Monday, June 23, 2008

Entitlement Mentality

I found Kathie Bracy's blog sometime recently while doing some research. Ms. Bracy is a retired elementary teacher who served in the Columbus Public Schools for 30 years. She is now working in the private sector in addition to collecting STRS retirement benefits. The main focus of her blog is issues of interest to retired teachers, and she says in her profile: "I am working through CORE (Concerned Ohio Retired Educators) to help bring about badly needed reform in our teachers retirement system."

I'm not sure what those reforms are, but perhaps her comments about the Social Security system, in which she now participates, are an indicator:

"Every penny of what I currently earn is taxed by Social Security...that's not to say the same applies to ALL Americans who derive income from non-governmental jobs who ALSO pay into Social Security. THEY DON'T pay tax on every penny they make...were you aware of that? Many Americans stop paying into Social Security after their annual wages exceed $102,000"

Ms. Bracy is forgetting the other half of this deal - Social Security benefits are calculated based on what a worker pays into the system over a lifetime. Therefore people whose premiums have been limited will also have limits applied to their payout.

I had the good fortune during latter part of my career to have often hit and exceeded the Social Security limit. Yes, it felt good to get a few paychecks without the Social Security deduction. By the way, Ms. Bracy failed to mention that there is no limit on the income exposed to Medicare taxes.

According to my last annual statement from the Social Security Administration (SSA), here's what I'm going to get:
  • If I stop working at age 62 and start drawing benefits, I'll get $1,512 per month - $18,144 per year.

  • If I wait until age 66 (what SSA now calls my 'full retirement age') I get $2,004 per month, or $24,048/yr.

  • If I wait until age 70, it would be $2,646/mo, or $31,752/yr.
Any other money I need to live on after retirement comes from my own savings, which in some years was fractionally matched by my employer. It's not guaranteed: if I blow it - it's gone. That happened to a lot of people about eight years ago when the Enron/Worldcom/et al debacle wiped out billions of dollars in the 401(k) and IRA accounts of folks who were hoping to retire soon. Many will never to get to retire at all now.
Over my lifetime, I and my employers have paid in total $177,152 into Social Security - about $88,500 each. Using a lifetime investment earnings rate of 4%/yr, I'll never get back the money paid in plus reasonable earnings. By my calculations, regardless of whether I start taking Social Security checks at 62, 66, or 70, I will leave over $300,000 on the table if I die at age 90 (spreadsheet available on request). That money will be used to make payments to others who never earned enough to pay for the benefits they will receive.
That's okay. I don't mind contributing to the cost of a safety net that prevents our senior citizens from suffering in poverty. Just please Ms. Bracy, don't accuse me of not paying my fair share into Social Security - I've paid that and more.
Did you and your school district pay enough into the STRS to fully fund your comparatively generous retirement benefits? If not, who is supposed to make up the funding shortfall?
Me again - along with millions of other Ohio taxpayers. That's what HB315 is all about.


  1. Oddly enough, it was Kathie Bracy who got me started blogging after reading this post for her blog:

  2. Interesting connection.

    There may indeed be some degree of market feedback to a public school district, but it is much more indirect and coarse than true individual choice.

    That's likely to become evident in Hilliard this Nov if the levy fails. The Board and the HEA set the unit price for teachers. Now the community gets to play their role by deciding how many to employ, and it's a binary choice:

    All of them if passes - or about 200-300 fewer if it fails.

  3. It should also be noted that the cap on income taxed by Social Security has risen by $3000-4000 every year; as well, benefits are capped regardless of income. I, too, have had the benefit of maxing out in some years - I have also had the "benefit" of no withholding at all for a couple of different years when I did not receive a true "paycheck" but rather, took post-tax equity withdrawals (money my company had saved for investing for future operations) due to the financial struggles my business has gone through post 911 and the stock market crash, which had a severe impact on many small businesses. I could quit working today at age 52 or continue working
    for another 10-20 years and my benefits will not change - I have hit the max. Of course, I am in no position to retire today; there is no pension plan in being self-employed, just as there is none in most of our situations, unless you happen to be in the public sector. I find it almost amusing that someone who can retire with a guaranteed pension at a relatively young age,and then subsidize said pension with another full time job (sometimes another public-sector job, sometimes almost the exact same job!) can complain about those of us in the private sector. Notice I said "almost amusing"!

