Imagine that you were a state employee of California for thirty years. You've retired in the past three years, with a annual retirement pension of $125k per year. Yes, shockingly enough....you moved up every three to five years and kept getting three percent yearly pay raises. Added to this...are the health benefits....worth another $12k a year.
The state is covering this $137k a year in cost for you. In fact....there are ten thousand of you folks in California who pull in $100k or more a year on your state-job pension. Cities, counties, and the state.....are all suffering greatly because they never understood the implications of another $3k raise here, a $5k raise there, and an eventual salary of $160k for a guy who manages forty-odd folks at some county office.
This week, there was an article with the New York Times. Apparently....folks in the administration and around Congress are quietly working on this new bankruptcy concept that states could declare, and then trim off all of this pension cost in a matter of days. No one is quiet sure of the end product yet, but it would appear that by summer of 2011...this will be pushed through the congress with both Republican and Democratic participation.
So we shuffle back to you, the retired pension guy in California....58 years old....and collecting your total package of $137k a year. The odds are....your pension will be cut by 35-percent (my humble guess). The states probably would like to cut the pension by half but I'm thinking that folks are worried about more mortgage defaults if Joe the retired state worker has only half of what he planned to have in retirement. Cutting Joe by one-third might be safe and at least ensure the state economy isn't screwed over too much.
As for your feelings as a retired state worker in this situation. I'm guessing you will be hostile and angry. You worked your entire life and knew precisely what you'd make at retirement. You bought a home and make $3k a month payments on it. You own a nice BMW. You take vacations to Alaska each summer. You spend $3k for Christmas presents each year. You probably enjoy a 5-star retirement situation. And it's sinking fast based on this upcoming change.
Two decades ago....you could have predicted all of this and warned people....but it didn't matter. Everyone thought that it'd just keep going.
So in the months ahead....as you watch a dozen states declare bankruptcy....listen to the folks cry and weep over the interviews as they tell you of the missing $35k in pension they suffer from. Most folks in the south will scratch their head because they don't even take home more than $18k a year from the state pension. They can't imagine how any fool ever got $100k a year.