The city of Miami, Florida is declaring a state of "financial urgency," which gives city commissioners the ability to cut the salaries and pensions of government employees despite their being under union contracts. The mayor of Miami said that the only other option would be to cut 1,000 jobs or raise taxes. The president of the general services employee union said that the move will result in a mass exodus of government employees, costing the city years of experience and expertise. But considering the facts surrounding city employee salaries and benefits, the chances of them leaving because of a pay cut are highly unlikely.

As FEN noted on our "Oh My's" page, Miami city employees earn an average of $75,961 in total compensation, not counting pension costs. The pay cuts proposed by the commissioners would not affect anyone earning less than $39,000 per year, at which point they would start at 5%, escalating to a maximum drop of 13% for anyone earning over $120,000. Even with a salary cut, city employees are not likely to drop to the average city resident's income of $29,151. Nearly half of Miami's approximately 4,000 employees earn more than $100,000 in salary and benefits, with 186 earning over $200,000. These numbers do not take into account overtime paid to police and fire employees.

If the salaries averaging out at over 160% higher than the city average weren't incentive enough to stay, the pension promises would tip the scales. Miami has two main pension plans: one for general employees and one for police and firefighters. Both plans are defined benefit plans, guaranteeing city retirees monthly payments for life.

General employees can retire at the age of 55, with a pension calculation of 3% times years of service, multiplied by the average of their highest two years salary. This means a person who started working for the city at the age of 21 could retire at 55 with 100% of his or her salary. Retirees are guaranteed a 4% cost-of-living increase, up to a maximum monthly boost of $400. Miami employees can also participate in DROP for up to four years, allowing them to retire with an account in the hundreds of thousands of dollars.

Police and fire employees have an even sweeter deal. They can retire at the age of 50, and can reach a pension of 100% of final salary after 31 years of service. In addition, their pensions are based on their single highest year's salary. Police and fire employees likewise have access to DROP accounts, and receive guaranteed cost-of-living increases, which vary based on years of service.

The pension cuts being proposed would not affect anyone who is already vested, meaning anyone who has worked for the city for 10 years or more will not see any change. The specific changes would cap the annual pension at $100,000, would change the final salary calculation to a five-year average, and would only pay out benefits to surviving spouses for up to 10 years.

Considering the fact that Miami's pension contribution for next year alone is $100 million, or one-fifth of the city's entire operating budget, the taxpayers of Miami cannot afford to continue footing the bill for these employee pensions. The employee union president said he is so fed up with the city that he will retire immediately. Since he is 60 years old and has been with the city for 35 years, he will be doing so with a pension of 105% of his highest salary.

While governors throughout our nation wring their hands over budget deficits, there is one fiscal adjustment that has been routinely ignored … the re-thinking of over-generous public pension plans whose unfunded liabilities present an ever-increasing stumbling block to financial stability. Yet tackling this one issue can begin the important reform work that will have a substantial impact on tomorrow’s taxpayers – our children and grandchildren.

Unfortunately, the only futures being taken into account when these pension policies were put in place were the cushy retirements being created for public sector workers, at the expense of the private sector workers whose tax dollars provide them. Even more unfortunately, those tax dollars have proven to be woefully inadequate for keeping up with such rich plans, meaning more and more debt is being passed to the next generation, with no abatement in sight.

A recent report by the Heartland Institute offers a good illustration of what’s wrong with many of the state pension plans, but these 80 or so plans (some states have one, two or three plans) are just part of the picture. There are over 2,500 state/local pension plans altogether – plans that cover teachers, police, firefighters and other government workers – meaning there are more than 2,400 local pension plans that also need to be addressed. And the unfunded liabilities of these plans are bankrupting our governments.

How did these public sector pension plans get so out of control? The defined benefit plans typically offered by the government (and previously by some private sector employers) have several components to their formula: length of service or age; percent of income replaced; what income is included in the calculation; etc. Public sector employees retire earlier than most private sector workers can AND use a larger base to calculate benefits AND collect those benefits for a longer period of time AND have guaranteed increases AND receive paid healthcare benefits as well (sometimes for a spouse, too!). This combines for an expensive lifetime financial commitment on behalf of the government (meaning courtesy of the taxpayers). What’s more, with earlier retirement, there is a shorter period of time in which to fund these benefits and a longer period of time in which they will need to be paid.

