Outrageous public pensions

What would you think about the government cutting the paychecks of
executives running those bailed-out banks to about, or even less than,
what teachers earn? Make that what retired teachers receive in pensions.

Most
Americans probably would say, "Wow, what a great idea. Teachers deserve
a lot more money. And those bozo executives should be punished for
nearly pushing America into the financial abyss."

My mind admittedly works in strange ways. So when I saw last week's news that the Federal Reserve
Board and Ken Feinberg (the federal executive compensation czar) were
moving to limit top executive salaries at a bunch of banks, my mind
slipped to something else I saw then: The eighth annual study by
National Taxpayers United of Illinois of the state's top 100 government
pension payouts.

It reveals that scores of administrators or
teachers in the state public education and higher education systems
could receive larger retirement checks than the senior executives
carrying the burden of repairing the nation's banking system.

Wow, indeed.
Admittedly,
this is a vague and challengeable comparison, partly because the
numbers cited by the feds are vague, if not mysterious. Feinberg is in
charge of setting compensation for 175 executives at seven companies
still using money from the Troubled Asset Relief Program (TARP): Citigroup, AIG, Bank of America, General Motors,
Chrysler, GMAC and Chrysler Financial. Some of those salaries he said
could be cut by 90 percent; top salaries at AIG's financial products
division could be limited to $200,000. Feinberg said in most cases the
cash salary would be capped at $500,000. They still could make more
with stock grants and bonuses tied to company performance, but even
those deals face new restraints.

Since the taxpayers have such
a large investment in these companies, tying compensation to
performance sounds reasonable. Even though the banks will be challenged
to find and keep the talent necessary to do the job.

For its
part, the Fed is focusing on 28 banks, reviewing their executive pay
practices, hoping that they'll set a precedent that'll spread through
the entire banking system. The Fed argues that because it regulates the
banks, it has the authority to conduct such reviews and, presumably,
force the executives into lower pay brackets. What the review will be
based on isn't clear, at least to me.

As for the retired
Illinois school administrators and teachers, here are the numbers:
3,597 retired government employees of all types (including educators)
reaped more than $100,000 in pension benefits for fiscal year 2009,
ending June 30. All but three of the top 100 are educators. The top 49
got more than $200,000, putting them perhaps in the lower ranks of the
nation's highest paid bank executives, as determined by the Fed and the
Obama administration. Tapas K. Das Gupta, a retired University of Illinois at Chicago medical professor, headed the list, last year receiving $390,716, or $32,560 a month.

Not
to make too much of the comparisons, but one can ask: If the public has
a right to cap outrageous private sector salaries, then why shouldn't
it be likewise able to cap outrageous retirement benefits? Yes, I said
outrageous. For all the good work performed by educators, why are they
entitled to earn two, three or four times more in retirement than what
the average working stiff in Illinois makes punching the clock? That
would be about $54,000 in 2007, according to the Census Bureau's 2009
Statistical Abstract.

Public pensions are at the heart of what ails so many government budgets, and Chicago and Illinois are clearly no exception. Mayor Richard M. Daley's
disastrous 2010 budget notes that in 2010, 43.3 percent of the city's
general tax levy, or $345 million, will be used to fund pension
contributions for city employees. National Taxpayers United of Illinois
notes that the average suburban public high school teacher retires at
age 55 with a salary of $100,000 a year, plus health benefits.

The
state constitution protects existing pensions, but the taxpayers group
suggests several steps to reduce the future pension burden on the
public and help raise the state out of its financial crisis. Among
them: increase the employee pension contribution by 5 percent, and
require public employees to start paying for at least some of their
retirement health benefits, say 3 percent of their paycheck and $250 a
month in retirement.

Such suggestions will shock some government
employees, naive in their belief that they are not exceptionally well
treated and comfortable thinking that they are getting everything that
they deserve. Humbly, I'll raise my own voice to suggest that taxpayers
deserve better.

