What world do these State of Massachusetts employees live in ? Pension fund still offering bonuses

A friend who does mental health counseling has a line he uses when he runs into someone who is saying or doing something that seems divorced from reality -

" What color is the sky in your world ?"

The State of Massachusetts Pension Fund Agency must have a sky that is green, the same as the bonuses they will be helping themselves to this year. The fund lost a total of $5 Billion dollars over the last three year but the managers and staff will reap thousands of dollars in bonuses. In any other professional job, if you were managing other people's money and lost $5 Billion, you'd be out of a job. Not here in Hack-o-ramaville. The fools on Beacon Hill will hand them the extra cash when they are already among some of the highest paid employees in the state.

These managers were criticized by David J. Holway, president of the National Association of Government Employees, the union that represents 22,000 state, local, and county workers in Massachusetts. When a Union Leader is calling you greedy, you know you have gone pretty deep into the muck.

Rome burns and our POLS fiddle....Is it any wonder why people have lost faith in those who are supposed to be public servants as they have lined their pockets at the expense of all others and have no shame at all about what they are doing?


Pension fund still offering bonuses
Agency lost money over review period
By Frank Phillips Boston Globe - November 08, 2011

At a time when few public employees are getting raises, the agency that manages the state’s pension fund has earmarked more than a quarter of a million dollars for staff bonuses, including a possible $33,000 payment to the executive director, according to internal documents.

The bonuses, awarded through a performance-based compensation system adopted four years ago, are tied to a three-year period ending in June. During that time, the fund, which started at $50.6 billion, suffered deep losses before rebounding to $45.6 billion.

The compensation is based on investment benchmarks set by the Pension Reserves Investment Management (PRIM) board and not entirely on the fluctuating value of the fund.

The total amount of the bonuses is $267,328, most of which has already been paid. That represents 11.1 percent of the total staff salaries, according to documents obtained by the Globe, and comes just months after the agency handed out $152,000 in raises to its 25-member staff.

The agency’s top two executives will receive their extra pay over two years, a total of 14 percent if the fund meets benchmarks for one more fiscal year.

Executive director Michael G.Trotsky, who is paid $245,000 a year, will receive $33,238.

Similarly, the agency’s chief investment officer, Stanley P. Mavromates Jr., who has the same salary, will collect $34,780. Trotsky has only worked at the agency since August 2010, or less than a third of the period covered by the three years that bonuses are based on.

State Treasurer Steven Grossman, who chairs the PRIM board, said the agency is reviewing whether to continue the controversial incentive compensation system, which also awarded bonuses in 2008. He said he will await judgment until the board’s compensation committee, which was created just after he took office in January, completes its review. The staff has not had raises since 2006.

But he said the central argument in support of the pay system is that PRIM must consider the competition it faces from the private financial world to attract and keep top talent.

“Recruiting and retention of top flight managers is a major issue,’’ Grossman said. “This is not Wall Street. Anyone who wants to make Wall Street money should go to Wall Street - or State Street. We have to consider the importance of recruiting and retaining the most talented people we can find.’’

But some of those who received extra pay have little to do with investment policy.

For example, Trotsky’s secretary, Samantha Wong, got a $4,828 bonus. She has only worked at the agency for little more than a year. She also received a 3.3 percent raise. Another administrative assistant, Alyssa Smith, saw her $44,000 salary increase to $54,000, a 22 percent hike, along with a $4,884 bonus.

Trotsky said both women’s responsibilities had been expanded.

The bonuses come at a time when the public debate, both here and across the country, has focused on widening income gaps, large corporate payouts, and the economic struggles facing the middle class. Massachusetts has seen thousands of teachers, public safety officers, and others laid off or their benefits slashed because state and local governments are making sharp budget cuts.

“These people must be living in some sort of bubble,’’ said David J. Holway, president of the National Association of Government Employees, the union that represents 22,000 state, local, and county workers in Massachusetts.

“For these highly paid individuals to have a payment scheme that gives them huge bonuses for their performance is totally outrageous. Obviously, they haven’t gone by Occupy Boston to see how people are feeling about how the rich are getting richer and the working families are struggling.’’

He said his union is demanding that Grossman rescind the policy.

