Benefit Promises that are Hard to Keep

Town Square has been filled with posts about city employee benefits for pensions and health care. The Weekly did a long article on the situation in Palo Alto. There are five main causes of the fiscal challenges caused by rising benefit costs:

1) Agreements were made about benefit levels and the cost sharing responsiblities of employees that now look unsustainable and out of step with changes in private company benefits

2) Health care costs have continued to rise far above the rate of growth in the economy.

3) Investment returns on state and local pension contributions have declined below levels assumed by pension fund managers.

4) The number of aging and retiring workers is growing as the large baby boom generation is aging.

5) There were years in the early 2000s in which cities and the state did not make pension contributions.

The last four causes have nothing to do with employee behavior, public unions or any cause that can be reasonably be construed as the public employees fault.

Yet most posters on Town Square blame public employees and city council and staff and offer a series of choices for whcih they have, as the saying goes, no skin in the game. Theyoffer cuts in employee pay and benefits, outsourcing and elimination of programs THEY find unnecessary. What should be a matter of shared responsibility (including changes in employee benefits and contributions) is, instead, a denial that much of the penskon/health care unsustainabilty is no one’s fault or everyone’s fault.

So let’s slightly change the focus to the other and equally or much larger set of benefit promises that are hard to keep–the ones in Medicare and, to a lesser extent, Social Security.

First there are many similarities. Benefits have been promised and are being paid that are unsustainable in the long term.

I and other eligible residents get cost of living increases in Socail Security and the amount I pay for Medicare has not kept pace with cost of benefits I receive.

These imbalances will increase as more baby boomers become eligible for Medicare and Social Security. Current tax levels are not sufficient to meet rising health care costs and growth in the agin eligible populaiton.

Sounds a bit like public employees and benefit costs except this time WE are the public employees (the ones who got benefits that are not sustainable) and the Congress representing us (like the council represents voters) passed the benefits.

I think both sets of unsustainable benefit proises require shared solutions. For Medicare and Social Security I am willing to have additional means testing (which would require me to pay more) and some means of reducing duplicative or medically unnecessary test by having Medicare tighten approval requirements. Just as new city employees throughout the country are accepting benefit packages less generous than long-time employees have, I am open to some changes in benefit levels for future Medicare and Social Security recipients. And I think the Social Security tax should be levied on incomes above $110,000 just as the Medicare tax is.

Similarly I don’t think the entire burden of bringing city employee benefits into sustainability should fall on the employees or reducing services that othere may like.

Do posters have any ideas about shared solutions to lcoal employee beneifts and those we as Americans are or will get from Medicare and Social Security–both sets of which are unustatinable as currently organized. Shared means we all put some skin in the game.