The Long Road Ahead For Government Pension Obligations

The US fiscal dilemma involves, as several pundits have recently noted, municipal defaults. Obviously, US states, such as California, New York, Illinois, Michigan, New Jersey and Massachusetts are also on the list of governmental entities in deep fiscal trouble.

Thus, as an economic society, we not only have the US federal deficit and spending with which to contend, but our smaller governmental entities. Among the liabilities weighing heavily on municipalities and states are pensions promised to government-related workers, such as police, firemen, teachers, sanitation workers and administrators.

One of my close friends is a teacher in one of the nearby northern New Jersey school districts. She works in the public school system so, of course, she is a union member, although, personally, she is a pretty solid political conservative.

This makes for some truly shocking behaviors and attitudes within a single person. For example, my friend has remained in the same school, in the same district, for her entire career. Holding several masters degrees and being a very intelligent person, she quickly grasped the essence of succeeding in a union-controlled environment. In a single word- seniority.

Thus, she has never contemplated moving to a closer school system. She currently earns the maximum allowable compensation for her work, yet she is not even 50 years old. Her cash compensation puts her, on an annualized basis, well above the US average. She only has to work 9 months per year. On top of the cash compensation, she has enviable pension and medical benefits.

Recently, she began expressing concern over recently-elected Governor Chris Christie's sequestering of unspent education funds. My friend alleges that Christie lied, because he said no jobs or programs would be curtailed, but, now, programs are being cut back, and teachers laid off.

From what she explained, it appears that something like this has been going on for years. The state tops up local school district budgets. Those districts squirrel some of the money away to spend on discretionary programs and hiring of teachers. In effect, New Jersey residents are taxed, or pay interest on borrowed funds, which are shipped to school districts which don't actually use all the money as intended. Or at all.

Christie, being extremely budget-conscious, is apparently freezing and recovering every unspent state dollar in sight.

My friend moans that her district's children's test scores are among the best in the nation. We can't simply abandon their efforts or afford to lose that status.

I carefully replied that this may be laudatory and desirable, but, actually, unaffordable. I tried to explain to her that the overwhelming majority of New Jersey and, I dare say, US adult voters feel their education-directed taxes are largely wasted. If anything, education spending needs to be pared back.

Everyone is aware of the numbers showing massive spending/pupil in urban districts whose test scores are abysmal.

If I wrote what my friend's actual compensation is, most readers would make a note to consider becoming a primary school teacher in the next life. It's very cushy. But my friend feels she is underpaid, reasoning that she could have earned much more in the private sector.

This is the mindset with which Christie, and his ilk across the US, must contend. Well-meaning, unionized employees feeling that every dollar of state spending cut from their budgets is a mistake.

It shouldn't be a surprise that my friend's contribution to her pension has risen in the wake of her union's fund's value drop during the recent financial sector meltdown. She informed me over the weekend that the state had borrowed liberally from the fund for years, and, thus, it's not even well-funded.

Chalk up another one for deceitful governing by Corzine, McGreavy, Florio, Whitman and Kean.

Speaking gingerly, so as not to end a friendship, I tried to explain to my teacher/friend that every group from which Christie is taking funding must feel like her. They all want to keep their budgets and salaries. My friend is genuinely scared that she, or some of her friends, will lose their jobs. When I shared some data I recently read with her about New Jersey job creation over the past decade or so, it made little impression. That data showed how there has been no net private sector job creation over the past 7-10 years, but something on the order of 50,000 new public sector jobs.

This didn't make a significant impression on my friend. She asked the enduring, rhetorical question of why those who teach our children aren't worth more than they currently are paid?

When I carefully offered an alternative view of education, free of unions and mandated public school monopolies, I was greeted with incomprehension. When I suggested specialists like my friend, free of unions and monopolies, could organize into special schools priced to offer premium services, she simply said that the low-priced teachers would always be hired before the more expensive ones.

She simply had no grasp, I believe thanks to her union brainwashing, that quality commands a premium. When I noted that unions penalize the best teachers, like her, and protect the least competent, she was silent.

New Jersey has too much government. And it's not alone.

Too many fire and police departments, departments of public works and local government administrators for tiny municipalities. In the ten miles between my town and Basking Ridge, there are six other small towns, each possessing their own fire, police, sanitation and council infrastructures. Overlaid on this are townships and counties. More councils. More police. More pensions and budgets.

It's no wonder the US has looming debt and deficit problems. At local levels, we've allowed ourselves to make government a better paying career than the private sector. Now, your and my friends include people who live off of our taxes. So when we want to pay less for less government, we're forced to feel that's a bad thing, because it's a friend's rice bowl we're taking away.

How did we get to this sad and untenable state of affairs? How can we return from this situation, when so many intelligent and educated fellow citizens, colleagues, and friends, make their living from bloated and unaffordable levels of state and local government spending?

Forget about the faux-crisis of government health insurance or medical spending. Existing overspending on federal, state and local government is a far more urgent, observable and, dare I say, more easily corrected crisis.

One which, when turned back, will instantly release funds back to individuals to create jobs, spending, and, in time, personal wealth. Real economic activity.

But when we spend so much on government, under whatever name you wish to hide it, we simply have less for private economic activity that creates business, jobs and wealth.