Many issues fall within the category: “Big Headline, Little Story.” Take offshore outsourcing. There are all sorts of scary news stories that suggest it’s a huge problem, even though it actually affects only a tiny slice of the labor force. Then there are other issues that really are huge problems, even though most in the media look at them and yawn. Here’s our George Passantino, writing in the OC Register, on one of those:
Just five years ago, California paid $160 million to support the retirement costs of state workers. This year, the state will kick in more than $2.6 billion, more than a 1,500 percent increase in five years. And by 2009, the taxpayer bill for state retirement costs is projected to hit $3.5 billion per year.
This is why it’s a really big problem:
When government pension promises are made, they are carved in stone. Unlike salaries which can be frozen or otherwise adjusted to cope with budget shortfalls, pension benefits are forever. That’s because courts have repeatedly ruled that once enhanced benefits are bestowed upon state employees, they can never be reduced. Equally troubling, the state’s traditional pension plans are vulnerable to election-year pandering and campaign promises that lead to irresponsible benefit increases that taxpayers are forced to finance without any say in the decisions.
And here’s the solution:
Shifting new state workers to a 401(k) plan would stabilize the state’s skyrocketing pension costs, while still allowing state workers to retire with dignity. Schwarzenegger’s proposal would put newly hired state workers in 401(k)-style accounts that the employee contributes to, with the state also contributing a portion. Upon retirement, the size of each employee’s pension would depend on the contributions made and the personalized investment strategy the employee used – unlike today’s guaranteed pensions that can pay many state workers 80 percent to 90 percent of their annual salaries for life.
Read the whole article here.