Tuesday, February 10, 2009

The Biggest Economic Issue for 2009 will be Pensions

As the world starts to understand the implications of the biggest economic melt-down ever, pensions are emerging as a major economic issue.

We have seen the headlines over the past few weeks as media in Europe and North America look at and examine the impact of the current economic situation on public sector pensions. Billions of dollars have been lost. Taxpayers will have to replace the lost money into these pension funds and at the same time are suffering major meltdowns in their own retirement portfolios.

The weight of the public sector pension upon the back of the taxpayer is unsustainable. There is rising anger in the private sector over the cost of public sector pensions and resentment that taxpayers are having to fund the gold-plated public sector pensions.

Recently the Las Vegas Chamber of Commerce examined government spending in Nevada. As a result of several reports on the efficiency of government spending they released an initiative of Legislative Reform Issues

The top 3 reform issues addressed the fairness of the public sector compensation package.

1) Reform the Public Employees' Retirement System (pensions)- Nevada pays retirement benefits of 75 percent of a retiring employee's three highest consecutive years' salary.

2) Reform the Public Employees' Benefits Program - Unless action is taken to significantly redesign, reduce or eliminate the state's health insurance subsidy program, or to devise a viable pre-funding mechanism, the estimated $4.0 billion unfunded liability is expected to grow as the state's workforce increases, retired workers live longer and medical costs rise over time.

3) Bring local and state government employees' wages more in line with those of the private-sector. - On average, a Nevada public sector employee is paid roughly 28 percent more than a private sector employee

These are serious issues that need to be addressed. In a buoyant hyper-active economy, like we have seen over the past 30 years, these excesses could be funded by governments. Now government at all levels can no longer afford these extravagant compensation packages.

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