Untouchable Pensions May Be Tested in California

By MARY WILLIAMS WALSH

Published: March 16, 2012

When the city manager of troubled Stockton, Calif., had to tell city council members why it was on track to become the biggest American city yet to go bankrupt, it took hours to get through the list.

Stockton, Calif., which must pay $30 million in annual pension costs, which it is told it cannot cut even in bankruptcy.

There was the free health care for retirees, the unpaid parking tickets, the revenue bonds without enough revenue to pay them. On it went, a grim drumbeat of practically every fiscal malady imaginable, except an obvious one: municipal pensions. Stockton is spending some $30 million a year to pay for them, but it has less than 70 cents set aside for every dollar of benefits its workers expect.

Some public pension experts think they know why pensions were not on the city manager’s list. They see the hidden hand of California’s giant state pension system, known as Calpers, which administers hundreds of billions of dollars in retirement obligations for municipalities across the state.

Calpers does not want cities like Stockton going back on their promises, and it argues that the state Constitution bars any reduction in pensions — and not just for people who have already retired. State law also forbids cuts in the pensions that today’s public workers expect to earn in the future, Calpers says, even in cases of severe fiscal distress. Workers at companies have no comparable protection.

Stockton is in the midst of a mediation process with its creditors that will determine by the end of June whether it will file for Chapter 9 bankruptcy, which would allow the city to negotiate reductions in its debt in court.

For Calpers, the prospect of a California city in Federal Bankruptcy Court portends a potential test of the constitutional mandate that federal law trumps state laws — in particular, the state laws that protect public workers’ pensions in California. Such a challenge could blow a hole in what experts consider the most airtight pension protections anywhere.

“Obviously, what Calpers wants is that it doesn’t come up in the process, which I think is ridiculous,” said David A. Skeel Jr., a law professor at the University of Pennsylvania who writes frequently on bankruptcy. “My view is that even the California Constitution is subsidiary to federal bankruptcy law.”

As the United States population ages and more and more public workers qualify for retirement, the cost of their pensions is growing fast, turning into a major drag on many local governments’ finances. The pension contributions that cities must make every year are rising, but their revenue, which often depends on property taxes, is not keeping up. Taxed-out residents, many of whom have lost their own pensions in the private sector, are unwilling to pay more. In tax-averse California in particular, where every tax increase must be put to a vote, officials are running out of options and some are considering bankruptcy.

Bankruptcy in America is a collective process, where creditors of a distressed company or municipality come together under court oversight and negotiate a plan to share the losses equitably, for the sake of the greater good. Some creditors may stand more toward the front of the line and others at the back, but there isn’t generally one big creditor that gets paid in full without having to get in line at all.

Yet that’s what Calpers appears to be doing.

“They will probably say it’s a statutory right and it can’t be changed by a bankruptcy court,” said James E. Spiotto, a Chapter 9 specialist with the firm of Chapman & Cutler. “I think it’s still subject to some question.”

A spokeswoman for Stockton’s city manager, Connie Cochran, said she could not discuss the city’s dealings with Calpers, citing the confidential mediation process.

When a company with a pension plan goes bankrupt in Chapter 11, it typically stops making most of its required pension contributions, just as it can stop paying many other bills. Some companies, like Northwest Airlines, even declare bankruptcy the day before a pension contribution is due, to save the cash.

Chapter 11 also permits companies to shed their pension obligations completely, if they can convince the bankruptcy judge that’s the only way they can restructure. The federal government, which insures traditional company pensions, then takes over the defunct plan and pays retirees their benefits, up to statutory limits.

There is no such backstop for state or municipal pensions. But cities, until recently, have managed to avoid bankruptcy, so there is almost no precedent for how public pensions will fare in Chapter 9.

Now that is starting to change.

Public Unions Send Medical Bills to Taxpayers

By Steven Greenhut - Mar 15, 2012

BLOOMBERG.com

The U.S. public pension mess, with its $2 trillion to $3 trillion in unfunded liabilities, is such a volcano of gloom that it takes a potentially bigger problem to turn our eyes away from it.

Turn your attention instead to the size of the taxpayer- backed health-care obligations for public employees.