But the story gets even worse. Public sector pension plans take a series of liberties that create an unrealistic financial scenario that can only be described as one of the greatest Ponzi schemes of all times. These include underestimating the raises that government workers may earn until they retire and overestimating the interest assumptions for funding. This collection of bogus assumptions is hidden away in “off-the-balance-sheet” accounting practices that allow the public sector to escape the scrutiny of those who must guarantee their retirement benefits … the taxpayers.

The Heartland Institute report measured state public pension plans against six chosen variables, including the solvency of the fund, and then scored and ranked the states. Forty-two states were identified as being unsustainable and in need of reform. To add to this dismal picture, multiple independent studies have concluded that the stated unfunded liability of nonfederal public sector pension plans ($400 billion) is closer to $3.5 TRILLION, or eight times higher than what gets reported to taxpayers. Additionally, the liability for retiree coverage under nonfederal health insurance plans is estimated at $587 billion, with $555 billion of that unfunded.

Decades ago, the private sector recognized when its defined benefit plans were unsustainable and took the difficult steps necessary to provide its workforce with an alternative way to help prepare for retirement. The public sector needs to do the same, and taxpayers need to demand that they do so. We need to insist on financial transparency; replace public sector defined benefit pension plans with defined contribution plans; require employee contributions; and end pension abuse practices.

Without urgent attention, these unsustainable public sector pension practices will continue to threaten the financial stability of our cities, counties and states. It is time for taxpayers to demand pension reform of their elected officials.

Great stories always have a hero and a villain. In this political narrative we have two characters, corporations and unions. Can you guess the villain?

Your answer to this question may be very different depending on your political ideology, your past professional experience or the letter that appears on your voter’s ID card. Yet, upon closer examination these two characters are quite identical, the only difference is that one earns profits through the selling of goods, which creates tax dollars, and one represents 16.9 million people, half of whom are public servants and rely on taxes for their wages and health benefits.

This presents the problem. Whenever we shed a critical eye upon unions, we are immediately labeled as “anti-union” or “union-bashing.” But it seems to be acceptable, if not expected, to criticize private entities. This makes little sense to me. Do we think that while corporate America is greedy and corrupt, somehow that union leaders are saints of the Starship Morality?

Greed isn’t something that ONLY exists in the private sector and the refusal to accept that fact is not only absurd, it’s quite dangerous.

For example, most people don’t know that as of July this year, unions have contributed $9.7 million in campaign spending, while corporations have spent $3.4 million.

Also, the National Education Association (NEA) spends more on campaign contributions than Microsoft, Wal-Mart and ExxonMobil…combined! Where is the outcry for that? Perhaps that’s why some people on the Hill are still pushing for the $10 billion bailout for education workers, even though it was rejected in the war spending bill. Maybe that’s why so many of the jobs “saved or created” with the stimulus bill, were education jobs.

The point here is not to demonize anyone. These teachers are not to blame, nor is every union corrupt and ineffective. But the ones that are deserve the same scrutiny as any other business, especially when taxpayers are left to foot the bill for their reckless behavior.

This isn’t a story where the good guys wear a cape, and the bad guys have pencil thin mustaches. Unfortunately in reality, the “good” guys can also be “bad” guys.

The next time you enter a casino and hear the clink-clink-clink of the coins pouring out of a lucky slot machine, check your wallet. As a taxpayer, there’s a chance that the money used to hit that jackpot was yours. There are numerous states where welfare cards are being used in casinos and even strip clubs. The most insulting part is that there are very few programs in place to prevent this indirect siphoning of your tax dollars into the overflowing coffers of a casino or strip club, and some states have no interest in even attempting to prevent it.

This burgeoning epidemic of waste first came to light in California. The Los Angeles Times’ Jack Dolan broke the silence in June when he reported that $4.8 million in welfare funds had been used in over half of California casinos and poker rooms since 2007. This money is freely given to recipients to assist them in basic necessities such as feeding their families. The first groundbreaking article was followed by another stunner from Dolan in July which found that the problem was not restricted to gambling facilities, but was also an issue at ATMs in numerous strip clubs within the state. California cannot afford this. The state is facing a deficit for the first month of fiscal year 2010 that clocked in at about a billion dollars and total welfare spending of $151.6 billion for 2009. It’s easy to think, ‘but I don’t live in California.’ Unfortunately, this is a national outbreak that is occurring in various states from sea to shining sea.