Trotsky defended the bonus system, saying the pension fund had its second best year ever in the fiscal year that ended in June, in terms of its asset growth. He also said that the fund, when compared to other large public funds nationally, is in the top third in terms of performance, but is in the bottom quarter in terms of pay.

He said paying this amount of money in bonuses to generate high returns is money well spent.

Under the bonus system, pension fund employees can collect bonuses amounting to 30 to 40 percent of their salaries if they meet or exceed benchmarks over a three-year period. The last time the fund gave out bonuses was in September 2008, based on the three-year period ending the previous June 30. At that time, the fund was valued at $50.6 billion. It dropped to $37.6 billion the following year and then rebounded slightly to $41.2 billion by June 2010.

Under the incentive compensation plan, the bonuses kick in when the fund’s performance exceeds the returns of the investment indexes that reflect the mix of the pension fund’s assets. If the decline in the fund’s value is less than the indexes, the agency’s staff can earn bonuses according to a specific performance scale. But if the indexes are not met, the employees do not get the extra money, even if the fund’s assets increase.

The plan was devised by PRIM’s former executive director Michael Travaglini, who argued that the system promoted value rather than conservative investment strategies. He quit his post in 2010 to join a Chicago investment firm when the Legislature appeared ready to sharply curb the performance bonuses. He had earned a $68,000 bonus in 2008. He said he wanted to go to the private sector and make more money to provide for his family

His departure came in the midst of a political advertising campaign by the Republican Governors Association aimed at Timothy P. Cahill, then state treasurer and an independent candidate for governor.

The ads attacked Cahill for his role as chairman of the PRIM board when it approved large bonuses despite steep losses in 2008.

Public Pension Hygiene Act - Making the Pols come clean on how deep the $$$$$ hole is in regards to unfunded public pensions

The State Governments have not been 100% honest with the taxpayers, and that has allowed them to dig a very, very deep hole that they will look for the Feds to fill in for them. This hole is $3.5 TRILLION Dollars deep.... That "hole" is the pensions promised to all the State Hacks who have retired early, double dipped, and set themselves up for a nice comfy retirement (backed by the Unions) even while the taxpayers have seen their retirements dry up like a puddle on a hot July afternoon.

While I don't want to see anyone deprived of their pensions, I don't see the equity in insulating Public Sector retirees from losses while we ignored millions of private sector employees who had the rug pulled out from under them. Just because you worked for the Town or the State shouldn't set you up for some "Divine Right" that the average Joe wouldn't have.....after all, the "average Joe" has been footing the bill all along.


Public Pension Hygiene Act
The first reform step is exposing the true size of the funding hole
Opinion - Wall Street Journal - 01/22/11

We're so accustomed to misnamed legislation like the Employee Free Choice Act (card check) that it's hard to believe that a welcome proposal called the Public Employee Pension Transparency Act describes what it actually purports to do. To wit, prohibit public pension bailouts by the federal government and expose the $3.5 trillion of unfunded public pension liabilities that local and state governments have obscured.

Most state and local governments currently use their own estimated rate of return on their investments to discount their liabilities. By projecting unrealistically high rates of return, states minimize their unfunded liabilities, at least on paper. Lower unfunded liabilities in turn allow them to reduce how much they and public employees must contribute to their pension funds. Inflated investment assumptions are one reason that public pension funds are unfunded to the tune of $3.5 trillion.

Public pensions typically assume an 8% annual return on average, but over the past five years state pension funds with more than $5 billion in assets have earned only 4.5%. Taxpayers must make up the difference between what the funds earn and what they need to pay retirees. For Californians that is roughly $5 billion this year.

Local taxpayers are already seeing their services whacked and taxes raised to fill these pension holes. University of California students will have to pony up 8% more next year for tuition to offset an expected $500 million in state budget cuts. Illinois residents will soon pay 67% more in income taxes, but taxpayers won't feel the full brunt for another decade when the funds begin running out of money. When Chicago's pension fund goes dry around 2019, over half of the city's revenue will be dedicated to pensions.

In the 1950s and 1960s, many private employers obscured their liabilities the way governments are doing today, though they didn't have a public backstop. Many funds went broke. In 1974 Congress established minimum funding requirements and penalized companies that underfunded pensions. The law also required companies to report and discount their liabilities using a more conservative rate of return.

