For those of you who are curious.. this is why NY and CA are going bankrupt

[briann]

http://www.newsday.com/ny-enpens0712830048jun05,0,1353982.story

obviously there are other reasons (employers fleeing, etc)... BUT this is the biggest reason.

'Jumbo pensions' spark state funding debate

BY SANDRA PEDDIE | [email protected]
    8:53 PM EDT, June 6, 2009

As state officials struggle to close gaping holes in the budget and deal with skyrocketing retirement costs, records show that at least 1,325 retirees collect six-figure pensions from the state - and nearly one-half of them are from Long Island.

The number and size of so-called jumbo pensions, fueled by high public salaries and generous retirement rules, lie at the heart of the debate over the daunting costs of public pensions in New York State, which have a price tag of more than $10 billion a year.

"What's happened is that many government positions are paying better than they used to, [and] the pension has remained super-generous," said Peter Sepp, spokesman for the National Taxpayers Union, a nonprofit watchdog group in Alexandria, Va.

Pension experts say these jumbo pensions will continue to climb as baby boomers retire. And with New York state retirement funds compelled to make up losses of more than $73 billion because of the recession, many are worried that school districts and local governments will have to turn to taxpayers to cover the costs. Private accounts such as a 401(k)rise and fall with the market, and have no such safety net.

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"There's going to be massive increases" in taxes to make up for the losses, said E.J. McMahon, executive director of the Empire Center for Public Policy, a conservative think tank in Albany.

Among the local recipients of jumbo pensions - which are high because pensions are based on salaries and length of time in the system - are State Republican leader Joseph Mondello, who collects an annual pension of $113,550; current Garden City Village Clerk Robert Schoelle Jr. who gets $139,220; and retired Commack Superintendent James Hunderfund, who has the highest pension in the state - $316,245 a year, according to records.

The potential crisis facing New York has its counterpart in the financial turmoil in California. There, the city of Vallejo declared bankruptcy last year, after the collapse of the housing market made it impossible to cover high salaries and pension costs, which, like New York State, are guaranteed by the state Constitution. Several other cities in the state are considering following suit. In New York over the past month, state officials from Gov. David Paterson on down have warned that New York is not far behind California.

At least 28 states are considering legislation - like raising the retirement age or requiring higher employee contributions - to rein in pension costs. Earlier this year, Paterson proposed similar changes, but his efforts foundered after fierce opposition from public workers' unions.

"If you refuse to say no to the unions and the spending interests, we're going to end up just like California," said Assemb. Michael Fitzpatrick (R,C-St. James). "There's an inability to deal with reality."

The full effect of the market downturn and its impact on pension costs won't be felt in New York until two years from now because fund managers base what they charge governments on a five-year average. But when it hits - schools will feel it in the 2010-2011 school year and local governments a little later - it will be what some are calling a "pension tsunami," with a tab in the millions.

"You're talking about tax increases that could go, just for this alone, anywhere from a 5 or 6 percent increase all the way up to a 15 percent tax increase," said Fred Gorman, a founder of Long Islanders for Educational Reform, a watchdog group.

Coupled with the expected loss of federal stimulus money by then, "It is alarming," said Robert Lowry, deputy director of the New York State Council of School Superintendents. Last month's school budget increases were generally small because of the use of federal stimulus money.

Unlike most private retirees, New York public workers contribute to their pensions for only their first 10 years of employment. In addition, they receive cost-of-living increases and lifetime health insurance, pay no state or local taxes on their pensions and do not have to deduct an offset for for Social Security.

Several of those pension sweeteners were approved by the 2000 state Legislature, and they have dramatically driven up costs, according to local budget officials. The Massapequa school district, for example, contributed $220,000 for pensions in the 2000-2001 school year. Last year, it paid $6.5 million, said Alan Adcock, assistant business superintendent.

"In my opinion, the retirement system costs since that time period have been one of the most significant costs increases for school districts," he said.

Currently, school districts across Long Island pay 7.93 percent of payroll to fund pension liabilities. Though the state Teachers Retirement Fund has not yet set the rate for the 2010-2011 school year, it warned of a "significant increase" in a memo sent in February to administrators.

A number of administrators expect the rate to nearly double. In Massapequa, that would mean an additional $5 million out of a $171 million budget, Adcock said. His district has already begun setting aside money in a reserve fund to cushion the blow.

For Jim Malloy, a 44-year-old self-employed business consultant from Smithtown, the solution is simple: He plans to move out state..

"I feel like a fool," he said. "I feel like I get up and go to work everyday to pay for everyone else's retirement."