This column also appeared in the ChicagoTribune

Comments

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  • Sorry, but that's a cheap and pathetically over-worked shot, Dennis! I happen to be one of those teachers you and others have found an easy target for your current populist rage. You know, rage is a funny thing in a democracy. It's always there just simmering under the surface, looking for a target. Once we're through with the really fat cats, hell, why not keep pressing the vigilante a few miles further? Yep, those profanely rich public school teachers whose retirement funds (mostly paid from their own checks) look like an easy target!! Only the FACTS show (and you I assume know this) that the BIG pensions belong to under 5%, and are almost always administrators not classroom teachers.

    Now look, a free press is one thing, but a carefree press is another. The fact that teacher salaries are public domain makes it easy on a slow news day to haul out in front of the journalistic firing squad. I wonder how many journalists would be willing to post THEIR salaries...?

    I'm a little disappointed, Dennis.

  • I am more than disappointed - I am sad that you chose to not let facts stand in the way of your opinion. I believe it was Joseph Pulitzer who said "Accuracy, accuracy, accuracy".

    As you know, we have several mutual friends who are retired elementary, junior high and high school teachers, including my wife.

    Case 1. A retired New Trier HS math teacher. He did not retire at age 55 to reap the $100,000 boondoggle your source claims as the average, and I know for a fact that he receives far less than that. By the way, a mathematical average is the least accurate of all the measures of central tendency. (I should know, since I majored in statistics at the UofI.) If you don't get the top retirement from New Trier, then where do you get it?

    Case 2. A retired junior high teacher who wanted to retire earlier than 60, and so she contributed more than $18,000 to TRS in order to do this.

    Case 3. My wife. She retired at 60 from a local elementary school after a total of well over 30 years of service. She contributed a great deal to TRS over that time, with contributions peaking during her last few years when the system changed drastically.

    What you have also done is to ally yourself with another mutual acquaintance, who I'll call "Ron". Ron believes that all teachers are worthless individuals who absolutely do not deserve the money they receive, before or during retirement. I would challenge you or him to produce letters from grateful parents thanking my wife for her caring approach to their childrens' education. I saved all of those letters and you are welcome to see them should we ever get together again.

    My wife, being a much more charitable person than I, said "Forget it - he's just ranting because that's what he's paid to do". I'm surprised that I am only the 2nd person to respond to your rant.

    Good luck in the future. For the foreseeable future our friendship is on hiatus. Please don't email me.

  • BobM -- Each of your "cases" is similar to those I know. Shoot-from-the-hip criticisms of teacher pensions are worse than disappointing and sad -- they create the kind of ill-informed blather about teacher worthlessness....Charles Addams said it best when he said: "Teachers affect eternity because they never know where their influence stops." ...like you, I have the letters to illustrate the point...I think gun-slinging critics never bothered teachers when they were working at the poverty level...only now that some have begun catching up to say the factory workers... altho still a distance from some journalists

  • For some light reading on the subject:

    Understanding school pensions. One view: http://www.thechampion.org/article.asp?id=2053

    How to calculate a teacher

  • I have to defend my friend, Dennis Byrne. Government pensions are out of control and not just teachers. My mother was a Chicago public school teacher. She retired in 1980 and her pension was a lowly 9000; increasing up to her passing in 2000 to about 15000. She evidently retired before the politicians were bought by the teachers unions. My stepfather on the other hand, retired from the post office in 1972 at age 55 and his pension started at 14k but was up to 42k when he passed in 1992 and my mom got half of his pension for the rest of her life.

    Today, teachers are making far more and their pension have gone up commensurately. The trouble is that these pensions are just way too high and are putting these states in deep financial distress. Part of the problem is that it has been easy for some states to defer the proper contributions, to be sure, but the other part is that teachers and administrators have been able to increase their salaries locally while foisting the pension benefits on the state as a whole. This has been done in grand fashion for superintendents who have had their salaries driven up massively at the end of their careers so that their pensions are likewise driven up.

    This isn't limited to teachers and Dennis I am sure would agree with that. I have a friend who was a political appointee in a prior administration for a very short term - about 6 years I think - and he now gets 20k or so a year in pension even though he is still earning a living elsewhere and is still under age 60. Another relative is a teacher who retired at age 55 and moved to another state where she is working as a teacher again and making 50k plus while drawing a pension of more than 50k. Not bad and certainly better than most jobs in the private sector.