These changes exploded liabilities and prompted many companies to switch from defined-benefit plans to defined-contribution plans like 401(k)s. While a majority of private workers now have defined-contribution plans, defined-benefit plans remain the norm in government.

Enter the Public Employee Pension Transparency Act, which is sponsored by House Republicans Devin Nunes and Darrell Issa of California and Wisconsin's Paul Ryan. Their bill would encourage governments to switch to defined-contribution plans by revealing the true magnitude of their unfunded liabilities. States and municipalities would have to report their liabilities to the U.S. Treasury using their own rosy investment forecasts as well as a more realistic Treasury bond rate (to be determined by a formula).

This data would make clear how much taxpayers potentially owe and increase pressure on lawmakers to fix their plans. For instance, Illinois estimated in 2009 that it had a roughly $85 billion unfunded liability. Using a Treasury discount rate, that unfunded liability balloons to $167 billion.

Out of respect for state sovereignty, the federal government shouldn't and can't tell local governments how to run or fund their pensions. But the bill doesn't do so and it also doesn't force states to fund their plans using a lower discount rate. States don't even have to comply with the law, though they would forego their ability to sell federally subsidized, tax-exempt bonds if they don't.

The bill may not persuade states like Illinois and California to revamp their pensions, but it will reveal how broken they are—and that's a start

NJ Governor - "Sick leave is for when you're sick- It's not supposed to be a second taxpayer-funded retirement payment."

Our man in New Jersey strikes again at the rigged systems that reward the feckless hacks that are on the state employment rolls - Limiting how they can rig the system in their favor and cutting the WASTE that has been allowed for far too long....

NOW, if we can only get someone like him into the Massachusetts State House....we tried but POTUS' Buddy SPEND-IT-ALL Deval Patrick got reelected by the DEMS and Unions....The economic crisis might force Deval's hand but he is a "tool" for the unions so we will keep paying idiot hacks in Massachusetts, even when they don't deserve the extra pay they will help themselves to.....Greedy Bastards.


NJ gov. signs law capping pay through arbitration
By David Porter
Associated Press / December 21, 2010

WAYNE, N.J.—Gov. Chris Christie signed a bill Tuesday that caps increases to police and firefighter pay awarded through arbitration, a measure he called the most important of the proposals in his so-called toolkit to help towns control costs.

Tweet Be the first to Tweet this!Yahoo! Buzz ShareThis With Democratic Senate President Stephen Sweeney looking on, Christie hailed the passage of the bill as a testament to bipartisan cooperation.

"We've proven over the last year that Republicans and Democrats can get things done together," he said. "Mayors have been yelling and screaming for these kinds of reforms for years."

The bill caps salary awards, including longevity pay and automatic step increases, for police and firefighters at 2 percent when their unions engage arbitrators to settle contracts.

It also fast-tracks the arbitration process by giving arbitrators a 45-day window to rule on disputes and limiting the appeal process to 30 days. In addition, arbitrators' pay will be capped at $1,000 per day or $7,500 per case, whichever sum is lower.

Christie said Tuesday that some cases in arbitration have dragged on for years, and that fear of excessive arbitration awards has hampered some towns' ability to conduct effective contract negotiations.

"Arbitration works when it's balanced," said Sweeney, who is an organizer for the International Association of Ironworkers. "But the system has gotten out of whack over the last 20 years."

Pension and health care costs are not included in the cap. Christie said the cap will lapse in April 2014, at which time lawmakers will review its effects and consider modifications.

"This is the most significant individual bill in the toolkit," Christie said.

Municipalities have been clamoring for tools to help them control costs since the Legislature approved -- and Christie signed -- a 2 percent cap on annual property tax increases that goes into effect Jan. 1.

Christie said residents could see a difference in their tax bills by August, but that the effect likely won't be seen until the end of 2011 or beginning of 2012.

"It's one of the major issues we're dealing with," Hoboken Mayor Dawn Zimmer said after the signing. "This gives us the tools going forward to make sure it's fair for the residents of the city of Hoboken and of New Jersey."

The governor said another primary target is sick leave policies for public employees, some of whom routinely get tens of thousands of dollars in unused sick time when they retire. Christie noted a case in Parsippany in which four police officers reportedly were due a total of $900,000 upon retirement.

Christie signed a bill this year that limits state employees to receiving $15,000, and he said Tuesday a similar measure in the Legislature for school, government and public safety workers needs to be toughened.

