Time to cut retirement benefits for city workers?
In an effort to get out from under mounting pension obligations, voters in two major California cities overwhelmingly approved cuts to retirement benefits for municipal workers -- a move that is expected to lead to similar ballot initiatives in other states.
Last week's votes will certainly be challenged by public employee unions, particularly since the measures affect pensions for current employees, not just new hires.
In essence, mid-career workers would be enitled to benefits they had accrued but would see the level of benefits they would earn in the future drop sharply - which unions say is not fair play.
Nonetheless, the mayors of both cities continue to back pension reforms, arguing that changes to city worker pensions were essential to keep municipal budgets in the black.
Could such a thing happen in Canada?
Probably not, as a referendum is a rare bird on this side of the order. But the problem isn't going away.
Pension plans are doing their bit, however. The Ontario Municipal Worker’s Pension (OMERS) recently told employees that they will be shouldering higher contributions in the future. This will mean employees and taxpayers both funding 14% of salary, up from 10.7% just 5 years ago.
Despite this large increase the OMERS deficit rose by another $2.7 billion last year.
"Many younger employees are questioning the value of these high contributions to pay pensions for retired employees at the same time as shortfalls are increasing, leaving doubt in their mind as to whether the pension will be there for them at retirement," maintain Bill Tufts and Lee Fairbanks, co-authors of Pension Ponzi: How Public Sector Unions are Bankrupting Canada’s Health Care, Education and Your Retirement.
They suggest that radical surgery along California lines is likely the only solution.
What do you think: Is it time to trim public service pensions? How would you vote on such a referendum?
By Gordon Powers, MSN Money