“Frankly, if you want to look at a truly scary set of unfunded liabilities, health care for retirees is a better choice than pensions,” said California Treasurer Bill Lockyer in an October speech meant to play down the pension crisis.

Not that Lockyer or his Democratic and union allies want to reduce any benefits that are at the heart of the problem. In their view, the real scourge is “pension envy” or perhaps “health-care envy” -- the failure of the private sector to keep up with government-benefit levels.

States and localities make their own decisions on how to finance these health-care policies. Far more government employees than private workers receive health and dental care -- and those plans cost more, require lower employee contributions and provide more comprehensive coverage.

Such generosity comes at a cost to taxpayers and municipal budgets, especially given the “promise now, pay later” approach of officials. As a recent Bloomberg News article noted, while most public pension plans are 75 percent funded, the figure for health-care plans is only 4 percent nationwide. So unlike pensions, governments are setting aside little money in advance to pay for their future obligations.

Courts Back Unions

Public-sector unions and their allies have foiled even modest efforts to scale back pensions, and the courts have done the rest. Now the unions are gearing up to fight changes in health-care plans, as well -- an issue that has reared its head after Stockton, California, announced that it was possibly headed toward a Chapter 9 bankruptcy driven by $417 million in liabilities caused by an absurdly generous lifetime medical plan.

The unions’ job is considerably easier thanks to a California Supreme Court decision in November that will make it as hard to change health-care benefits as it is to deal with pensions.

It’s not that leaders in California, which is in the deepest public-employee-related fiscal hole, don’t understand the scope of the problem. Controller John Chiang released a report in February that acknowledges a $62.1 billion unfunded health-care liability.

“California should pay $4.7 billion in 2011-12 to pay for present and future retiree health benefits,” according to Chiang’s office. “In the 2011-12 budget act, the state provided $1.71 billion to only cover current retirees’ health and dental benefits.”

With pensions, government employers and employees contribute a percentage of income into retirement funds. The liabilities depend on how well the funds perform, with higher estimated rates of return leading to a lower predicted debt and vice versa. But as Bloomberg News reported, “States haven’t financed almost 96 percent of the $627.4 billion they were projected to owe for future retiree benefits in 2010.” They try to pay these health-care costs as they go.

Few governments have the excess cash available to prepay these already promised benefits. But often there are straightforward ways to solve the problem. In 2006, Orange County cut its $1.4 billion health-care liability, in a model effort touted not just by the Republican board of supervisors but by the union representing county workers. The union said the deal demonstrated its willingness to help fix the system.

Reforms Overturned

Retirees had been placed in the same medical pool as current workers. Because retirees are older, their health-care costs are higher, so the county was subsidizing the rates for retirees. The county separated the pool, raised the monthly contributions paid by retirees and reduced the unfunded liability by $815 million. But the retirees’ group sued the county and took the case to the state Supreme Court, which ruled in a way that has made it far easier to challenge cutbacks of these benefits.

Pensions are vested, contractual rights. As such, the California courts have consistently quashed efforts to change benefits for existing workers, as is frequently done in the private sector where employers have frozen pension benefits.

Health care typically is different. It has been viewed as a non-vested benefit that can be changed at the discretion of the employer. Until now, in California.

“Under California law, a vested right to health benefits for retired county employees can be implied under certain circumstances from a county ordinance or resolution,” according to the state Supreme Court ruling.

The Orange County Register editorial board opined that “much in the way that federal courts have found penumbras in the Constitution -- i.e., meanings between the lines, or in the shading or the shadows -- the state Supreme Court found that certain benefits are the result of ’implied’ contracts.” Localities now face a high hurdle to change these benefits.

Treasurer Lockyer warned about a health-care “time bomb,” but threw the problem back to the taxpayer.

“Nothing is more important in providing for retirement security than preserving the defined-benefit pension for those who have it,” he said in the October speech. Any changes would need to be “on our terms,” he added, to preserve “the power of workers and their unions to be a balancing force to business and the unregulated marketplace in American life.”

Protected Class

To Lockyer and other representatives of the public sector, the real retirement problem is not billions of dollars in unfunded liabilities that are leading to slashed services and higher taxes, but a stingy private sector that isn’t generous enough to its workers. Instead of proposing reforms that bring government benefits down to manageable levels, the state’s Democratic leaders are proposing a bizarre new mini Social Security system that provides a few crumbs to private-sector workers. But their goal is clear.

