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Laura & John Arnold Foundation’s Josh McGee on the mounting pressure on state and local governments to cut pensions for public workers.
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Our next guest says the rising cost of public employee retirement benefits as a principal budgetary stress.
Not just in Wisconsin of course in California but all across the country.
As we just discussed in the chalk talk unfunded state and local government pensions -- -- more than three trillion dollars joining us now to talk about.
This catastrophic.
Potentially catastrophic problem.
And solutions is Josh Magee he's vice president for public accountability initiatives that they Laura and John Arnold foundation.
Good to have you with -- the extra mile of where we're looking at numbers for example in San Jose.
Eight.
That are just I mean this is insane that a city would run deficits year after year after year.
And be turning over.
Pension.
Benefits.
That amount to ninety and 95% of -- an employee's salary.
How the world would we get in this kind of idiotic -- So I'm not gonna get too much in to the generosity of public employee benefits the fact is we have a system that allows for political gaming and significant underfunding which crowds out other discretionary spending.
It sounds to me like you just got into it.
As Rahm Emanuel said it's it's crazy to have our citizens choose between pensions and a police force pensions and -- streets.
Yeah -- you know it's crazy to do a lot of things and we've done a lot of those things here is Americans over the course of the past forty years.
About when we look at the decision's gonna be made in San Jose San Diego state of Wisconsin.
-- how important do you think those those in elections and those jurisdictions are to the presidential election.
I think it could be huge these these elections these votes on Tuesday evening -- -- a referendum on public employee unions.
I think this misses the underlying theme.
The need for government reform to deal with state local budget shortfalls.
I think that's going to be a huge theme.
As we go into the presidential election I think it's huge impact on -- -- lives let's help amount.
What is the solution that.
Well the solution is to first mandate transparency with respect to the cost of these public employee benefits.
Seconds to require that governments pay the full cost of benefits each year.
To create -- responsible.
Funding -- to pay down the unfunded liability.
And third two it to improve the the portability the generational equity insecurity of benefits for employees like there were put through a wall -- -- -- we're all talk and American here but the world did you just say.
So the truth of the matter is right now public employees after working full careers are facing more.
Budgetary political pressure on their benefits than ever before benefits that they at a -- on your journal.
I don't really care about.
The fact that they're gonna have to make some adjustments because every citizen in the country.
In the private sector of has to do so.
Given the vagaries of the free market system why in the world should I be overwhelmed.
Of because public employees would have to make an adjustment as well -- To be clear I'm not arguing that you should be overwhelmed I'm saying that they have -- on one thing for most of their lives and we should improve the security of those benefits.
By promising them and paying for those promises.
-- and what do I said do you that that's absolutely -- -- because it's pretty clear as the nose on your face that these municipalities are not going to be able to do so without raising taxes extraordinarily.
And frankly impossible.
And possibly as you know.
So why would you say such -- -- I would agree with that maybe you misunderstand I think that minutes entirely adjustable -- I do and that's why this future would you be if I -- I I fully expect the benefits and a lot of places will have to be adjusted budgetary pressures going to be too great.
What I am arguing is that the current system promises one thing and delivers another it promises one thing to employees that promises one thing the taxpayers and deliver something completely different.
Cost of skyrocketed.
Right at the time we can least afford them.
We need to create a system that responsibly pace for promises benefits to employees and as honest about cost -- taxpayers.
Let me ask you this because I get a little confused understand why public employee should have defined benefit programs pension.
And private sector employees should have 41 -- -- via.
So I I think that the traditional final average salary pension is.
Is going by the -- side.
I think that it's too difficult to predict what the costs -- I think we're gonna see a sea change over the next come -- -- next few years here.
A move towards hybrid systems cash balance of defined contribution woman trying to -- Josh understand -- a public employees should be treated differently.
But then a private sector employee.
I agreed that that current system creates huge underfunding.
I don't know that I'm going to go down the road of of saying the negotiated benefits.
Inside a fair system I inside a market system even our.
Should be taken away.
-- but I'm not talking about take them away I'm talking about.
Why would we have a separate class of citizenship for -- -- those who worked for government vs those who pay for government in the private sector.
I agree with you -- Josh on that note we're just gonna say thank you very much -- -- larger banks know.
