Pay debate turns to state, local employees

Wednesday - 3/9/2011, 3:17pm EST

Karen Tumulty, national political correspondent, Washington Post

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Your pay has been the subject of debate for the past couple of months, resulting in the President proposing and Congress passing a two year pay freeze.

But now the pay debate is turning to state and local government employees - some who receive outrageously generous retirement packages - in one case, to the tune of half a million dollars.

States are now turning to the federal government for a model of retirement benefits reform. A quarter century ago, the federal government adopted a hybrid pension system - a combination of a fixed pension, social security and a 401(k)-type plan.

The norm for state and local employees now is a defined benefit plan that guarantees a certain pension payment, immune from Wall Street's performance.

The budget troubles of states and municipalities have turned greater attention to this system - and the abuses happening within in.

In one case in California, the former city administrator of a small town is collecting $520,000 in pensions, Washington Post national political correspondent Karen Tumulty reported.

This former administrator had worked five positions at the same time and was receiving a pension for each job, Tumulty said.

"A few bad actors can create a very distorted picture for everyone," she said.

Tumulty reports that 19 states have reduced their pension liabilities and a dozen are considering a hybrid system that includes a 401(k)-type plan.

However, not all of these changes can happen immediately.

"There's a problem in that you cannot change anything that has been promised a current employee in most places - and that of course is where the money is," Tumulty said.

Some employee unions - such as the American Federation of State, County and Municipal Employees - are dedicated to the defined benefit pension.

Tumulty said, "I think they're fighting against a tide here."

Read Tumulty's article in The Washington Post.

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