Robert J. Cristiano PhD, Real Estate Professional in Residence at Chapman University in Orange County, CA and Director of Special Projects at the Hoag Center for Real Estate & Finance, sums it up:
In the distant horizon, a giant wave is building. There are some who recognized the swell and raised the alarm. There are others who deny the possibility of such a wave. Most remain blissfully unaware.
A $1 trillion gap exists between the $3.35 trillion in pension, health care and other retirement benefits states have promised their current and retired workers as of fiscal year 2008 and the $2.35 trillion they have on hand to pay for them.
By 2010, the general public received a series of shocks. The first shock was the jobless recovery of the Great Recession that cost 8 million jobs. Most of the job losses occurred in the private sector yet the majority of the $800 billion Stimulus Bill went to “save and create” public sector employment.
The second shock was learning that civil servants earned twice that of private workers. According to the Bureau of Economic Analysis, Federal workers received average pay and benefits of $123,049 while private workers made $61,051 in total compensation.
The third shock was revelation of incredible retirement plans doled out by politicians since 1999. In 2002, California passed SB 183 that allowed police and safety workers to retire after 30 years on the job with 3% of salary for each year of service, or 90% of their last year’s pay. During the Great Recession, fireman began retiring with $150,000 pensions at age 52 despite a life expectancy approaching 80. In Orange County CA, lifeguards, deemed safety workers, retired with $147,000 annual pensions.
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