"Sick leave is for when you're sick," he said. "It's not supposed to be a second taxpayer-funded retirement payment."

The “New Tammany Hall,” - Jury Rigged Public Pensions and the incestuous alliance between public officials and labor...

New Jersey has become famous for more than a bunch of 20-something MTV idiots in a beach house and the home of Bruce Springsteen. New Jersey has become the "battleground" for the fight regarding public employee pension costs and how much they are crippling the budgets of our states & towns. Governor Chris Christie is a central figure in this fight....I wrote a bit about this subject earlier -- see enclosed link

http://usnavyjeep.blogspot.com/2010/11/our-man-in-nj-keeps-up-efforts-to-bring.html

New Jersey may be the frontlines of this fight presently but my home state of Massachusetts is not far behind.

The anger is due to the fact that private sector employees saw pensions evaporate more than a decade ago, but public employees have an incestuous relationship with politicians which has insulated them from the same experience of seeing pensions disappear or be capped.

I agree that we have an obligation to those, public & private employees who paid into a pension. They took money from their checks and that should be theirs. I highly disagree with those who act like a promise of "money & benefits for life" with no investment of their own are owed what someone promised them 20-30 years ago as that promise was made on "projections" and like a New England weather forecast, those projections have proven to be wrong. Even more unacceptable are those who double dipped and jury rigged the system because of loopholes...These criminals should be held accountable as they are "stealing" by any reasonable person's definition of the word ":theft" and have no remorse about doing so or who it hurts.

" In California, pension costs now crowd out spending for parks, public schools and state universities; in Illinois, spiraling pension costs threaten the state with insolvency. " - When the needs of a minority of connected insiders is placed ahead of the needs of ALL OTHER CITIZENS, you can expect some serious anger.

Reform of a jury-rigged system that rewards insiders and greedy union officials is as much of a threat to the security of our state and local governments as any made by the bastards on Wall Street.....The only difference is that one set of greedy bastards works in Finance and the other group were supposed to be working for the citizens....both groups are greedy and don't care who else must be neglected as long as they get what they want.

Well I feel hopeful because both sides are facing the reality that the majority (the rest of us) will make sure that the best interest of the citizens is the focus of changes that will be made in these jury rigged systems in the very near future. Here's hoping that I am right as if I am, things can only get better. If I am wrong, then things will only get worse. And that is not something we can tolerate.


Public Workers Face Outrage as Budget Crises Grow
By MICHAEL POWELL
Published: January 1, 2011

FLEMINGTON, N.J. — Ever since Marie Corfield’s confrontation with Gov. Chris Christie this fall over the state’s education cuts became a YouTube classic, she has received a stream of vituperative e-mails and Facebook postings.

Marie Corfield, a teacher in Flemington, N.J., challenged Gov. Chris Christie over state education cuts at a town hall meeting in September. Their tense exchange was posted on YouTube.

“People I don’t even know are calling me horrible names,” said Ms. Corfield, an art teacher who had pleaded the case of struggling teachers. “The mantra is that the problem is the unions, the unions, the unions.”

Across the nation, a rising irritation with public employee unions is palpable, as a wounded economy has blown gaping holes in state, city and town budgets, and revealed that some public pension funds dangle perilously close to bankruptcy. In California, New York, Michigan and New Jersey, states where public unions wield much power and the culture historically tends to be pro-labor, even longtime liberal political leaders have demanded concessions — wage freezes, benefit cuts and tougher work rules.

It is an angry conversation. Union chiefs, who sometimes persuaded members to take pension sweeteners in lieu of raises, are loath to surrender ground. Taxpayers are split between those who want cuts and those who hope that rising tax receipts might bring easier choices.

And a growing cadre of political leaders and municipal finance experts argue that much of the edifice of municipal and state finance is jury-rigged and, without new revenue, perhaps unsustainable. Too many political leaders, they argue, acted too irresponsibly, failing to either raise taxes or cut spending.

A brutal reckoning awaits, they say.

These battles play out in many corners, but few are more passionate than in New Jersey, where politics tend toward the moderately liberal and nearly 20 percent of the work force is unionized (compared with less than 14 percent nationally). From tony horse-country towns to middle-class suburbs to hard-edged cities, property tax and unemployment rates are high, and budgets are pools of red ink.