  4. What a predicament for the district to be in.

    I wonder if the HEA considers these things when they negotiate; "Yes, we will get raises and steps, but most likely the levy will fail and we'll lose 200+ next year".

    Seems like if they were interested in the long term viability off all of their jobs, they would have settled for something more palatible to the community. Unfortunately, if the layoffs come, it will be at the expense of some wonderful new teachers and not some of the deadwood up the seniority list. Another reason why I think unions have ruined education in Hilliard.

  5. As is often the case, the people negotiating on behalf of the union membership are themselves very high on the seniority scale, within a few years of retirement. For them, the "average final pay" is crucial in setting their pension benefits.

    That's not to say they are negotiating selfishly. When you get as high on the seniority grid as they are, there are no more step increases - they are affected only by the base pay increase, which is 3% in the new contract. If the HEA leadership were out to take care of themselves, they would have asked for smaller step increases and a larger base pay increase.

    But regardless of what kind of pay increase structure gets negotiated, the HEA leadership is at zero risk of getting laid off, unlike the most junior teachers.

    And you're absolutely right - a system based on seniority instead of impact will cause us to lose good teachers and keep some who should be encourged to find other professions. The education industry is not a meritocracy - it just rewards survival.

    Perhaps not the best lesson to be teaching our kids in an increasingly competitive world.

  6. Paul,
    Did you happen to see the article in Hilliard's This Week paper about the principal at Britton retiring and taking a new job in the Olentangy School District. Her statement "it is not uncommon for retirees to assume another job upon their departure" is what caught my attention. I checked the BOE minutes for her personnel action and it says she has been in education for 35 years, 7 of which have been with Hilliard City Schools. Assuming she started in education when she was 22, she is retiring around the age of 55.

    I don't know what happens with principals, but I assume it's the same as with teachers and she'll receive 88% of her average final salary for life with 3% cost of living adjustments.

    A person working for a private company who is the same age, will work an additional 11 years before being "full retirement age" at which point they will receive about $24,048/yr. from SS, assuming they managed to hit the SS max. income limit.

    I agree that working schools is hard work, but if it is so draining that educators need summers off and to be able to retire at 55, why is it "not uncommon for retirees to assume another job upon their departure", especially back in the school system?

    I'm tired of seeing my taxes increase only to be spent carelessly by our school board. I haven't seen a 7% annual wage increase in the past 8 years, nor have I expected one, given the state of the economy.

    Just using your blog for the opportunity to vent.

  7. I've never fully understood why school employees retire early, then go right back to work in their own or another school district. I think it might have something to do with having hit a point where the retirement benefits aren't going to get much better if the employee works longer.

    I think it might also have something to do with locking in their retirement deal.

    I remember when the first employee retired from my company, a business formed in the post-pension era. Someone asked how retiring was different than just quitting.

    The answer: it wasn't...

  8. "Double-dipping" is only possible in the public sector, which, again, is why I found Ms Bracys' point to be ridiculous. Paul, the reason public sector employees do this is because they can! I would do it too, given the opportunity. The problem lies within that "opportunity" being perceived as inherently wrong by the rest of us, which is exasperated by the 7% raises and low cost benefits given to educators who then complain about being underpaid. It also leads to the most experienced educators leaving their school system as soon as possible in order to capture this double dipping for the longest period possible, all the while saying they teach for the love of teaching and "it is all about the kids". Hard for me to swallow when I go the polls, ya know?

  9. Of course, how could I forget the double-dipping element. Somehow I had in my mind that the retiree didn't collect pension benefits after being reemployed.

