Public Pension Doom Begins to Descend
Grotesquely extravagant public sector pensions are a Sword of Damocles hanging over the economy. The thread preventing this sword from coming down on our heads is starting to fray.
In Pennsylvania, localities are jacking up taxes in a desperate attempt to meet their obligations.
Lancaster city taxpayers will see an increase in their 2015 tax bill of just over 7.5 percent. …
The city’s spending and revenue plan calls for a property tax hike of 0.98 mills, or just over 7.5 percent, which means about $73 more in taxes for the average city homeowner. …
According to [Mayor Rick] Gray, a key reason for the tax increase is the need to fund rising pension obligations. State-mandated pension obligations will increase by nearly $1 million in 2015.
City residents will pay more in property taxes after Erie City Council approved a 2015 budget with a 0.80 mill tax increase. …
Mayor Joe Sinnott had said the increase was necessary because of rising personnel and pension costs.
WHAT IT MEANS: The increase represents a 7.4 percent hike and raises the city millage from 10.85 mills to 11.65 mills, bringing the total millage for city property owners to 33.15 mills, including Erie County and Erie School District taxes, Horan-Kunco said during the meeting. A property owner in the city of Erie will pay an additional $80 a year for a property assessed at $100,000, increasing the total city tax from $1,085 to $1,165 a year. The increase will generate about $2.1 million more in revenue.
How bad will it have to get before the authorities realize that excessively generous pensions for public sector workers simply are not sustainable? Worse than bankruptcy:
This fall, city leaders watched as federal judges approved debt-cutting bankruptcy plans in Stockton and Detroit, ending two of the largest municipal bankruptcy cases in U.S. history. Many speculated both cities could do more to ease their fiscal problems by making significant cuts and structural changes to public pensions. However, both judges demurred and moved forward with plans that eased a portion of the cities’ financial obligations, but largely protected pensions. The failure to significantly address public pension debt and make structural changes to the pension systems in both Stockton and Detroit does not bode well for the economic future of either city post-bankruptcy. It also presents an interesting conundrum for other cities in dire fiscal distress that bear significant pension costs and unfunded liabilities. …
Both Stockton and Detroit are still saddled with billions in unfunded pension debt even after exiting bankruptcy. The bankruptcy plans that both cities presented and got approved did nothing to even chip away at existing pension debt. It is unlikely that either city will be able to contain the pension debt that devours their budgets unless structural changes are made to the current defined benefit pension systems they have in place. Other formerly bankrupt cities, like Vallejo, California, have struggled post-bankruptcy because of pension debt and the same type of budgetary problems affecting Stockton and Detroit.
The choice is between cutting pensions and remaining in the financial intensive care ward, reliant on never-ending tax hikes. For now authorities will keep opting for more tax hikes, secure in their belief that we have plenty of money and will never rebel.
But as Margaret Thatcher observed, one problem with socialism is that eventually you run out of other people’s money.
On tips from JustTheTipHQ. Cross-posted at Moonbattery.