OUR VIEW: Lucrative pensions ream taxpayers

As government at all levels struggles with declining tax revenue and increasing operating costs, the elephant in the room largely ignored is the monumental expense of public employee retirements. A recent study by a taxpayer organization points out the behemoth of a problem by noting the obvious: When government agencies increase employee pension costs, they tend to increase taxes to cover the added expense.

A study of municipal retirement systems shows that pricey pensions not only drive up costs, but ultimately also drive up taxes. This link between pensions and tax increases became apparent in a study of 17 cities in San Diego County, Calif. El Cajon leads the pack, spending almost one-fifth of its general fund on pension obligations.

Confirming the obvious, the study discovered that four of the five cities with the largest pension costs also have asked voters to approve sales tax increases the past three years. The cities studied spend an average of 10 percent of their general funds on pensions, compared with the 4 percent statewide average reported last year by a state commission.

Most of the cities opt for the benefits formula of the state’s generous retirement system, including three-fourths that provide police and firefighter pensions paying 3 percent of final salary for each year of service at age 50 and 30 years on the job.

As these costs have weighed increasingly on financially strapped municipalities, some have moved to require employees to pay more of the cost. Unless government managers and elected officials begin to rein in these mounting costs, public agencies will be forced to divert growing portions of operating budgets to pay for the retirements of people, many of whom are no longer on the payroll. This will necessitate reductions in ongoing services for constituents, who pay the bill.

More troubling yet is that these high costs don’t reflect substantial new increases expected in the near future to recoup investment losses suffered in the economic downturn.

This elephant-size problem can’t be ignored forever. When local elected officials finally understand they must curb these runaway pension expenses, they are likely to discover an even larger unfunded debt they also have ignored. It’s long past time for locally elected officials throughout the United States to acknowledge both elephants in the room.