    A good friend of mine retired after 30 years as Navy corpsman, then went to work for the Post Office for another 10 years or so, all the while collecting his Navy pension. So now he gets both pensions.

    In his case, I don't begrudge him a penny of it because there's no way the Navy pay/pension compensates for the horrors of multiple combat tours in Vietnam trying to keep wounded Marines alive.

    His top pay was about $50,000/yr - about the same as a teacher with 6 years experience.

    I guess the free housing and chow make up for the difference.

    His Navy pension after 30 years service is less than $40,000/yr. A Hilliard teacher after 30 years would get more than $50,000/yr.

  10. Don't forget that you the taxpayer are kicking in 14% of an educator's salary for those 30 years in order to allow that early retirement. Also remember that at retirement, the educator can collect severance on all those unused sick days. The list really does go on and on.

  11. Oh, I just *LOVE* people who take great delight in talking ABOUT others and not TO them. My e-mail address is plainly visible in two places on the main page of my blog, yet nobody contacted me about the comments to which you have taken exception. Also, if you had inspected the "offending" post ("Every penny & Do all Americans pay their fair share?", posted 6/14/08: a little more closely, you would have seen that I did not write it; I merely posted it. Wake up, fellows! Your credibility is at stake with stuff like this.

  12. Ms. Bracy:

    You are correct that I attributed these words to you when you were in fact quoting another writer. My apologies.

    Did you post this story on your blog because you agree with it, or did you have some other motivation?

    And I posted my reaction in my blog and not yours because you have commenting disabled. Why is that?


  13. Here is a lengthy response I got from John Curry, the actual writer of the piece above. A couple of key items come from this:

    1. Mr. Curry and I couldn't be more different in our view of economics and fairness;

    2. STRS members aren't that thrilled with the way their retirement system has been managed over the years...

    Attention Mr. Paul Lambert,

    I am writing you in reference to your blog comments re. Kathie Bracy's blog posting, "Every penny & Do all Americans pay their fair share?" that you posted on June 23, 2008.

    Your blog entry concerning this article recently came to my attention by Kathie Bracy herself. I have several comments concerning your statements in this article:

    First, let me make it clear that the author of this article was not Kathie Bracy but this is clearly stated just after the title with these words: "From John Curry, June 14, 2008."

    Next, you go on to say, "I'm not sure what those reforms are, but perhaps her (actually my) comments about the Social Security system, in which she (actually me) now participates, are an indicator."

    Mr. Lambert, it would have benefited you to do a little research to see "what those reforms are" as you would have found they had nothing to do with the Social Security system at all. These reforms all had to do with the reform of the State Teachers Retirement System of Ohio and were initiated by both CORE (Concerned Ohio Retired Educators) members and STRS Board members John Lazares and Dennis Leone.

    Dr. Leone and John Lazares, both CORE members, initiated these reforms...most all of which I believe you would probably find acceptable to the taxpayer such as yourself. Here is a list of those reforms:

    Had STRS Board members Dr. Dennis Leone and John Lazares not brought these issues up, the STRS of Ohio would still be doing the following items......
    • Legal expenses paid for by STRS for staff members who hire their own lawyers outside STRS, for whatever purpose, without prior knowledge and consent of the Board

    • Huge bonuses for over 300 non-investment staff members/employees who do no more than their day-to-day job (investment staff deserve the bonuses)

    • Bonus checks for investment staff members would still be based, at least in part, on subjective factors instead of solely on benchmark factors

    • STRS employees who adopt children would still be getting a $5,000 gift from STRS

    • Cars for staff members and their families to use at their own discretion, permitted by official Board policy

    • As many as seven Board members taking the same expensive trip and to faraway places such as Hawaii, Palm Springs, Anchorage, Kiawah Island, China, Africa; stays at fancy hotels with a minimum of "business" being conducted

    • Free lunches/dinners at fancy restaurants; free booze; STRS paying beach bar bills

