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Benefit envy: Anger brews over government workers’ pensions

By GEOFF MULVIHILL
Associated Press

Neporsha Hamlin (center) of Madison protests the governor's budget bill at the state Capitol in Madison. Polls show the majority of Americans are siding with state and local government employees in Wisconsin and elsewhere who are trying to maintain their collective bargaining rights and their pensions and benefits. (AP File Photo/Andy Manis)

When Erin McFarlane looks at public workers, she sees lucrative pension benefits she doesn’t ever expect to get. And it makes her mad.

“I don’t think that a federal employee or government employee is worth any more than anybody else who does their job and does it well,” said the Slinger, Wis., woman. She’s been working a couple of bartending jobs since January, when she was laid off from her job at a Harley Davidson plant after almost a decade.

She’s not alone in seeing public servants as public enemies in some ways.

It’s a case of pension envy.

For McFarlane, 36, it’s part of a ubiquitous discussion, at the bars where she works and on Facebook. And it’s the center of some of the biggest political battles playing out in state capitals across the country as governors say their states can no longer afford the benefits that public employees have been promised.

Government workers in McFarlane’s state have rallied for weeks against Gov. Scott Walker’s efforts to take away many collective bargaining rights, saying that would amount to killing the middle class.

A USA Today/Gallup poll last month found show that Americans largely side with the employees, though about two in five that want government pay and benefits reined in.

Barbara Davis, a retiree from Cherry Hill, N.J., has been watching public workers in rallies in Madison, Wis., as well as Trenton. She says the protesters are wrong about tightening benefits hurting the middle class.

“I’m sorry, but what they’re doing is telling off the middle class,” said Davis, 76, and a co-chairwoman of the Cherry Hill Area Tea Party. “The middle-class people don’t get all the goodies that they do.”

At its heart, the issue is this: Some public workers get a sweet deal compared to other workers. And it’s taxpayers who pay for it.

That’s set off resentment in a time when economic doldrums have left practically everyone tightening their belts. Many people have found their tax bills rising even if their earnings haven’t.

In Davis’ case, it’s the property tax that smarts. She and her husband pay about $12,000 per year for the house she describes as a three-bedroom “tract home.” That’s a high tax even in New Jersey, where the average property tax bill tops $7,000 and where the Tax Foundation has found homeowners pay three and a half times the national median.

A half century ago, industrial jobs at car and steel plants provided high salaries and rich benefits. But as manufacturing moved overseas, many formerly well-paid workers had to take lower-paying jobs. By the end of the Great Recession, the economic order was undeniably changed.

“It’s the government sector worker who’s the new elite, the highest-paid worker on the block,” said David Gregory, who teaches labor and employment law at New York’s St. John’s University.

For instance, most non-uniformed public employees who have worked in New Jersey for 30 years with an ending salary of $85,000 can look forward to retiring at 55 with an annual pension of about $46,000. Working until age 60 and a salary of $90,000 can bring a pension of $57,000. And many of the New Jersey’s public-sector retirees have no or low premiums for their health insurance.

For a private-section worker who retires at 55, relying solely on a 401(k) without an employer match, it would take a $100 contribution to a plan every week for 30 years and getting an annual return over 7 percent to get to the same level of pension benefit as the public worker retiring at that age. Those benefits would run out after 25 years for the 401(k) retiree.

To be fair, most public-sector retirees don’t get such rich pensions. New Jersey’s Treasury Department says the average annual pension due state workers who retired between July 2009 and June 2010 was just over $30,000 per year; for local government employees, it was about $20,000.

And the members of the state’s two biggest public employee retirement systems are required to pay 5.5 percent of their base salaries into the pension funds.

St. John’s Gregory said the rest of the benefits are deferred compensation promised to workers instead of better salaries.

National data compiled by the U.S. Bureau of Labor Statistics confirms that public-sector workers do better when it comes to pensions and benefits.

As of last September, professional and management workers in the private sector were making $34.91 in hourly salary; public sector professionals made $33.17 an hour.