A new regime in state politics is venting frustration less at Goldman Sachs executives (Governor Christie vetoed a proposed “millionaire’s tax” this year) than at unions. Newark recently laid off police officers after they refused to accept cuts, and Camden has threatened to lay off half of its officers in January.

Fred Siegel, a historian at the conservative-leaning Manhattan Institute, has written of the “New Tammany Hall,” which he describes as the incestuous alliance between public officials and labor.

“Public unions have had no natural adversary; they give politicians political support and get good contracts back,” Mr. Siegel said. “It’s uniquely dysfunctional.”

Even if that is so, this battle comes woven with complications. Across the nation in the last two years, public workers have experienced furloughs and pay cuts. Local governments shed 212,000 jobs last year.

A raft of recent studies found that public salaries, even with benefits included, are equivalent to or lag slightly behind those of private sector workers. The Manhattan Institute, which is not terribly sympathetic to unions, studied New Jersey and concluded that teachers earned wages roughly comparable to people in the private sector with a similar education.

Benefits tend to be the sorest point. From Illinois to New Jersey, politicians have refused to pay into pension funds, creating deeper and deeper shortfalls.

In California, pension costs now crowd out spending for parks, public schools and state universities; in Illinois, spiraling pension costs threaten the state with insolvency.

And taxpayer resentment simmers.

Trouble in New Jersey

To venture into Washington Township in southern New Jersey is to walk the frayed line between taxpayer and public employees, and to hear anger and ambivalence. So many Philadelphians have flocked here over the years that locals call it “South Philly with grass.”

These expatriates tend to be Democrats and union members, or sons and daughters of the same. But property taxes are rising fast, and voters favored Governor Christie, a Republican. Bill Rahl, a graying plug of a retiree, squints and holds his hand against his throat. “I’m up to here with taxes, I can’t breathe, O.K.?” he says. “I don’t know about asking anyone to give up a pension. Just don’t ask for no more.”

Governor Christie faced a vast deficit when he took office last January, and much of the federal stimulus aid for schools was exhausted by June. So he cut deeply into state aid for education; Washington Township lost $900,000. That forced the town to rely principally on property taxes. (Few states lean as heavily on property taxes to finance education; New Jersey ranks 45th in state aid to education.) The town turned its construction office over to a private contractor and shed a few employees.

Assemblyman Paul D. Moriarty, a liberal Democrat, served four years as mayor of Washington Township. As the bill for pension and health benefits for town employees soared, he struggled to explain this to constituents.

“We really should not receive benefits any better than the people we serve,” he says. “It leads to a lot of resentment against public employees.”

All of which sounds logical, except that, as Mr. Moriarty also acknowledges, such thinking also “leads to a race to the bottom.” That is, as businesses cut private sector benefits, pressure grows on government to cut pay and benefits for its employees.

Robert Master, political director for the Communication Workers of America District 1, which represents 40,000 state workers, speaks to that difficulty.

“The subtext of Christie’s message to a lot of people is that ‘you’re paying for benefits you’ll never have,’ ” he says. “Our challenge is how to defend middle-class health and retirement security, not just for our members but for all working families, when over the past 30 years retirement and health care in the private sector have been essentially demolished.”

This said, some union officials privately say that the teachers’ union, in its battle against cuts to salaries and benefits, misread Mr. Christie and the public temperament. Better to endorse a wage freeze, they say, than to argue that teachers should be held harmless against the economic storm.

In the past, union leaders, too, have proven adept at winning gains not just at the bargaining table. In 2000, union lobbyists persuaded legislators to cut five years off the retirement age for police and firefighters — a move criticized as a budget-buster by a state pension commission. The next year, the budget still was flush and union leaders persuaded the Republican dominated legislature to approve a 9 percent increase in pension benefits. (The legislators added a sweetener for their own pensions.)

Those labor leaders, however, proved less successful in persuading their legislative allies to pay for such benefits. For much of the last two decades, New Jersey has shortchanged its pension contribution.

Governor Christie talked about tough choices this past year — then skipped the state’s required $3.1 billion payment. Now New Jersey has a $53.9 billion unfunded pension liability.

