Publisher's Note: Protect and change
By Jody Reese
Public retirement funds have become a huge hassle for New Hampshire communities. In the past the state — which runs the system — has gotten away with under-funding it because the investment growth in the fund has kept pace with people retiring, but no more. As the investments have yielded lesser returns, a debt has accumulated in the system. In short, New Hampshire owes a lot of people a retirement and as things stand now might not be able to cover its obligation.
This has led to a legislative push to increase funding of the retirement system and cap payments.
As a point of fairness, those in the system should be paid what they were promised. Many take jobs in public service at lower wages than are offered in the private sector because they know that in 20 to 35 years they will get a guaranteed pension. That obligation must be paid. A deal is a deal.
However, going forward we need to radically change the state pension system, and by radical I mean completely remove it.
The very idea of a pension assumes a person will stay in a career for most their entire working life. That is no longer the case. The average worker will hop around to more than seven jobs — and more than one career.
Public service employees should have the same freedom as everyone else to jump from job to job or move from being a school teacher to a lawyer to a small business owner — and not be punished for it. Pensions tend to act as anchors to keep an employee in the same type of job their whole career.
Instead, the state should move (for all future public employees only and those that want to convert over) to an individual-type account that moves with them from job to job and require Social Security payments (many in the public sector don’t contribute and therefore don’t receive Social Security benefits). This would make the public sector more compatible with the private sector so public employees could move back and forth and let employees invest for themselves.
It would also make the public sector more competitive and attractive to people who just want to be a teacher or police office or public defender for a few years. It would also likely raise wages to match the private sector.
Finally removing the fixed pension would make it easier to make government more efficient. In the private sector employees are easily removed for poor performance. But pensions tend to make it harder to get rid of poorly performing employees because being fired means losing such a huge future payment. A fireable offense must be something quite horrendous because of the loss of the pension. If the retirement account were something that followed the worker, then firing the worker wouldn’t be such a blow. The worker could move on to a job more suited to their skills.
Changing the pension system will make government better for the taxpayer and the public sector employees.