The government entities spent 1.7 times as much on health care per employee-hour worked and nearly twice as much on retirement costs. Public-sector workers — who are more often represented by unions — are far more likely to have defined-benefit pensions with promises to pay for the retirees’ whole lives.

Olivia Mitchell, a professor of insurance and risk management at the University of Pennsylvania’s Wharton School, says the data isn’t perfect. It doesn’t compare workers with the same education or experience levels, and it covers a broad range of jobs. Also, she said, it doesn’t take into account that about one-fourth of public workers aren’t covered by Social Security.

There’s one clear downside for the public employees: “We also know that the public-sector pensions are in deep trouble financially,” Mitchell said, pointing to studies that suggest that they’re underfunded by a total of $3 trillion, largely because governments have skipped payments. “Exactly what will be done about that, nobody knows.”

Unchanged, those retirement systems could eventually stop paying entirely.

“One way or another, if we don’t make changes, the government will collapse,” said Abel Stewart, of Toledo, Ohio.
Stewart, 36, the director of contemporary worship at a Methodist church in suburban Toledo, says he has a hard time conjuring up sympathy for the government workers he’s seen protesting because of all the time he’s spent working with struggling immigrants.

“These are middle class people who have a house, who have enough food, who are complaining they don’t have enough,” he said. “Instead of fighting for the piece of the political pie, we’d be better off looking at how to live within our means.”

That’s not a unanimous view.

Tony Christoff, a 38-year-old stay-at-home dad in Perrysburg, Ohio, believes public workers like police officers and teachers — including his wife — should be rewarded. “They go over and above and deserve the pay they get,” he said.

Jeff Nash is a Democrat elected to the county freeholder board in union-heavy Camden County, N.J., who has come to believe that public employees need to sacrifice.

“The days of government workers receiving free benefits and pensions without risk, those days are coming to an end because everyone else who pays for government services is paying more for their health insurance, like myself, and running the risk of a 401(k) as part of their retirement savings. Government is changing to match what the rest of middle-class America is enduring today.”

“It’s not a matter of fairness,” he said. “It’s a matter of evolution.”

Hetty Rosenstein, the New Jersey director of the Communications Workers of America, which represent New Jersey government workers in several fields, says she gripes about her members’ pensions are misplaced.

“There’s pension envy because people who are working in the private sector, they’re being denied pensions,” she said.

Associated Press writers Carrie Antlfinger in Milwaukee and John Seewer in Toledo, Ohio, contributed to this report.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

30 comments

  1. This article misses the point entirely that Gov. Scott Walker wants to take away collective bargaining rights and THAT is the issue. Teachers, firefighters, and police officers are not buying vacation homes and living the high life, yet they’ve agreed to take quite a significant pay cut in order to balance the WI budget. What this article does is further the agenda of the conservative right which is to pit middle class against middle class.

    Hey, you with the home large enough to cost you $12,000 a year in taxes. How about if you get a conscience?

  2. I support Scott Walker. Union leadership is running jobs across the board into the ground.

  3. Sarah. No other workers get collective bargaining. Why do u think you deserve something no one else has. Get over it. U r bankrupting our country

  4. Collective Bargaining protect tenured teachers – even when bad – over good teachers and gives unions more power than the taxpaying voter

  5. Jean Claude Forget

    Collective bargaining isn’t a right, it is a privilege afforded to the communist unions by the taxpayers. The taxpayers have decided they can no longer afford the cost of the communism and are demanding Walker take it back. Any union goons who have a problem with this are free to go find another job where they can join another communist union that isn’t laying on the back of real Americans who actually earn their paychecks.

  6. NO, Scott Walker wants to restore the same rights to all workers in Wisconsin! That’s the bottom line and the MAJORITY of voters in Wisconson agreed with his agenda and that is why he was elected in Novemer!

    You union workers are in the minoriity and the rest of us taxpayers are tired of paying into your retirements and benefits!!! You aren’t paying into my retirement, why should I apy into ours?!!!!!!! Why should we buy your viagra??!!

