The Dirty Little Secret

I'd like to talk about what I call the dirty little secret.  It's now exactly what you might think.  I refers to how things are being handled with teachers here in California and their pensions.

What some people might not know is that it takes about Five(5) years to make tenure for most teachers.  It is also known that in many school districts they give out pink slips almost every year and turn around and hire back many if not most of those same teachers.   Why do these 2 facts really matter.   You only begin to get access to pensions when your tenured and you restart the clock every time your pink slipped.  So that means some teachers at the local school may be working in the district for 5 years but, do not have tenure.

It will known and complained about that the Pension fund for teachers and other public state workers is very underfunded.
So this 'Dirty Little Secret' is in directly helping the pension fund since you have a growing portion of teachers that have yet to qualify for access to the pension fund.  This odd gap that is being created will create what one could call a doughnut in regards to payouts.  You have the fatted stuff now and the lack there off in the future or the gaping hole in payouts.

Is this really a good thing.  Well some would say yes since it is helping the over all pension situation.  Others would say no since it really does not solve the problem of how much is being paid out it just messes with the number of people that will receive payouts. 



And think about the teachers that are doing 4-8 years of teaching and have no retirement to show for it.  They have no district sponsored 401(k) and also no pension to speak of since they keep getting put back on the merry-go round each year.  Talk about a disaster in the making.

The payout will become excessive for the few that qualify and non-existent for those that can't get there at times for no fault of their own.  Reward the one that worked the system and don't bother with the newbies.

Do you think the unions are helping any?  Not really.  They currently can get union dues from all the teachers, and claim they are fighting for them, while due to some regulations deny them access to what they also claim is right of the union employee.  They also like to use the last in first out system.   Everything is based on seniority and not quality, test scores, or any other real valuable measure.   You keep the bad one in for longer then they should be and keep putting the young highly motivated teachers on the merry-go round.

Here in California they had a proposition to make it so corporations or unions could not automatically use monies that they have taken from your pay check for political purposes without your prior consent.  Prop. 32 when down 56% to 44%.  A slight majority in favor of leaving thing alone.  So we will continue to see teachers unions take the money given them and buy off candidates even if a good chunk of the teachers don't support  that candidate.  A bummer really since it could have leveled the playing field a bit, though the negative ads did their job and got people confused as all get out. 



How then do you try and help solve the whole pension issue and in the process help the younger or newer teachers that are not eligible for the  pensions yet.  You have to get around the merry-go round or 'dirty little trick'.   You have to offer some type of 401(k) or flat retirement plan.  People in private industry overwhelmingly are put into 401(k) plans.  So why not go that route with public employees?   Why do we have to have a pension for them?   The usual system is the employee decides to have X amount taken from the pay check.  The company matches up to a certain amount.  The employee has the money invested in a somewhat limited set of mutual funds or other financial instruments.  Hopefully, the money grows over time but, bottom line the company is not on the hook for pay outs years down the road.  It's more on the head of the employee and not the pension fund.  And since most public worker pension funds back fill with government money at times you wonder how soundly the money is being invested or whether they are taking in enough in the first place.

Now think about how this system could be beneficial over all.  You could even have a 100% match and come out ahead.  Instead of having to pay out a teacher that retires at say 55 with a set amount for the rest of forever.  If that person lives to 90 you'll have 35 years of payouts.  The 100% match would be progressive since it would be lower as the teacher starts out and then gets bigger as pay raises.  This is better then the fixed higher rate down the road that traditional pensions provide.  You do have to handle the health care portion of the equation.  This means that if you go with the 401(k) system you have to have the people paying into medicare and the like or compensate for it in some way.

Here are some simple numbers:
start pay 40k annual
end pay 75k annual
30 years work - so pension would be forking over ~70-80% of final pay i.e 55k.  Take that over another 35 years of payout.

Pay per pension over 35 years - $1,925,000
Average pay 30 years work - 57k if you did the 100% match - $1,710,000.

Seems like peanuts but, when you add this all up it can count for millions upon millions.



Most people go with the higher contribution by the participant of the pension.  But, are the people being stiffed by the 'dirty little secret' pay in as well?  If so they really are being stiffed on a massive scale.


So how do we save money in the long haul and also help out those being hit by the 'dirty little secret'?  Likely a investment system where the worker takes on more control and the decision making.

And hopefully the worker will make good choices, which you can not guarantee will occur with the current system and a bureaucrat handling things.



Buaidh - NO - Bas