“In general,” Voltaire wrote, “the art of government consists in taking as much money as possible from one party of the citizens to give to the other.”

In California, this art form has been perfected. It’s anybody’s guess how the government class continues to get away with it.

(Steven Greenhut is vice president of journalism at the Franklin Center for Government and Public Integrity. He is based in Sacramento, California. The opinions expressed are his own.)

The Gaming of Public Pensions

Charles Chieppo | March 13, 2012 - GOVERNING.COM

It seems as though no more than a few weeks can go by without another story highlighting why traditional public-sector pension plans are no longer sustainable. Last month, it was the fact that state and local governments were going to have to make up shortfalls caused by lower-than-expected pension-fund returns just when those governments could least afford it. Now it's the all-too-common practice called "spiking" that's in the news.

In Ventura County, Calif., Chief Executive Marty Robinson was earning $228,000 annually as she approached retirement last year. As in 19 other California counties, Ventura bases its pension calculation on an employee's final salary. It also allows things like cashed-in vacation time, educational incentives, car allowances and bonuses to be counted as part of that salary.

Earlier this month, the Los Angeles Times reported that $34,000 in unused sick time and an $11,000 bonus for earning a graduate degree were among the benefits Robinson cashed in during her final year. As a result, the 62-year-old will receive a $272,000 annual pension for the rest of her life, more than she earned while working.

And Marty Robinson isn't alone. Among Ventura County retirees with six-figure annual pensions, an astounding 84 percent are collecting more than they earned on the job. Meanwhile, the county's retirement fund is underfunded by $761 million.

In his 12-point pension-reform plan, California Gov. Jerry Brown proposes to stop spiking by basing pensions on an employee's three highest-earning years and not including add-ons as part of the salary calculation. If he wants to see how the proposal would work, Brown need only look to Massachusetts, where both of those provisions are already law. Specifically, he should examine the case of Charles Lincoln.

In 2000, Lincoln, a Brockton police lieutenant, was a key supporter of Joseph McDonough's candidacy for sheriff of Plymouth County. After McDonough was elected, he hired Lincoln as security director at the county jail, a full-time job that Lincoln held concurrently with his full-time position as a Brockton police officer.

During the three years he held both jobs, Lincoln called in sick 29 times to his job at the county jail and 222 times to the Brockton police department. According to a Massachusetts inspector general's report, he worked a full shift at the jail on 148 of the 222 days he called in sick to Brockton,

On January 15, 2004, Lincoln retired from the Brockton police department. Eight days later—three years to the day after he started—Lincoln retired from his position at the Plymouth County Jail. As a result of logging three years with two "full-time" jobs, he collects $139,787 annually, the biggest pension in Plymouth County history.

It may have taken three years instead of one, along with the use of sick days to juggle two full-time jobs, but even in a state that already has the laws Gov. Brown is proposing for California, Charles Lincoln gamed the system in a way that wasn't all that different from Marty Robinson's spiking. And it appears that Lincoln did it without breaking any laws. (While he was subsequently accused of mail fraud in connection with his actions, Lincoln was ultimately acquitted.)

The moral of the story is that it will take more than tweaking to fix state and local governments' pension mess. The fairest solution is to base what retirees get on how much they contributed.

There are at least two ways to achieve that goal. One is to do what many private-sector employers have already done and move from traditional defined-benefit pension plans toward defined-contribution plans. Alaska, Colorado, Georgia, Michigan and Ohio are among the states that have moved in that direction.

Another alternative is cash-balance pension plans, which guarantee an annual interest rate on employee contributions and the employer's match. The interest rate on a cash-balance pension changes annually and is often tied to the return on 10-year Treasury Bills, currently around 3.25 percent. Over the past 20 years, it has averaged closer to 5 percent.

These reforms cannot and should not affect the pension benefits of current long-time employees. But fundamental change is the only way to stem the never-ending tide of ways to game the status quo.