  7. This article shouldn’t be running in a Wisconsin publication. It seems like almost everything in here applies to New Jersey and not here. Our pension plan is different and 97% funded, our public worker’s total compensation is less then the private sector, etc.

  8. The Associated Press seems determined to set middle-class people against each other. This article implies that there’s only a limited pot of money available that we all must fight for. In fact, with our country’s CEO’s making anywhere from $15 million to $88 million a year, we should be scrutinizing them, not turning against each other.

  9. It’s very simple, if public workers do not like what is being offered, quit. Find another job. There will be 10 people ready, willing and able to take their spot.

  10. Public workers are going to be taking a 10% salary cut, reducing them farther below what the private sector gets paid. Every public employee when hired must utter the oath: “yes, I know, the pay sucks but the benefits are good.” And now you want to take away the benfits.

    Fox News and the Tea Partiers (if they aren’t the same thing, not sure) have convinced the American public that the rich are their gods and they must offer them more and more sacrifices or they will take away all their jobs, and their homes, and send their children to far off wars. Oh wait, they are already doing all those things. Well, if they don’t give them more and more of their hard earned pay, the rich will take away even more.

    Listen – state employees aren’t taking your wealth, your homes, your children. The RICH are taking these things away. Don’t you get it????. I’ve been around a lot of years and have seen the middle class get screwed more and more and the rich make out like bandits. Why are you pointing fingers at the poor public employees?? They are getting screwed just like you.

  11. Dot – you can bemoan the salary of a CEO, of which I’d certainly take issue with your $15 million minimum, but that’s another issue.

    Have you taken a look at the salaries of the union leadership? In Wisconsin, Marty Beil, executive director of American Federation of State, County and Municipal Employees (AFSCME )Council 24 SEPAC, made $161,847 in 2008 according to the organization’s Form 990. More than the $144,423 a year Scott Walker makes as Wisconsin’s Governor. His assistant director made $138,553. These leaders are making approx. 4X the average private sector salary of $39,718. Not to mention adding on their benefits. Obviously, they’ve done a great job keeping union salaries and benefits high, so you’d probably say they are worth every penny.

    But if you want class warfare, how about starting with the union leadership.

  12. Ron,

    Nice post, I nearly cried. I mean, they are coming for my children. I never knew.

    Seriously, welcome to the world where the tax payer is not going to foot the bill for benefits greater than their own. Period, end of story.

    If you don’t like the resulting pay and/or benefits, you have a choice now don’t you? Don’t let the door hit you…

  13. To all of you that think public sector employment is where it’s at, quit your bartending job and join the gravy train:

    http://wisc.jobs/public/index.asp

  14. My understanding regarding pensions. I think it is pretty accurate if a bit simplified.

    For state employees ones compensation is a combination of wages and benefits. Historically public employees have negotiated to have increases in compensation come in the form of improved benefits. These benefits include a pension to be paid when you retire.

    As part of your compensation, your employer contributes a percentage of your salary to the pension fund. The percentage of your salary they contribute can vary depending on what is negotiated. This is much like an employer contributing to your 401K or 403B. But, instead of you deciding where the money will be invested a professional group invests all the contributions from all the employees. This results in a very large sum of money. These pension monies are not mixed with other state funds. These are not state funds. These monies belong to the employees, as part of their compensation.

    When you retire, the size of your pension is determined by the number of years you have worked for the company (the more years you have worked, the more you have contributed), what your final years salary was and another factor that is set based on actuarial numbers. Pension fund professionals have developed a formula regarding payout so that the fund will always have funds available for future generations of employees. Your payout does not come from the state budget funds. The pension monies are separate.

    If someones pension seems large it is because they have worked for many years and the professionals who have been investing the money have done a good job.

    The State of Wisconsin Public Employee Pension fund is very well managed. It is very healthy. Some state’s pension funds are not healthy. There are legitimate concerns. But again this is not the case in Wisconsin.

