I never understood that old saw, “What you don’t know can’t hurt you.” Of course it can. If I don’t know someone is about to clobber me with a baseball bat, it’s still going to hurt when I get smacked.
Even if I’m not aware that someone is spreading disparaging information about me at work, it can still hurt my reputation, advancement prospects, and income (not that I’m paranoid).
That’s why we work hard to know what’s going on around us. We pay attention to our surroundings walking down the street, and we typically have our antenna up at work. We also do our best to make informed decisions when shopping by comparing prices online.
But what about the governrnment? What about the amorphous blob that you send money to that provides services, but you’re not sure exactly how the numbers work?
I’m not talking about the federal governrnment. That one’s easy. Just under half of Americans pay no federal tax at all (not including FICA), so there’s no kicking into the kitty. And as for how Congress spends it, well, there are plenty of websites that dive into that in great detail.
But what about where you live? What about your town? Do you know the financial health of that hamlet or metropolis?
Almost all political decisions that affect your life are made at the local level, and yet most people can’t name the members of their city council, much less their county officials or state reps. These are the people that hold the greatest sway in determining how much you have to pony up every year, and what kind of services you’ll get in returnrn.
I’ve got news for you. It’s getting ugly. And it’s all about pensions.
Don’t get lost in the weeds. One Oregon state retiree gets $76,000… per month. That’s unusual. The state retirement system is woefully underfunded. That’s not unusual. But guess what? So are many city retirement funds.
And then there are teacher retirement funds, county retirement funds, and even elected official retirement funds. Almost all of them are bleeding money. And they have one other thing in common. They are backed by you, the taxpayer.
Don’t expect a bunch of guys in black trench coats to come to your door demanding your jewelry and emergency cash to pay the liabilities.
They’ll take something from you, but it will be more subtle than that. They will take, or squeeze, your standard of living, by raising taxes and lowering services. It’s already happening.
Take Phoenix, for example. The city has an ongoing issue with city pensions for employees and public safety workers. The city’s payments to the state public safety pension exploded from $56 million in 2007 to $207 million this year, a 270% increase.
To make ends meet, Phoenix has increased taxes over the last several years, including adding a fee to water bills and raising property taxes, and has slashed city services, like closing municipal swimming pools. The city council has to make hard choices this year, which could include closing senior centers, libraries, and a lot of other things, simply to pay for growing pension costs.
Phoenix is not an outlier. It’s not a poster child. It’s simply one example of what is happening around the country.
And to make it worse, we’ve come to this point during what is about to be the longest bull market in U.S. history, something Charles plans to talk more about in his free presentation tomorrow, in fact.
If these cities, counties, states, and other entities can’t fund their pensions through contributions and investment growth in the best of times, what happens when the markets roll over, and yet pension liabilities continue to grow?
That’s right. They’ll come looking for me and you. Raising taxes and fees, while cutting services.
There’s no question that this will happen, it’s just a matter of when, and how much pain will be spread in your town.
So, I’ve got a question. Do you know?
Do you have a sense of how your city, county, and state will pay what it owes to governrnment retirees? Have they raised taxes and fees as well as cut services?
Drop me a line at email@example.com and let me know. I’d love to hear how things are going in your town.