GAO Report Buries Ugly Truth About Doomed Public Pension Plans

by FRANK KEEGAN | March 8, 2012

STATE BUDGET SOLUTIONS

Read beyond Page 1 in the most recent study of our municipal and state pension crisis and find the chilling truths that prove it is only a matter of time before those funds cannot pay promised benefits. When that happens - sooner for some, later for others, but inevitably for all -- billions of dollars every year must come from services, taxpayers, bondholders and beneficiaries.

The Government Accountability Office buries the scariest truths found in its sampling of 3,400 state and municipal pension systems for 27 million workers and retirees, with a closer look at sixteen state and city plans.

Most discouraging is the fact that despite desperate recent reform efforts, public defined benefit pension plans ultimately are doomed unless we pump trillions more dollars into them, and even that emptying of public coffers is endangered by reckless shortsighted policies of politicians and fund managers.

The report makes clear our public policy question is not if defined benefit pension plans run out of money. The only question is when these supposedly perpetual sources of secure retirement for dedicated public employees will run out of money.

GAO-12-322, "State and Local Government Pension Plans: Economic Downturn Spurs Efforts to Address Costs and Sustainability," is a good summary of official information about an occult government fiscal crisis big enough to bankrupt America.

Unfortunately, all the official information is a lie within a deception fabricated from pure delusion.

GAO points out delusion No. 1 on Page 34 of the 54-page report in summing up recent attempts at reform:

"Despite these efforts, continued vigilance is needed to help ensure that states and localities can continue to meet their pension obligations. Several factors will ultimately affect the sustainability of state and local pension plans over the long term. Important among them are whether government sponsors maintain adequate contributions toward these plans, and whether investment returns meet sponsors' long-term assumptions. Going forward, growing budget pressures will continue to challenge state and local governments' abilities to provide adequate contributions to help sustain their pension plans and ensure a secure retirement for current and future employees."

GAO does acknowledge the reality that politicians have not, are not and most probably never will "provide adequate contributions."

The hard reality is, according to GAO, "To address rising actuarially required pension contribution levels and budget pressures, some states and localities have taken actions to limit employer contributions in the short term or refinance their contributions. These strategies included changing actuarial methods or issuing pension bonds to supplement other sources of financing for pension plans. Such strategies help plan sponsors manage their contributions in the near term, but may increase their future costs."

Those pension obligations bonds not only indenture future taxpayers and public workers who will get no benefits of any kind from them, they let politicians off the hook now for cheating pensions.

According to GAO: "These transactions involve significant risks for government entities because investment returns on the bond proceeds can be volatile and lower than the interest rate on the bonds. In these cases, POBs can leave plan sponsors worse off than they were before, juggling debt service payments on the POBs in addition to their annual pension contributions. In a recent brief, the Center for State and Local Government Excellence reported that by mid-2009, most POBs issued since 1992 were a net drain on government revenues."

Among the few governments inflicting POBs on taxpayers recently, the dystopian state of Illinois actually used pension obligation bonds (POBs) and false reforms to make the catastrophe a lot worse:

"... the state took advanced credit for these future benefit reductions, further reducing contributions in the short term. According to plan actuaries, by taking this advance credit, the state also increased unfunded liabilities in the short term, adversely affecting its retirement systems."

But the heart of delusion is in a footnote on Page 26: "We have previously reported that state and local plans have gradually changed their asset portfolios over many years by increasing their allocations in higher-risk investments partly in pursuit of higher returns."

High-risk investments mean state and local politicians put less money into pension plans now because they claim big future returns - generally assumed to be 8 percent a year every year without another market crash ever - will pay promised benefits.

That is self-evidently false. After a decade in which their risky investment strategies collided with reality in the dot-com Bust and Great Recession, pension fund managers have to get at least 8.9 percent a year every year for the next 30 years just to achieve an 8 percent discount rate. Even if that miracle happens, somebody - workers, taxpayers, bondholders and service recipients - must take trillions of dollars in hits every year through at least 2042 just to pay pension benefits.

The harder reality now is that because of the Federal Reserve Bank's repression policy holding 30-year risk-free returns at about 3 percent, risky investments in pension portfolios have to get even riskier.

That just sets us up for a bigger crash the next time markets drop.

According to the latest full fiscal year data from the U.S. Census, state pension funds blew $1.46 for every dollar in contributions and investment earnings between 2007 and 2010.