    To be clear, when the governor proposed to reduce state funding for pensions and health insurance, he was essentially cutting the pay of state employees. He was cutting the total compensation–wages and benefits. I know that most state employees understand that they need to make a sacrifice when revenues are down. Unfortunately someone who is earning $20,000 will see a larger pay cut because their insurance premium is the same as someone who is earning $50,000. Perhaps a more fair way would be to negotiate a % reduction in pay, perhaps even a higher reduction for those who make over a certain amount.

    There has been talk that the public employees should switch to a 401K or 403B type of arrangement where individuals decide where to invest the money. Suffice it to say–this is a horrible idea. I am not an investment professional. Even investment professionals have not done as well as the Wisconsin Retirement System. The current State of Wisconsin Retirement plan is a tremendous success. Not because the state has made exhorbitant contributions, but because it is very well managed and well structured. The large number of individuals that participate allow for the risks to be spread out over a long period of time and many people.

    It would be a great idea to let others invest in this fund.

  15. Here are some facts for us to discuss vs just argueing. This info is from the Wisconsin web page.
    Wisconsin Teachers Private Workers
    Salary $51,000 avg. $50,462 avg
    Benefits $38,406 avg $10,589 avg
    Total $89,527 $61,057

    Keep in mind that the teacher can retire earlier with much more pension and medical for life with little or no additional cost to them.
    Private workers who do have a pension and medical get a much smaller pension and must pay a portion of medical in most cases.

    In addition a teacher works only 9 months a year with a full salary.

    Current contribution Proposed
    Pension 0.2% 5.8%
    Health Care 4.6% 12.6%

    State government employees are paid for all 11 holidays where private are paid on average 8 days. (source US Labor Dept)
    Retirement benefits cost governments on average 8% of total cost vs 2.5% to 4.9% in private sector. (source US Labor Dept.)

    They also have union work rules and security. For example teachers gain tenure after 3 years and thus are almost impossible to fire even if they are incompetent. That is not true in the private sector. We lose many good yound teachers because of these rules.

    jim

  16. The only studies I’ve seen showing priate workers make what public workers do are studies funded by the unions. For example, please show me a teacher at a private school that makes what a teacher with similar experience does in a public school… Good luck and happy hunting!

  17. I find it interesting that people say if they don’t like their job quit. If we had national health care, that probably would be the case, but what does one do when a family member is sick at home? I know many people who work because of the benefits (in both public and private positions). As a public employee my job was advertised and there are not ten people waiting to take the job. I have two Master’s (almost a PhD) and there are not that many people who have my exact skills. I make just over $50,000 and have been doing my job for nearly 30 years. I don’t feel over paid, but I do feel under appreciated.

  18. Public employee benefits were negotiated. Maybe the State should get more serious in these negotiations instead of letting the union win all of the battles.

    Also the State funds most of these pension plans. Maybe they should “starve the beast” like the federal GOP does. Change the law and make a smaller contribution to the fund. Even though the fund is professionally managed, it needs the State’s funding or increased funding from the workers to succeed. That way the State decides how much they can afford.

  19. Sarah is right: the article does miss the point. It is about the unions. Even champions of unions like FDR recognized that public sector unions are a disaster. Normal unions duke it out with management. If they get too friendly, the company goes out of business from the unsustainable costs – as happened with auto worker unions (until the idiots in DC decided to bail them out). Public employee unions provide campaign money for management taken from forcibly collected dues, and vote for management. There is no balance of power – the unions and management are in cahoots, and there is no going out of business until the entire country is bankrupt. Public sector unions need to go across the board, but the NEA is the worst of the lot and needs to go first.

  20. “I make just over $50,000 and have been doing my job for nearly 30 years”

    Bullsh!t… you probably make more like $80k with benefits included. Nice try, though.

  21. “Public employee benefits were negotiated. Maybe the State should get more serious in these negotiations instead of letting the union win all of the battles.”

    Unions pay the Dems to negotiate better terms.

  22. Most who value walker as governor of Wisconsin and what he is doing have been tricked. You see the rich want to protect their wealthh at all cost. Walker wants to be a lackey and a \wealthe\. He knows how to speak gently and lie- \I hate to lay off anyone, I really do.\ This statement really means, I’m so glad to stick it to you. I’m a climber.

