Opus 2015-195: Tax Dollars at Work: Retirement Fund Slight of Hand

I have not hear much lately about concern for funding of retirement for public employee union members.  Let me share with you how California is going to deal with it.  The information below is from the Winter 2014 CALSTRS Connection, a quarterly newsletter about the California teachers’ retirement system.

The headline on page 11 presents a typical Progressive “Tax the rich” scenario.  It reads in bold print,

“2014 Funding Plan Increases Employer Contribution Rate by 10.85 Percent”

Who could have a problem with that?  The greedy employers will pay the cost.  The small print says this will close the $74 billion gap over the next 32 years.  We are told that “Under the plan, employers will pay the biggest share.”  The mindless mass cheer and applaud.  Wasn’t that easy?

Not so fast.  First of all, where will the employers (school districts) get the money?  From the tax payers, of course.  That mean you, and you, and you if you live in California.  Tax increase anyone?  But the math gets even better.  Notice that the headline mentions a 10.85 percent increase.  To most people that means that if you are paying $100 now it will become $110.85.  Simple math, but not the way they teach it in public schools today.  In the small print it tells you that the old rate of 8.25% that employers paid would gradually increase to 19.1%.  The way most people think this is an increase of 131%.  Do you see the slight of hand.  Technically they are correct but they are making people feel a false comfort, deliberately.

The slight of hand doesn’t stop there.  For those who thought the employer would pay it all, there is a little surprise higher on the page under “Member contributions”.  In that paragraph that is easy to miss as you celebrate socking it to the greedy school districts (aka tax payers) it says that the member will be increasing their payout by 2.25 percentage points.  They don’t give the starting numbers but I am estimating that is an increase of about 25%.

And to complete the package in one sentence it says the state contribution will be increased from 5.541 to 8.828%.  I will let you do the math.  And remember that the money the employers are paying is coming from the state.  And remember that the money the state has comes from the tax payers.

So the solution is there for you to see in California. 

The biggest losers will again be the tax payers.  As a public school teacher, I thank you.  As a citizen, I beg you to wake up.

homo unius libri