Funds are going deeper into debt and taking bigger risks in a desperate scramble to delay the inevitable collapse.

GAO admits none of the reforms will have significant impact on the existing debt for state and municipal retirement benefits. That is estimated at $1.26 trillion if you believe there never will be another market downturn and politicians will start making full contributions to pay down the debt and fund earned benefits every year.

Neither of those phenomena has occurred ever in human history.

If you don't believe that, the unfunded liability is more than $4 trillion, plus another trillion in false health-care promises, and growing fast.

Now is the time to admit reality and deal with an exploding public policy disaster that - even accepting official lies and delusions - can bankrupt our nation.

Public workers, taxpayers and honest politicians must act this year to freeze state and municipal pension plans, begin paying down the debt and shifting to a sustainable system.

This is an issue of real numbers, not politics. Waiting for the next market crash to prove it will be too late. Then all public pension plans will pass a fiscal event horizon beyond any capacity to earn, tax or cut our way out of eternal debt.

Then inexorably, whether in a decade or five decades, the pension checks must stop coming.

NYT Says 'Old' Constitution Outdated for Failing to Guarantee 'Entitlements' Like Health Care

By CLAY WATERS

From the Media Research Center

Sorry, Founders: The "terse and old" U.S. Constitution has been ruled out of date by Supreme Court reporter Adam Liptak for failing to provide such "rights" as free health care.

Liptak made the front of Tuesday's New York Times "Sidebar" news analysis, "'We the People' Loses Followers," the paper's most e-mailed and viewed news story of the morning.

Liptak arrives at his judgment via a new study by two law professors. The analysis, at least after being filtered through Liptak's coverage, seems to hew to the liberal ideology of the Constitution as a "living document," (i.e. whatever a liberal wants it to mean), conflating genuine rights like freedom of religion with entitlements like free health care: "But the Constitution is out of step with the rest of the world in failing to protect, at least in so many words, a right to travel, the presumption of innocence and entitlement to food, education and health care."

Liptak wrote:

The Constitution has seen better days.

Sure, it is the nation's founding document and sacred text. And it is the oldest written national constitution still in force anywhere in the world. But its influence is waning.

There are lots of possible reasons. The United States Constitution is terse and old, and it guarantees relatively few rights. The commitment of some members of the Supreme Court to interpreting the Constitution according to its original meaning in the 18th century may send the signal that it is of little current use to, say, a new African nation. And the Constitution's waning influence may be part of a general decline in American power and prestige.

In an interview, Professor Law identified a central reason for the trend: the availability of newer, sexier and more powerful operating systems in the constitutional marketplace. "Nobody wants to copy Windows 3.1," he said.

In a television interview during a visit to Egypt last week, Justice Ruth Bader Ginsburg of the Supreme Court seemed to agree. "I would not look to the United States Constitution if I were drafting a constitution in the year 2012," she said. She recommended, instead, the South African Constitution, the Canadian Charter of Rights and Freedoms or the European Convention on Human Rights.

The rights guaranteed by the American Constitution are parsimonious by international standards, and they are frozen in amber. As Sanford Levinson wrote in 2006 in "Our Undemocratic Constitution," "the U.S. Constitution is the most difficult to amend of any constitution currently existing in the world today." (Yugoslavia used to hold that title, but Yugoslavia did not work out.)

Americans recognize rights not widely protected, including ones to a speedy and public trial, and are outliers in prohibiting government establishment of religion. But the Constitution is out of step with the rest of the world in failing to protect, at least in so many words, a right to travel, the presumption of innocence and entitlement to food, education and health care.

Liptak failed to differentiate between rights retained by the people from the power of the government, like freedom of speech and religion, and entitlements, which are transfers of money and services established by government either via majority rule (i.e. voting) or judicial fiat. Examples include food stamps, welfare payments, and "free" health care.

Liptak turned up his nose at the right conservatives would say protects all the other ones, the Second Amendment: It has its idiosyncrasies. Only 2 percent of the world's constitutions protect, as the Second Amendment does, a right to bear arms. (Its brothers in arms are Guatemala and Mexico.)

