’s Athletic director who made a paltry $551,305.

Doctors at the UCONN medical center made up the balance of the top ten list. For example, Hilary Onyluke, the Chief of the division of Neurosurgery made $1,030,000, and John Nulsun, The Director of the Center for Reproductive Services, made $917,000.

I do not want to question or criticize the salaries paid to these employees while they perform their valuable jobs, but I think it is about time that the State of Connecticut consider why the people of Connecticut have to provide these employees with pensions after they retire.

The Yankee Institute reported that in 2102 more than 7700 state employees made more than $100000 per year while the average median household income in Connecticut was about $66000 per year. The Yankee Institute noted that half of the individuals making more than $150000 are associated with the University of Connecticut or its health center. Has anyone ever considered why people who make less than the median income should have to provide pensions for a minority who make two or three times that amount? 

Pensions were originally created to provide retirement income for state and municipal employees who were traditionally underpaid and who would not be ale to save for their own retirement. This is no longer the case as state and municipal employees have become a kind of new aristocracy with wage, benefit, and pension packages negotiated by powerful public service unions. Most residents of the State of Connecticut do not have anywhere near these benefits but still politicians demand that they fund the benefits of the new aristocracy.

Politicians never talk about the fact that most people in the private sector have great difficulty in funding their own retirement accounts. they only talk about unfunded public pensions. One of the causes of the French Revolution was the inequity in French society. Peasants paid taxes while aristocrats were exempt. Click here for an amusing but sad video on the California Pension aristocracy, or just view the video below. ###


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