    • Free use of STRS laptop computers in the homes of Board members, with no way of really monitoring whether the use of the laptops was personal -- in violation of Board policy

    • Free credit cards for staff and Board members

    • Free newspaper subscriptions, personal long distance phone calls, personal fax machines for Board members

    • Unitemized lunch and dinner bills paid by STRS

    • Thousand dollar plane tickets to New York, paid by STRS, with no requirement that far more economical reservations be made 30 days in advance

    • Broadway shows, baseball games, concerts, trips to Kings Island and Columbus Zoo Light Show, etc., either at STRS expense or as gifts from companies doing business with STRS

    • State Attorney General and State Auditor would still be on the Board

    • Executive director would still be advising the Board to approve big money contracts without documentation, and most of them would be dumb enough (call it "trusting") to do it

    • Lawyers would still be inserting language in such contracts after the Board approves it (thanks to the "trustworthy" executive director/staff)

    • Free second night stays in Columbus and elsewhere (Orlando, etc.) for Board members, following meetings, for no legitimate reason

    • Free hotel stays and meals for spouse/partner of Board member

    • There would still be nine members on the Board, with no investment experts whatsoever

    • Herb Dyer would still be there, along with a number of other Board members whose ethics prevented them from following the spirit and the letter of ORC 3307.15

    • Child care services for STRS employees would not come close to covering the operating costs of the center; cafeteria services would not be cost neutral

    • STRS would still be spending $5,000 a year to beautify the front lobby at Christmas time (remember all the poinsettias?)

    • There would be no policy requiring that the Board receive copies of big ticket contracts before voting on them

    • Free college education would still be offered/provided for employees, regardless of whether the employee gets a "C" or a "D" in the course

    • STRS would still be buying tickets to the zoo for employees' families, then appropriating them for themselves so that somebody else would have to pay for the children to go, or they wouldn't get to go at all (talk about Grinches)

    • Reimbursements for unused sick leave/vacation leave for employees who don't qualify

    • There would be no policy prohibiting the awarding of sick leave accumulation to rehired retirees who were already paid for their accumulated sick leave at their previous public employer

    • Escalating, unchecked administrative expenses; unchecked hiring of staff and employees

    • Waterfalls would still grace the main lobby

    • The Board still would be allowing the executive director to give severance cash and free health insurance to laid off STRS employees without formal board approval

    • The Board still would be going into executive session, illegally, to discuss proposed policies

    • The Express Scripts contract would not have several provisions that it currently does regarding the company’s fiduciary obligations with the board

    • There would still be secret balloting by the Board

    • There would be no statutory provision in Senate Bill 133 in 2004 that prohibited the likes of Jack Chapman, Hazel Sidaway, Eugene Norris, and Debbie Scott from ever serving on the board again because of their STRS spending habits

    • There would be no language in Senate Bill 133 stipulating that future dishonesty on STRS Board election materials (such as saying that you are teaching social studies at Perry High School when you’re really not) will knock you off the board

    • Mike Billirakis, Jack Chapman, Hazel Sidaway, Eugene Norris, Debbie Scott, Joe Endry and Herb Dyer would not have been convicted in court. Say what you want about it being an Ethics Commission investigation, but it was the Commission's head, David Freel himself, who said that Dennis Leone’s 2003 findings triggered the whole thing (along with Sondra Stratton pushing the Commission relentlessly in 2004).

    Mr. Lambert, the last item in the list above was accomplished by CORE member Sondra Stratton who filed an official complaint with the Ohio Ethics commission. Sondra is a retired educator from Brown County, Ohio. Thanks to her, these six former Board members and the former Executive Director of Ohio STRS now have criminal convictions for violations of Ohio's ethics laws. This, Mr. Lambert, is matter "how you slice it."

    Now, let's examine the Social Security part of the entry that you seem to be concerned about. In Ms. Bracy's (actually my) posting, it was stated, "Every penny of what I currently earn is taxed by Social Security...that's not to say the same applies to ALL Americans who derive income from non-governmental jobs who ALSO pay into Social Security. THEY DON'T pay tax on every penny they make...were you aware of that? Many Americans stop paying into Social Security after their annual wages exceed $102,000."