    You aren’t aware that the governor is trying to get sick and disabled children(200,000 in Wisconsin) in a situation where they will not be taken care of on Medicaid related programs.

    This Walker is truly a Manly Man! He is taking on the children of Wisconsin when they are sick and hurt., down and out. He won’t have to deal with rallies at the Capital. He won’t have to worry about them coming to Madison and speaking up for their rights. He will never be forgiven by the parents of the children.

    So all you pea party people and repubs come to Wisconsin and watch walker in the ring with these sick and disabled children. He should be pretty good at winning a fight with them, especially the babies. Oh the babies, it won’t matter if some of the youth of America die.

    The wealthy, including Wall Street Bankers, Brokers, etc. are putting their money to work right now(remember the million dollar bonuses Wall Streeters got to bring down the economy-housess lost, jobs lost and the millions the CEOs, etc. make every year?

    They are buying and storing commodities(food, water, clothes, silver, gold) ; if the dollar crumbles, they are getting ready to make money when currencies crash, and other money vehicles loose their value; they are buying homes outside of America so in a crunch they can leave us here to rot.; they are buying and storing(because they are afraid of the middle class and poor). They are buying weapons and ammo too.

    Any reporter, ask the Wall Street people if they have any of these things. They will say \NO\ but if you look a little deeper you will begin to find the clues.

    Pea partiers and repubs, they will not take you with. You will feel stupid for believing them.

  23. Kudos to the people of Wisconsin for exposing the union rip-off of its citizens. As an outsider who would hate to see America vote through the fist rather than through the vehicles our Fore-founders gave us. After all–the Republicans and Walker won the election–not the Democrats who act like two-year olds. Contrast all of the trash in Madison to the peaceful protests of the Tea Party (they even left the grounds where they demonstrated broom-clean) who were lambasted by the numb-stream media.
    Hard to imagine but many of these duds are teaching our children. I have teachers in my family and they tell me the teachers in Madison are the same ones that cannot be fired because the union protects them. After Jimmy “duh” Carter forbade Collective Bargaining among Federal Employees, they (like private employer’s employees) were at the mercy of their bosses and inherited merit pay, and do quite well. Notice though, that the union leaders do not want this for their flock. The bottom line is that the high school educated union bosses don’t want to give up their lucrative salaries.

    Thank goodness the Lone Ranger and Tonto rode into town—Michael Moore, the communist, and Jessie Jackson, hero of the downtrodden, who would do better lip-synching than talking. With that, these two lampoons assured that the people of Wisconsin–the voters, will triumph in their support of their superb governor, Walker, as Kasich is in Ohio.

    Speaking of Ohio, this week the same methodology was employed in German Village (Columbus Ohio) when 10 congressmen were roughed up by the union in a restaurant as they peaceably tried to eat.

    Haven’t we seen this behavior before in Europe—called the Brown Shirters then, I believe. On Wisconsin.

  24. Kudos to the people of Wisconsin for exposing the union rip-off of its citizens. As an outsider who would hate to see America vote through the fist rather than through the vehicles our Fore-founders gave us. After all–the Republicans and Walker won the election–not the Democrats who act like two-year olds. Contrast all of the trash in Madison to the peaceful protests of the Tea Party (they even left the grounds where they demonstrated broom-clean) who were lambasted by the numb-stream media.
    Hard to imagine but many of these duds are teaching our children. I have teachers in my family and they tell me the teachers in Madison are the same ones that cannot be fired because the union protects them. After Jimmy “duh” Carter forbade Collective Bargaining among Federal Employees, they (like private employer’s employees) were at the mercy of their bosses and inherited merit pay, and do quite well. Notice though, that the union leaders do not want this for their flock. The bottom line is that the high school educated union bosses don’t want to give up their lucrative salaries.