A recent Monmouth University/Gannett New Jersey poll found a narrow plurality of respondents in the state in favor of ditching the pensions for a 401(k)-type program. Public pensions, however, run the gamut, from modest (the average local government pensioner makes less than $20,000 a year while teachers draw about $46,000) to the gilded variety for police and firefighters, some of whom collect six figures. And then there’s the political class, which has made an art form of pension collection.

Some politicians draw multiple pensions as county legislators, called freeholders, and as prosecutors or union leaders. Back in Washington Township, people tend to talk of state government as a casino with fixed craps tables.

A white-haired retired undercover police officer, whose wrap-around shades match his black Harley-Davidson jacket, pauses outside the Washington Township municipal building to consider the many targets. He did not want to give his name.

“Christie has all the good intentions in the world but has he hit the right people?” he says. “I understand pulling in belts, but you talking about janitors and cops, or the free-loading freeholder?”

Good Jobs, at What Cost?

So how much is too much? On their face, New Jersey’s public salaries are not exorbitant. The state has one of the highest per-capita incomes in the country, and the average teacher makes $66,597, which even with benefits is on par with or slightly behind similarly educated private sector workers, according to Jeffrey H. Keefe, a Rutgers professor who studied the issue for the liberal-leaning Economic Policy Institute.

Mr. Keefe, however, uncovered some intriguing class splits. Blue-collar public workers make more money than their private sector counterparts. For such jobs, public unions have established a higher wage floor.

The sense that public workers enjoy certain advantages is not a mirage. Public employees pay into their pension funds, but health benefits often come at a fraction of the cost of most private sector packages.

Government employment also tends to be more secure. When the economy crashed, federal stimulus dollars safeguarded many public jobs. The alternative, many economists point out, was to force towns and cities into extensive layoffs, even as unemployment hovered around 10 percent and millions of Americans sought help from public agencies.

But it accentuated the perception that public workers, however tenuously, inhabited a protected class. That’s a tough sell in Washington Township.

Ask Michael Tini, 54, who works as a card dealer in Atlantic City, about teacher salaries and benefits and he taps his head, not unsympathetically.

“Look, I understand that teachers are the brains of the operation, O.K.? But my hours are cut, and my taxes are killing me.”

He taps his head again. “They have got to take it in the ear, too.”

“The New Deal is demographically obsolete. You can’t fund the dream of the 1960s on the economy of 2010.”

This was an issue that I brought to the attention of many people when I was on the Town of Middleboro Personnel Board.....Not that anyone in local government gave a damn because they knew they were " in" the system, and had no worries about getting benefits for life.... The HACKS always took care of themselves first with an " I got mine" attitude and "don't give a damn who it hurts" outlook on anyone else.....

We are unable to sustain the amount of funds promised to people 20-30 years ago.....The choice that we will need to make is do we devote a majority of our funds to providing a very comfortable retirement for the privileged few who are "in" the system OR do we ensure that our governments is sustained to serve the need of the majority of our citizens ??? And there in lies the rub......
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Battle Looms Over Huge Costs of Public Pensions
By RON LIEBER
Published: August 6, 2010 - NY TIMES

There’s a class war coming to the world of government pensions.
Who should pay for the trillion-dollar pension gap?

The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever-escalating monthly pension benefits are breaking budgets nationwide.

The have-nots are taxpayers who don’t have generous pensions. Their

401(k)s or individual retirement accounts have taken a real beating in recent years and are not guaranteed. And soon, many of those people will be paying higher taxes or getting fewer state services as their states put more money aside to cover those pension checks.

At stake is at least $1 trillion. That’s trillion, with a “t,” as in titanic and terrifying.

The figure comes from

a study by the Pew Center on the States that came out in February. Pew estimated a $1 trillion gap as of fiscal 2008 between what states had promised workers in the way of retiree pension, health care and other benefits and the money they currently had to pay for it all. And some economists say that Pew is too conservative and the problem is two or three times as large.

So a question of extraordinary financial, political, legal and moral complexity emerges, something that every one of us will be taking into town meetings and voting booths for years to come: Given how wrong past pension projections were, who should pay to fill the 13-figure financing gap?
Consider what’s going on in Colorado — and what is likely to unfold in other states and municipalities around the country.

Earlier this year, in an act of rare political courage, a bipartisan coalition of state legislators passed a

pension overhaul bill. Among other things, the bill reduced the raise that people who are already retired get in their pension checks each year.