    It isn't that teachers don't earn their pay; I am sure they do. And most teachers do a good job. It is just that there are a lot of teachers and there a lot of people who want to be teachers. When you have a profession with a lot of supply and not much of a barrier to entry, salaries should be commensurately lower. In the private sector, few people have the qualifications and leadership ability to be a ceo; that is why they get paid a lot. they have a limited time to prove themselves and most of the time they are tested severely and surmount a serious competition to get to their positions. Not so in government service so the two are not comparable.

    The real problem is that teachers and other government positions have their salaries set by politicians who are then elected to their positions with the help of union dues from the same employee unions that are representing the employees whose salaries are set by the politicans. This circular benefit society is engineered to the detriment of taxpayers, now and more so in the future, when our children and grandchildren get stuck with the bill.

    The answer is to make money much less necessary for politicians. How? Reduce the size of their districts to 3000 voters or so, making big money and big media unnecessary and even undesirable. This would necessitate much larger assemblies or legislatures, but with no salaries or benefits, costs would go down. Constituent service would be much better and more representation would be achieved with such small districts. Most importantly, career politicians would exit without the pay and benefits and we would get policies that are rational and not just enacted because someone paid for them.

  • Well here it is -- the classic game of shuffle the numbers. The above comments and source references engage in the oldest of these shuffles -- projections. If X retires at this age and if X is earning this salary and if X lives out these numbers of years >>> then the shuffle comes up with X reaching some enormous grand totals. Totals, my friends, that exist on paper but hardly ever in flesh-and-blood reality!

    Yes, I have a vested interest being a teacher, but I really can't be impressed with shuffling theoretical numbers and then focusing the shuffle chiefly on the most excessive results. Sorry, but that is a mathematical game anyone can play with any profession or union. Including yours.

    Not only is this a one-sided approach, it concentrates only on what the X's are getting and never on what they've been putting in. Sorry, guys, I'd be far more impressed if you would have come up with a shuffle that would include YOUR story and not only OURS

  • Dennis,

    I said bad things to you in public and even though I apologized on the phone this morning, I need to do it here in public. I don't retract what I said with the exception of the last paragraph - that was uncalled for.

    I also see that I made a typo/error when I spoke of the letters my wife received from grateful parents. Obviously, neither you nor Ron could get letters, but I think you know what I meant.

    As I said this morning, teachers can change lives for the better and my wife was one of the best at doing just that. When some of her younger friends were still working at the school where she taught, they would accept only her as a substitute. I'm not saying that she was the only good teacher in town - all of her friends would also qualify for that sort of accolade.

    Since she retired the local board (District 28) has eliminated the generous raises during the last three years to help raise the average pay for the final three years on which TRS bases its calculations. Actually, I think it was Blago who insisted on that.

    Of all of the public employees who retire, I believe that teachers deserve what they receive. In the same vein, I would certainly hope that police and fire department retirees get equally good treatment. At least my wife wasn't putting her life on the line every time she went to school.

    Your friend (once again)

    Bob

  • In reply to BobM:

    Bob, glad we're friends again. As before in our long years of friendship, we can agree to disagree. You are rightfully proud of your wife (and all our other friends who are teachers); my own children benefited greatly from their guidance and inspiration. Still, the problem remains; Chicago and Illinois budgets are in serious trouble. Most analysts agree that some of the problem is the funding of pensions. Some proposals would address that problem by, for example, increasing the share that new employees contribute. No one, to my knowledge, is suggesting a reduction in existing pensions (especially as there is a constitutional prohibition against it). A healthy debate on such matters as we go forward is welcome, I hope.

  • In reply to BobM:

    Good to see public dissent doesn't have to destroy personal friendships. This does, however, raise that old conundrum about at what point does arguing transition into consensus? One of the problems of democracy -- especially accentuated by a million-a- minute blogs-- is we become an entire army of generals. Dennis, how does a blogger respond to that...I mean besides just dragging out the 1st Amendment?

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