States Should Follow Federal Example on Pensions and Health Care Costs

With skyrocketing pension costs the primary economic threat to many states, it is obvious that there needs to be reform. State workers can still retire with full pensions that are often padded near the end of their careers. The costs are exceeding the contributions and the income made from the pension funds as many more workers retire. Due to these huge costs States are being forced to make huge cuts to many important programs from education, to health care to aid for the needy and in some cases are threatened with bankruptcy. Many State workers also have health care benefits that require no contribution from them. Both of these programs are unrealistic and small modifications could save them and the finances of many States and Cities.

A primary example I give you is the benefits for Federal Employees. Now the noise you hear from Washington is what a drain Federal Employees are on the budget and how highly paid we are. People also assume that we also have a fully funded pension and health care costs. However, upon closer inspection, federal employees are a bargain for the taxpayer. The days of the fully funded pension have been gone since 1986. Any employee who began with the Federal Government since that time as an Individual Retirement Account similar to that in the private sector as their primary source of retirement funding. These are contributions the employee makes to his/her account. Like many private sector employees we do get a partial match from our employer, but this is only a small fraction of what would have been paid under the old pension system. Employees get their choice of mix of retirement funds with different risk levels, but it is a private investment. This along with our Social Security constitutes our retirement savings.

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