The Wall Street Journal had an excellent article on the desperate financial situations of the states in this country. The article was full of fascinating and sobering facts:
1. State pensions are underfunded be $1 trillion.
2. States on average have only set aside 7.1% of retiree healthcare and non-pension benefits and 20 states have set aside no money.
3. Private payrolls have decreased 7.4%, state and local payrolls remain unchanged.
4. Local and state labor costs were $1.1 trillion in 2008, accounting for half of the spending.
5. The past social contract of government workers receiving lower wages in exchange for earlier retirement and generous pension programs is gone.
- Government wages are now an average of 34% higher than the private sector
- Benefits are 70% higher than the private sector
- Health insurance costs for public workers are 2.18 times higher than private sector workers
6. 37% of public workers are unionized compared to 7.2% in the private sector.
7. 84% of municipal workers have guaranteed pension retirement compared to 21% private sector
- Public sector pensions pay twice as much as private sector
- "Public-sector retirement costs also are high because many can retire at age 55 after 30 years of employment with pensions equal to 60% or more of final salary, which is often jacked up by lots of overtime in final working years."
- "In some states, employees can "double dip" by retiring early and then resuming their previous jobs or taking other government positions. So they get salaries and pensions at the same time."
This is just one of the legion examples proving how easy it is to spend someone else's money.
You can read proposed solutions in A. Gary Shiller's article here.
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