Several "rights" enshrined by the Times via the study (shown in a separate graphic) need unpacking. What exactly does the generic phrase "Women's rights" entail? Access to abortion? And does "Freedom of Movement" include the "right" to other people's tax money in the form of welfare benefits, as the Supreme Court ruled in the late 1960s? Details from the University of Missouri-Kansas City School of Law: "Shapiro v. Thompson (1968) considered the constitutionality of a state law that established a one-year residency requirement for welfare recipients. The Court struck down the law, finding it a violation of the "right to travel" (really, more the right to migrate)."

Mr. Waters is editor of the MRC's TimesWatch site.

Public Safety Employees Among Highest Paid in Palo Alto

Posted: March 8, 2012 - mercurynews.com

Public safety employees were among the top earners in Palo Alto last year, according to newly released salary data.

The highest-paid person in the city was police Lt. Kenneth Denson, who took home a whopping $407,908 in calendar year 2011. More than half that sum -- $212,738 -- was attributed to a "cash-out" of unused vacation and sick leave. His base salary was $195,169, according to the data released Tuesday night.

Denson, who retired on Dec. 30 after 31 years with the city, was among a dwindling group of employees who predate a rule change that prevents workers from converting unused sick leave into pay, said Marcie Scott, assistant director of human resources. Members of the Palo Alto Police Officers Association hired after Aug. 1, 1986, cannot cash out sick leave.

A detailed breakdown of Denson's cash-out was not immediately available Wednesday afternoon.

Denson was in good company. Among the top 100 earners in the city, 77 worked for the police or fire departments and drew total wages in excess of $151,000, according to the salary data. Eight of the top 10 earners were retirees, too.

Fire Capt. Jason Amdur, who left the city's employ on Sept. 11, trailed Denson with a total take-home of $322,734, and police management specialist Douglas Keith, who departed on Sept. 13, ranked third with $311,060.

Similar to Denson, Amdur was hired before the city changed the cash-out rule for members of the International Association of Fire Fighters, Local 1319; it doesn't apply to anyone hired before Dec. 31, 1983. Amdur, who was paid a base salary of $94,082 and earned $65,365 in overtime last year, received a $163,286 cash-out, according to the salary data.

By way of comparison, the city's top official, James Keene, was No. 7 on the list. The city manager earned a total of $246,811, although that sum did not include other perks such as a home loan.

Exact figures weren't immediately available Wednesday, but Scott said the city has seen a rise in retirements since 2009, when it began seeking concessions from its various labor groups.

"We've had an elevated number of retirements as we've reached agreements that include employee concessions," she said.

According to the salary data, several of the top-paid firefighters retired around the time the city inked a tough new contract with the union last fall. The agreement will require employees to begin paying their full 9 percent CalPERS pension contribution at the start of the next fiscal year and cover 10 percent of their medical insurance premiums going forward.

The retirement trend is expected to continue, particularly with the city poised to impose a similar contract on the Police Officers Association. The city declared an impasse with the union on Feb. 24.

While public safety employees are retiring with big salaries, which ultimately influence their pensions, the city expects the introduction of a reduced retirement benefit for new workers to result in savings.

New firefighters, for example, won't be eligible to retire until age 55, and instead of calculating a pension based on the single highest salary earned in a single year, it will be based on an average salary of the three highest consecutive years worked.

There are, however, costs associated with the wave of retirements that cannot be defined by dollars and cents.

"We are at a time of evolution and change in our police department," Lt. Zach Perron said during a ceremony Monday to recognize Denson for his years of service. "As you've all heard, there's been a remarkable loss of institutional knowledge and experience within our ranks due to recent retirements and Lt. Denson, as his remarkable professional resume suggests, is a shining example of that loss."

America’s Atlas Generation – The Forgotten 33%

January 9, 2012 - Union Watch

Much has been made of the 1% vs. the 99%; the “super-rich” vs. the rest of us, who are presumably the hard working, loyal Americans who’ve been left behind. But who are the rest of us, and how does who we are affect how much we pay in taxes, and how we may vote?

The chart below depicts the American electorate divided not into two groups – the 1% vs. the 99%, but four groups – the 1% super-rich, then 20% representing government workers, 46% representing citizens who either pay zero taxes or negative taxes (ala the “earned income credit”), and the remaining 33% who are neither super-rich, government employees, or not paying taxes. One might term this group the forgotten 33%, because no special interest will speak for them. They have neither the numbers nor the financial wherewithal to decisively influence elections.

