[quote=CA renter][quote=livinincali]It certainly looks like the public unions will win in the courtroom on prop B. State law concerning collective bargaining seems to trump the proposition city voters passed. Of course with that said if the public unions ignore the will of the voters they could face some wrath down the line. If you really piss off the voters it wouldn’t surprise me to see an attack on collective bargaining at the state level.
In my eyes the problem is defined benefit plans where you assume an above market risk free rate of return where the tax payer makes up the loss. Even in the rare event where the risk pays off the tax payer doesn’t get any benefit and instead the public sector employee gets an increase in benefits based on the better than average return.
If the unions members want to set up a defined benefit plan where they bare the risk that’s fine but right now they get to gamble on the risk curve and then force somebody else to make up the losses. Of course we all know what’s going to happen in the future. It will be easy to throw that small minority of the beneficiaries under the bus when the funds run out whether it’s legal or not.[/quote]
Not true. When the investment returns outpace expectations, contribution rates go down. This tends to happen at the same time that tax revenues are at their highest, too, giving public employers a massive influx of new/unexpected money to spend. That leaves more money for other projects, tax cuts (like when the extra taxes on auto registration was repealed, or when Prop 13 is left untouched), and savings.
I think you missed the most important part that was wrong in the bolded part. Employees never get an increase in benefits solely as a result of better than average returns. That’s the whole idea behind defined benefit plans. Benefits are “defined”, and must be paid irrespective of the return. Only employers (in this case, the public entities) benefit with higher than expected returns. Hence the decade of the 90’s when many municipalities and other public entities made no contributions at all.