This sort of thing just isn’t done. States have asked current workers to contribute more, tweaked the formula for future hires or banned them from the pension plan altogether. But this was apparently the first time that state legislators had forced current retirees to share the pain.

Sharing the burden seems to be the obvious solution so we don’t continue to kick the problem into the future. “We have to take this on, if there is any way of bringing fiscal sanity to our children,” said former Gov. Richard Lamm of Colorado, a Democrat. “The New Deal is demographically obsolete. You can’t fund the dream of the 1960s on the economy of 2010.”

But in Colorado, some retirees and those eligible to retire still want to live that dream. So they sued the state to keep all of the annual cost-of-living increases they thought they would be getting in perpetuity.

The state’s case turns, in part, on whether it is an “actuarial necessity” for the Legislature to make a change. To Meredith Williams, executive director of the Public Employees’ Retirement Association, the state’s pension fund, the answer is pretty simple. “If something didn’t change, we would have run out of money in the foreseeable future,” he said. “So no one would have been paid anything.”

Meanwhile,

Gary R. Justus, a former teacher who is one of the lead plaintiffs in the case against the state, asks taxpayers in Colorado and elsewhere to consider an ethical question: Why is the state so quick to break its promises?

After all, he and others like him served their neighbors dutifully for decades. And along the way, state employees made big decisions (and built lifelong financial plans) based on retiring with a full pension that was promised to them in a contract that they say has the force of the state and federal constitutions standing behind it. To them it is deferred compensation, and taking it away is akin to not paying a contractor for paving state highways.

And actuarial necessity or not, Mr. Justus said he didn’t believe he should be responsible for past pension underfunding and the foolish risks that pension managers made with his money long after he retired in 2003.

The changes the Legislature made don’t seem like much: there’s currently a 2 percent cap in retirees’ cost-of-living adjustment for their pension checks instead of the 3.5 percent raise that many of them received before.

But

Stephen Pincus, a lawyer for the retirees who have filed suit, estimates that the change will cost pensioners with 30 years of service an average of $165,000 each over the next 20 years.
Mr. Justus, 62, who taught math for 29 years in the Denver public schools, says he thinks it could cost him half a million dollars if he lives another 30 years. He also notes that just about all state workers in Colorado do not (and cannot) pay into Social Security, so the pension is all retirees have to live on unless they have other savings.

No one disputes these figures. Instead, they apologize. “All I can say is that I am sorry,” said Brandon Shaffer, a Democrat, the president of the Colorado State Senate, who helped lead the bipartisan coalition that pushed through the changes. (He also had to break the news to his mom, a retired teacher.) “I am tremendously sympathetic. But as a steward of the public trust, this is what we had to do to preserve the

retirement fund.”

Taxpayers, whose payments are also helping to restock Colorado’s pension fund, may not be as sympathetic, though. The average retiree in the fund stopped working at the sprightly age of 58 and deposits a check for $2,883 each month. Many of them also got a 3.5 percent annual raise, no matter what inflation was, until the rules changed this year.

Private sector retirees who want their own monthly $2,883 check for life, complete with inflation adjustments, would need an immediate fixed annuity if they don’t have a pension. A 58-year-old male shopping for one from an A-rated

insurance company would have to hand over a minimum of $860,000, according to Craig Hemke of Buyapension.com. A woman would need at least $928,000, because of her longer life expectancy.

Who among aspiring retirees has a nest egg that size, let alone people with the same moderate earning history as many state employees? And who wants to pay to top off someone else’s pile of money via increased income taxes or a radical decline in state services?

If you find the argument of Colorado’s retirees wanting, let your local legislator know that you don’t want to be responsible for every last dollar necessary to cover pension guarantees gone horribly awry. After all, many government employee unions will be taking contrary positions and doing so rather loudly.

If you work for a state or local government, start saving money outside of the pension plan if you haven’t already, because that plan may not last for as long as you need it.

And if you’re a government retiree or getting close to the end of your career? Consider what it means to be a citizen in a community. And what it means to be civil instead of litigious, coming to the table and making a compromise before politicians shove it down your throat and you feel compelled to challenge them to a courthouse brawl.

“We have to do what unions call givebacks,” said Mr. Lamm, the former Colorado governor. “That’s the only way to sanity. Any other alternative, therein lies dragons.”