Pensions in California Go Wild...

Pensions incentivize people to stay employed with companies for the long haul.  Pensions avoid relocation loss in efficiencies.  But what happens when pensions lead to the destruction of entire cities?

Steven Greenhut writes a piece about the current status of Stockton and its near bankruptcy run due largely to the heavy amounts of money due to government pension plans.  In the article, Greenhut states that there are 94 people who are currently receiving over $100,000 a year in their pension plan in Stockton.  That number is double the amount of a relatively similar sized city in California.  There are also 15,000 total Californians receiving $100,000+ pension plans, which take away a big question mark to where government money could be better off spent.

Now, this is all within Greenhut’s opinion.  It is true that these people who are receiving these luxurious pension plans have worked hard and deserve a solid foundation heading into retirement; however, the problem exists when we see the state of the economy.  It would seem logical that these numbers would be adjusted when times have changed in order to benefit the entire economy.  Instead, California is stuck with a few wealthy government retirees and tons of troubled civilians in the rest of the state.  Balance within the economy is the crux to a successful state, and unfortunately, this isn’t benefiting anyone in the long run.

While it seems largely unfair to strip retired government officials from their golden parachutes (to some degree), our government should be reevaluating the way that pension plans are structured in the future.  If we are giving the same rates that have been offered in the past, we will never be able to dig ourselves out of this crisis in the future.  Yes, creating flexibility in pension plans would be violating the exact reasoning the plans themselves are typically established, but in times of uncertainty, it is difficult not to readjust. 

Take for example quantitative easing.  If we hadn’t been able to print more money to try and stimulate our economy, the United States would have crashed and burned so hard that we would still remain in a recession.  

There is always a need to reevaluate situations and adjust to the surrounding environment.  Sometimes this occurs at huge costs, but as long as the benefits are higher, especially for the long run, we must be willing to sacrifice for the greater good of the country.       

Reference:

1. Greenhut, Steven. “If Stockton is Broke, Then Why Isn’t San Diego?” Bloomberg. http://www.bloomberg.com/news/2012-03-02/if-stockton-is-broke-then-why-isn-t-san-diego-steven-greenhut.html