Byron Schlomach

Empty promises for government employees

Posted on April 27, 2011 | Author: Byron Schlomach
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A recent Arizona Republic series revealed how some government employees are abusing Arizona’s pension systems by artificially boosting their salaries to collect a bigger pension, or by “double-dipping” – working while collecting retirement. That has strained Arizona’s pension funds. Unfortunately, even eliminating these abuses would still leave Arizona’s pension systems deeply in the red by more than $50 billion.

In fact, if Arizona’s pension funds were private sector funds, federal government standards would put them in “red zone” critical status. Moreover, if the funds assumed a 5 percent rate of return instead of the current ridiculously optimistic 8 to 8.5 percent, none of Arizona’s pension funds would be more than 65 percent funded.

It turns out that governments in Arizona have been very generous in promises to employees. But those are likely to be empty promises unless policymakers get serious about reform.

Raising taxes isn’t an option. Already, taxpayers are forced to contribute $921 million more to public pension funds than they did in 2003, not to mention that taxpayers must also contribute to their own retirement accounts.

The legislature has started to rein in pension abuse and close the loopholes. But putting Arizona’s public pensions on the path to solvency will require some real reforms. In my report, “Defusing the Pension Bomb: Making Retirement Plans Solvent for All Public Workers,” I recommend specific reforms that can protect both public pensions and taxpayers. These reforms include placing new government employees in a 401(k)-style plan that they can own and manage. That would help ensure that government employees have retirement benefits without endangering taxpayers.

Dr. Byron Schlomach is director of the Goldwater Institute’s Center for Economic Prosperity.

Learn More:

Goldwater Institute: Defusing the Pension Bomb: Making Retirement Plans Solvent for All Public Workers

Goldwater Institute: $50 Billion Tidal Wave: How Unfunded Pensions Could Overwhelm Arizona Taxpayers

Goldwater Institute: Arizona Needs Bold Pension Reform Plan

Arizona Republic: Public Pensions, A Soaring Burden

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