Pension Crisis Hits Critical Mass In West Virginia

The pension crisis has reached critical mass in West Virginia. Cities like Huntington are out of cash and begging the state (taxpayers) to bail out foolish promises that cannot be met.

Please consider Cities Turn to State for Pension Relief.

City officials from around the state say their communities can no longer afford to cover the benefits of retired police officers and firefighters, so they are asking the state Legislature for help.

If nothing changes, cities such as Huntington could have fewer police officers and firefighters on the streets as they are forced to cut back staffs because of increasing pension obligations. The city’s last six police and fire department retirees will likely draw $1.5 million each in pension benefits over the course of their retirements, even though each person made less than $900,000 during his or her career, according to Deputy Mayor Tom Bell said.

“What happened here is we just can’t afford to dedicate that amount of money” to pensions, Bell said.

Huntington is in the worst shape, but other cities around the state also are struggling to cover their pensions.

State requirements also help drive up the cost of covering pensions.

For example, police and firefighters can retire with full benefits at age 50, the reasoning being both lines of work often involve physical activities that become more stressful the older people get. But people now live much longer than they used to, so it is not uncommon for retirees to live more than three decades past their retirements, Bell said.

“The problem is the state couldn’t add enough money to pay for these lucrative pension benefits,” he said. “What we have to do is close that to new hires and adopt a more conservative pension plan.”

The so-called “Huntington plan” would let cities do just that. It also would give them a 40-year re-amortization of their existing pension debts, meaning they would pay back the debts at higher rates but have more time to do it.

West Virginia is in deep trouble and ridiculous promises such as retirement with full benefits at age 50 is a huge part of the reason.

For starters West Virginia immediately needs to put new hires on the same pension plan as most in private industry receive. In a single word: none.

Then, on a city by city basis, cities should offer pensioners two choices.

1) Approve lower benefits for everyone now
2) Take their chances in bankruptcy court

Finally, cities should also privatize as many services as possible including firefighters.

Raising taxes is not the solution. Nor is redistributing other revenues to fund pension boondoggles. It is time to kill government jobs in general and government pensions plans in particular.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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