    Thank goodness the Lone Ranger and Tonto rode into town—Michael Moore, the communist, and Jessie Jackson, hero of the downtrodden, who would do better lip-synching than talking. With that, these two lampoons assured that the people of Wisconsin–the voters, will triumph in their support of their superb governor, Walker, as Kasich is in Ohio.

  25. This woman is a whiner. Why didn’t she whine about the workers at GM making $25 bucks an for sitting on thier butts, and putting on a part every half hour. They have pensions that are superior to the state workers. They get paid more for doing less. Unionized private workers do very, very well. I don’t hear any complaining about that. Don’t envy others, because you aren’t capable enough to get what they have. Don’t hide primitive feelings, behind your phoney, sanctamonious opinions.

  26. From the comments posted here it appears the goal of pitting middle class against middle class has been achieved.

    To anyone saying public employees shouldn’t have pensions or collective bargaining rights because you don’t have it, let me ask you: Do you also believe that executives of companies that took taxpayer bailout money should not receive bonuses or million dollar salaries because you don’t have either of those, and because you are the ones paying for it?

    And why are you okay with large companies paying little or no taxes, or even receiving incentives from local & state gov’ts (yes, local governments actually give them money) in order to do business there? (WalMart, McDonalds, etc, not mom&pop local businesses which are the largest “job-creators”) Corporations posted record-breaking profits in the 3rd quarter of last year. Profits that go back to their shareholders, not their employees, or the local community. How was YOUR 3rd quarter last year?

    Why aren’t you calling for those clawbacks and tax adjustments just as vigorously as you are calling for public employees to “pay their fair share”? Likely because the media is not dangling them in your face as public enemies like they are doing with public employees. The media isn’t being financed by unions, but it IS dependent on ad $ from companies with billionaire execs. Before you swallow the message that so-and-so should give up something they have, look into the motivations of the people telling you that first, then make up your own mind.

    Oh, and if someone offered you a public employee pension, would you take it? Yes? Thought so.

  27. I think it’s interesting…the left, famous for it’s class envy is now having to defend its own greed. And having observed them first hand in Wisconsin, defending themselves in most tactless and tasteless manners.

  28. Dennis,

    $25/hr for GM employees is WAY understated. It costs GM closer to $75/hr when you include benefits.

    Lilyjo, here’s to hoping you soon get to enjoy a 401k like the rest of us.

    I am not sure that I know anyone that advocates for leaders of failed companies to get bonuses while the company gets a bail out. I for one believe people (and companies) have a right to fail. Unions and Obama disagree.

  29. Anyone affilated with a political party is a fool. Republicans and Democrats alike take from the average middle class citizen and give to either the rich or the poor. The TEA Party has been hijacked by the republicans, if you do not believe it wait a few years and see. During that time educate yourself on history and what you are fighting for.

    http://www.thomhartmann.com/bigpicture/thom-hartmann-must-see-true-story-tea-party

    Mr. Forbes flat tax is about the only fair way for everyone. Another way to make it fair is to open up everyones payroll and tax records for all to see since everyone appears to be worried that someone else has a better deal. The Republicans are growing and feeding off that very ideas for the last 3 months.

  30. I’m truly shocked and saddened by most of the remarks here. surely the right and the tea party have won the battle. It is a different country from the one I was born in many years ago. We didnt’ envy auto workers in Detroit when I grew up in Brewton Al. We always knew we could move to Detroit if we wanted one of those jobs. now people are much more invested in trying to take something from someone else – regardless of how that something was obtained in the first place (give it up, over the course of years and different governments in power you can’t trace the origins of most government pay and benefits and holidays – not for all 50 states without tons of work), but suffice to say they were negotiated by fair-minded people at the time. If you think someone else has a better deal – join them, dont defeat them. To my knowledge all government entities are still hiring time to time. If you succeed in bringing the entire middle class down to $8 per hour jobs, who is going to buy homes, buy new cars, eat in restaurants, pay $10 per ticket for a new movie? Many many things wil change if you keep this business up and you will still be unhappy, you know why? Because envious miserable people always stay envious and miserable – its their type, regardless of what they get. Get a life people.

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