Following the expose about California, numerous states launched investigations to determine if the same level of taxpayer waste was being propagated within their borders. Michigan discovered that 42 ATMs at various casinos were set to not only accept welfare cards, but also unemployment benefits. The welfare benefits are all taxpayer funded, and the unemployment benefits are covered by the worker and the employer for the first 26 weeks but then up to an additional 73 weeks are financed through the sweat and hard work of taxpayers. Coincidentally, this state also maintained the highest unemployment rate in the nation, until Nevada just recently gained a slight lead. Michigan is working with banks and the casinos to curtail this abuse. However, a spokesman for the Unemployment Insurance Agency didn’t seem to grasp the fundamental problem with this waste occurring. “It’s up to the individual to determine how to spend those dollars,” he said, blatantly ignoring the fact that the taxpayer is financing about 75% of this financial abuse of unemployment benefits.

The states of Oregon and Maine also discovered that there is rampant misuse of welfare cards. Two Maine legislators have pushed for the same accountability that California now faces. The card that is used by Maine in the Temporary Assistance for Needy Families (TANF) program has no restrictions at all. It can be used anywhere, but the head of the office that oversees the program does not see any problem with that. She stated that the grant in 2010 was approximately $31 million, with an average benefit of $383 per month. “That is not a lot of money,” she concluded. Oregon discovered that its own TANF program also has no restrictions but emphasized that it had not received any complaints about this behavior.

The most amazing surprise of this story comes with an article that was found in New Mexico’s Albuquerque Journal more than a year prior to the investigation in California. A Journal investigation revealed that welfare money was withdrawn from up to seven New Mexico tribal casinos over a year period. These casinos are required by gambling agreements with the state to ensure that ATMs do not accept welfare cards. However, the Gaming Control Board can’t impose penalties on any violations of this rule, so it’s basically useless. The casinos claim that the ATM suppliers are at fault and should be responsible. Somehow this bombshell article was never picked up as a national story and this caused over a year to pass before the subject received national attention.

This cannot be allowed to continue in any state. The simple fact that your state may not be included in this report does not mean that this abuse is not occurring. It only implies that the subject has been widely ignored and swept under the political blanket of silence. Only one state launched an investigation and used the press to put the public at ease about this financial misuse. Pennsylvania’s Department of Public Welfare bragged that using their cash assistance to gamble is “absurd” and that the cards could never be used in casinos within their boundaries. It is your right as a taxpayer to know that the taxes you labor to contribute are not being used to purchase poker chips, slot machine pulls or even lap dances. California’s Governor Schwarzenegger worked quickly and tirelessly to end this abuse and recently passed an executive order to ban the use of any welfare cards at casinos and increase efforts to end any other abuse. Please contact your state officials and demand similar quick and decisive action in your state.

Here's the problem with politics today. In order to get reelected, a member of Congress needs to be big on talking points, but vague on details. You need to say 'cut the deficit,' without offering a single idea of how to cut the deficit. Why is this? Because the answers to how to cut the deficit are not popular. Enter Paul Ryan.

Paul Ryan (R-WI) is the ranking Republican on the House Budget Committee, and a member of the President's deficit commission. Rep. Ryan introduced a proposal for how to tackle the deficits, called "A Roadmap for America's Future." The Roadmap details ways to tackle government spending on Medicare and Social Security, as well as changes to the tax codes for individuals and businesses.

Ryan's Roadmap contains some very controversial ideas. It replaces Medicare with a voucher system, under which seniors would use government vouchers to purchase healthcare insurance from a pool of Medicare-approved plans. It also gives people the option of exiting Social Security, and instead channeling their funds into an investment account. Both of these plans give opponents excellent campaign material, in that they could claim he is ending Medicare and Social Security.

Paul Ryan wrote an opinion piece in the August 13^th Washington Post that further explains his plan for reforming Medicare. Rather than backing off, he is pushing forward, despite the fact that most members of the House are already in campaign mode. Whether you like Ryan's suggestions or not, you have to applaud his courage for stepping up and detailing an actual plan.

Follow this link to see FEN’s summary of Ryan’s Roadmap.