The choice of colors – red for the 20% political class AND for the 46% entitlement class, is not accidental. These voters have an identity of interests that automatically inclines them to favor more government spending; government workers because more government spending means more job security, higher pay and benefits, and more expansion of their organizations, and citizens who pay no taxes because their economic status is enhanced through receiving entitlements for which they bear no share of the costs. This identity of interests between the political class and the entitled class has created a supermajority of voters in America who have a self-interest in supporting big-government.

Perhaps the most appalling – and unchallenged – fallacy promoted by the big-government supermajority, primarily through their spokespersons in the public sector unions, is that the super-rich are “trying to destroy the middle-class by pitting the private sector workers against the public sector workers.” Nothing could be further from the truth.

The middle class can indeed be represented by the 20% of the population who works for the government, combined with the 33% of the population who works in the private sector and make enough money to pay income taxes. But the similarity ends there. Government workers have pay and benefits that are, on average, twice what private sector workers earn. Their pension funds offer defined retirement benefits that are literally five times better, on average, than what private sector workers collect from social security.

While the government worker union spokespersons want us to believe that Wall Street is trying to divide and conquer the middle class by pitting private sector workers against government workers, the truth is this: Government workers have joined with Wall Street and turned against the private sector taxpayers, because it is in their mutual economic interests to do so. Nothing illustrates this fact more clearly than the existence of nearly $4.0 trillion in government employee pension fund assets, paid for by taxpayers, invested and managed by Wall Street, with taxpayers guaranteeing the returns (if the investments fall short, taxes go up), and government workers guaranteed the defined benefit that allows them to retire, on average, 10-15 years earlier than private sector workers, with pensions that average 3-4 times as much money as social security.

The “super-rich” embody, of course, more financial interests than just those of Wall Street bankers. But Wall Street bankers, who used their bipartisan political influence to over-build America’s financial sector and defer any sort of meaningful regulations that might have introduced competition and accountability into their industry, are the ones who most deserve the ire of the American electorate. They are also the ones who are most co-dependent with the political class, because there is no source of money pouring into Wall Street that comes anywhere close to the hundreds of billions each year that taxpayers have to fork over to the public employee pension funds.

To turn around and suggest that somehow the super-rich are aligned with the forgotten 33% – those middle-class private sector workers who make enough to pay taxes – strains credulity. Both the super-rich as individuals and the super-rich to the extent they are associated with corporations or financial institutions are completely bi-partisan in their political contributions. For that matter, Republicans are only scarcely less addicted to big government programs and higher taxes than Democrats. Many of the super-rich are not capitalists in the most virtuous and productive sense of the word – they aren’t trying to altruistically imagine innovations that will make our lives better, then fighting to convince people to voluntarily purchase these products – they are using their political influence to lock out competitors, access government subsidies, and force people to purchase their products through laws and regulations.

America’s forgotten 33%, those who are neither entitled to avoid all taxes, nor members of the political class who pay no taxes, nor the super-rich, might be called “The Atlas Generation.” They carry the world on their shoulders. Their challenge is daunting – they must convince the political class to support sustainable taxpayer funded benefits under formulas that apply equally to ALL workers, public or private, without relying on Wall Street speculative investments to pay for this. Equally challenging, they must convince the entitled class that there is an alternative to identity politics, the politics of envy, and the cycle of government dependency. And they must convince a critical mass of the politically influential super-rich to embrace and advocate a political economy that nurtures competition instead of crony capitalism.

St. Louis's Dome Dilemma

Taxpayers Face a Big Bill for Upgrades Needed to Keep NFL's Rams in Town

By JACK NICAS

February 28, 2012 - THE WALL STREET JOURNAL

ST. LOUIS—Nearly 20 years after the Rams arrived here from Los Angeles, this shrinking city wants taxpayers to open their wallets for a stadium overhaul designed to keep the professional football team from fleeing for the glitz of its former home.

Under terms of St. Louis's deal with the Rams, the 17-year-old Edward Jones Dome must be one of the eight best stadiums in the National Football League in 2015, using criteria spelled out in the contract. If not, the team can leave then—around the time two separate groups hope to open stadiums in the Los Angeles area.

