Employee and employer contributions
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Employee and employer contributions provide the capital for pension and retiree healthcare funds. These funds are then invested and provide for the benefits of retired employees through the investment returns and the continued contributions of the employer and new employees. Employer contributions for public pensions come from the general fund of the public agency and hence ultimately from the tax payer.
Many proposed pension reform solutions involve increasing employee contributions to deal with the decrease in investment returns due to the economic decline. In Phoenix, a measure was passed in March of 2013 that required new public employees to match the contribution from the city to the pension fund, making the employees give 50% of contributions to the fund.
Many blame swelling city pension payments for the financial difficulties experienced by cities across the nation and even for the recent bankruptcy in Detroit, Stockton,
Examples
- San Jose spends approximately 20% of its annual budget on pension costs.[1]
- In 2012, the city of Cincinnati had to contribute $35 million to its public pension fund. This amounted to nearly a tenth of its 2013 operating budget.
- New York City is expected to contribute $8.06 billion - over a 10% of its expected budget - to the city pension funds.[2]
- San Francisco, which recently passed Proposition A to reform its retiree health care fund, was responsible for a payment of $150 million to the retiree health care fund in 2013, which money came out of the city's general fund. Moreover, according to City Supervisor Mark Farrell, this amount was expected to grow to $500 million per year over the next 20 years if no measures were taken.[3]
See also
Additional reading
- Bloomberg News, "Police Chief’s $204,000 Pension Shows How Cities Crashed," July 31, 2013
- Alternet.org, "America’s Retirement Crisis Grows as Cities Raid Pension and Health Plans," December 10, 2013
- Petaluma360.com, "Pension costs up, streets still a mess," May 27, 2013 (dead link)
- Seattle Police Relief and Pension report
Footnotes
