One solution may be to have taxpayers directly vote on benefits for public servants...make the unions take on the people who will be paying for it rather than temporary placeholders with no real skin in the game.
Assuming reasonably educated voters. But as we've seen in California, the ballot initiative process only helps the idea that can be distilled down to a compelling soundbyte and is championed by the deeper pockets.
I'm afraid public employee compensation reform probably loses on both counts.
Do you really think people are going to go to the polls and vote to cut pay for prison officers, police, firemen etc.? Sure, it may actually be legislation targeted at specific kinds of pensions and double dipping, but on TV it's going to be 'our cops and firefighters can't even put food on the table'.
Anyway, the whole point of representative democracy is to not have to consult the electorate for every little thing. Voting on pay is too nitpicky. The best alternative I can think of is that no one bargaining contract can run longer than 5 years, but that just swaps one set of problems for another.
Do you really think people are going to go to the polls and vote to cut pay for prison officers, police, firemen etc
Economics will demand it at some point.
I didn't visit HN for a few days, sorry I didn't reply to your comment at the time. It's not that I don't think it would be a good thing to change policies this way, I agree that economics demands such a change.
Where we differ is in our belief over whether California voters would actually pass such an initiative at the polls. On past forms, I think campaign slogans would beat out economics or critical thinking. I do think ballot initiatives are a good thing in general, but as a state we have also passed some very foolish laws, whose long-term impact was not appreciated at the time. 'Three strikes' leading to life in prison is the most obvious example.
Or to require that the value of the benefits start being paid down in a sustainable way immediately. Only if those who are benefitting from the delayed benefits are required to fund them will this problem really be solved. In the private lending market we call this a downpayment.
The Federal Employee Retirement Income Security Act (ERISA) requires that private employers that offer pensions do pay as they go.
Defined contribution 403(b) and 401(k) programs have to have their deposits made soon after each year end. Defined benefit plans are more complicated, but there are big federal fines for companies that fail to deposit the increase in expected value of future payments each year. There are extensive (but imperfect) actuarial rules in the US Code to make the actual minimum contribution match the needs of the pension fund. Big funds need to buy insurance, too, in case things go wrong.
States and municipalities are immune from the federal standards. That's why they're ignoring the consequences and just promising to pay pensions without depositing enough money according to their own actuarial computations. A private company would have had to cut back on promises or pay the full current cost of future benefits.
Heck, even the Federal Government is keeping up with employee pension planning. The trouble is all in states and municipalities.
The states know they are doing this; actuarial science is not a mystery. But governors and legislators figure that public employee unions must be satisfied. And the problem won't explode until they're out of office and then it's someone else's problem.
And we voters who don't hold them responsible are ultimately at fault. Public employee unions couldn't hold politicians captive if we were willing to vote out pols who kowtow to irresponsible demands.