The fight to save St. Louis's NFL franchise comes at a tough time. The city of St. Louis, St. Louis County and the state of Missouri together still owe $153 million on the downtown dome and face deep budget cuts in other areas. But they are proposing a $124 million plan to build new club seats and a 50,000-square-foot plaza at the dome—with nearly half the cost funded by taxpayers.

In Los Angeles, taxpayers would pay almost nothing for the proposed stadiums.

Economists say large cities often fare better than smaller markets in stadium deals with professional sports teams because they can offer franchises a bigger base of potential fans, and because the larger cities are less reliant on a team to help shape their area's image.

Despite evidence that these investments rarely pay off in purely economic terms, smaller-market cities continue to offer sports teams millions of dollars in hopes the investments will pay off by improving the quality of life, aiding in the recruitment of new businesses and burnishing their national reputation. Minneapolis and Minnesota are offering more than $600 million for a new Vikings football stadium. And Indiana still owes $649 million on the Colts' four-year-old stadium.

In larger markets, however, cities have managed to keep taxpayers largely off the hook for stadiums, such as the New York Giants' and Jets' $1.6 billion, two-year-old stadium and the San Francisco 49ers' planned $1.02 billion stadium.

Indeed, taxpayers have shouldered about four-fifths of the funding for NFL stadiums in the eight smallest media markets with new facilities since 1995, according to an analysis of data from the consulting firm Convention Sports & Leisure International. During that period, taxpayers have funded less than a fifth of the cost of NFL stadiums in the eight largest media markets where new facilities have been built or are planned, according to the data.

The Rams have until Thursday to decide whether to accept the renovation plan or offer their own. Rams owner Stan Kroenke, a Missouri native who also owns the pro basketball and hockey teams in Denver, has said little to comfort fans. "Anything could happen," said Rams spokesman Artis Twyman. "After 2015, we could stay or we could leave." Mr. Kroenke has also expressed interest in pursuing ownership of baseball's Los Angeles Dodgers, fanning speculation about a departure to Los Angeles.

The two stadium proposals in Southern California both lack a key component: an NFL team. Just outside Los Angeles, a proposal for a privately financed stadium has been seeking NFL approval for two years. In Los Angeles, city officials have tentatively agreed to another plan for a downtown stadium, and Mayor Antonio Villaraigosa recently set up a city task force to oversee the project. The sports-and-entertainment conglomerate Anschutz Entertainment Group Inc., which says it will pay for the $1.2 billion stadium, has discussed relocation with several NFL teams, including the Rams, people familiar with the matter said.

In St. Louis, taxpayers would fund $59.5 million of the proposed renovations. Meanwhile, St. Louis County announced plans last month to lay off 27 workers to help shrink a $26 million budget gap, while Missouri Gov. Jay Nixon recommended shedding 816 jobs to help plug a $468 million hole. St. Louis is eliminating 50 police positions, and recently began charging residents $11 a month for trash pickup.

The plan suggests public funding could come partly from special taxes on fans, such as ticket and parking surcharges. If the Rams and local officials can't agree by June 15, arbiters will decide what improvements are necessary to satisfy the lease, which runs until 2025. The Rams can leave if local officials reject the arbiters' plan.

Rams fan Michael Phillips, a 34-year-old St. Louis native, said the city should let the team go if the cost is too high. "We can barely afford our schools, but we can basically buy [Mr. Kroenke] a new stadium," he said.

Smith College economics professor Andrew Zimbalist, who studies the impact of sports teams on cities, said the renovation cost is "not an economic investment."

David Peacock, head of a board that attracts sporting events to the city, said there is more to the issue than the renovation costs. "It's civic pride and it's economics," he said. "There are benefits beyond just the 10-plus [home] games. It's creates economic opportunities."

Kevin Demoff, the Rams' chief operating officer, said the team's goal isn't to boost city coffers, but to "use football to make St. Louis a better place for its residents and the region."

Since plans for the Rams began here 20 years ago, St. Louis has lost nearly 20% of its population. (The county's population has stayed flat.) And since 2006, attendance has fallen by about 14%; during that period, the team has been one of the NFL's worst.

—Matthew Futterman contributed to this article.

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