Mark Twain famously said, “Reports of my death were greatly exaggerated.” The same can be said for public pension programs.
While a handful of pension programs have infamously run into big problems – some California cities and Detroit come to mind – those are the exceptions, not the rule. Thousands of public pension plans are functioning just fine and doing exactly what they are designed to do: efficiently and economically ensuring that employees can retire with some financial security at an age that best serves the community.
Although retirement plans involve lots of numbers and formulas, at their heart they are about people. In designing a retirement program, city officials consider the people they serve, the people they employ and the services they provide to the taxpayers. It is a balancing act that requires answering questions such as, “How long should firefighters, police officers, trash collectors work?” And, “Who is our competition for the best and the brightest and how do we compete with them?”
In Georgia, there are hundreds of cities that are providing living wages for retired employees at funding levels that will continue to do so for many, many years. It is too simplistic to look at funding percentages and stamp a plan as either “good” or “bad.” Plans only need to be funded at 100 percent if the government is in danger of going out of business and having to pay off all its retirees – present and future – the next day. This is not going to happen, particularly in Georgia, where there is no mechanism for cities to declare bankruptcy. Instead, look at retirement plan funding the same way you would your home mortgage: You may have a $200,000 loan but you’re not expected to pay it all at once; you have a 15- to 30-year time period to do so. To really determine if the funding level of a retirement plan is appropriate, look at the long-term results. Reduced liability over the long term is an indication of appropriate funding.
Within local governments there are hundreds of variations of retirement plans, designed to meet the needs of the employer, the employees and the community. Goals are achieved through a combination of employer-paid plans, employee contributions, social security and individual savings. However the goal is achieved, we believe that providing a safe and financially secure future for our retirees is important for all three entities. Keep in mind these are not golden parachutes; the average monthly benefit for retirees in the Georgia Municipal Employee Benefits program is $865, or $10,382 per year.
As more Americans have been moved from traditional retirement plans to employee-funded programs, the average age of retirement has climbed steadily northward. Too many employees are unable to provide for themselves in their retirement because they didn’t or couldn’t save enough. They lived longer than they planned for or ran into fiscal difficulty because of unforeseen medical or other financial issues.
When they run into trouble, they will turn to the government for help. This is not the future we envision for our dedicated public servants. Rather, we believe providing sustainable, dignified retirement for all citizens is healthy for our cities, our state and our nation.