    In reference to the (my) posting above you state, "Ms. Bracy is forgetting the other half of this deal - "Social Security benefits are calculated based on what a worker pays into the system over a lifetime. Therefore people whose premiums have been limited will also have limits applied to their payout."

    To your above comment I say, yes, the very wealthy who pay into Social Security will have their benefits limited should they retire a millionaire or a billionaire but...don't you think they won't require the Social Security as a "safety net" so that they won't starve or freeze to death? I doubt if any of those who retire with multiple years of annual wages over $102,000 per year will have these problems unless they are fools or gamblers. Also, Social Security was designed as a "safety net" and not to be one's sole monetary retirement income. The very wealthy, having "extra cash" can and should invest some of this "extra cash" in investments, bonds, CD's, or a host of other investment instruments available for this extra cash. The majority of people not earning the $102,000 per year spend most of their incomes for the necessities of life: food, shelter, clothing,transportation, and nowadays, medical insurance and healthcare expenses.

    So, yes, the wealthy don't pay Social Security on annual salaries or wages over 102K but this 102K figure should be raised significantly so that the many millionaires and a few billionaires don't "skate" by without paying SS on those millions and billions. Presidential candidate Obama wants to see a donut hole (as I call it) or void whereas those paying Social Security will NOT pay on earned income from the current $102,000 to $250,000. But, once the wage earner goes above $250,000 then the Social Security payments will then (again) come into effect. Yes, I'm sure that if he becomes President and this passes that the millionaires and billionaires will scream bloody murder but...they most surely can afford it. If you feel that this is not fair then maybe you also will have a complaint about the IRS tax tables which also significantly increase with the amount of annual income one has. If one is a millionaire and/or billionaire and (truthfully) reports one's income they will find they are certainly not in the 15% bracket are they? Is this fair? I think so, you probably won't.

    I do agree with you when you state that Ms. Bracy(actually me) failed to mention that there is no limit on the income exposed to Medicare taxes. I didn't mention it because it does not have a taxation "cap" (102K) like wages for Social Security taxation do.

    You, in another paragraph, state: "Any other money I need to live on after retirement comes from my own savings, which in some years was fractionally matched by my employer." Well, Mr. Lambert, I know of no educators who have a "savings matching" concract issued by their local school boards....can you tell me any that do?

    You also go on to say that, you "will leave over $300,000 on the table if I die at age 90. That money will be used to make payments to others who never earned enough to pay for the benefits they will receive." Many educators who die after retirement will also leave some of their monies on the table. That is how it works in a retirement system as well as in the insurance industry as well as public services including police and fire protection. If I die today I will have left some of my STRS contributions with the Ohio STRS. If I am healthy then I will not be able to take advantage of my health insurance...maybe I should ask for a premium refund? If I don't need the services of the police department then maybe I should ask for a tax refund for the tax monies that I paid for police protection? If I don't have the need for a fire truck then maybe I should ask for a tax refund for the tax monies that I paid to the fire department?

    In your next to last paragraph (concerning a safety net for senior citizens) you say that you, "don't mind contributing to the cost of a safety net that prevents our senior citizens from suffering in poverty." I find myself in agreement with this statement. However, you then state, "Just please Ms. Bracy (actually me) don't accuse me of not paying my fair share into Social Security - I've paid that and more." Actually, Mr. Lambert, no, you didn't pay "your fair share." You stated, earlier in your article: "I had the good fortune during the latter part of my career to have often hit and exceeded the Social Security limit. Yes, it felt good to get a few paychecks without the Social Security deduction." I'm sure it did were not taxed on the excess of the monies earned on those "good" years.

    You say, near the end of your letter: "Did you and your school district pay enough into the STRS to fully fund your comparatively generous retirement benefits? If not, who is supposed to make up the funding shortfall?"

    Mr. Lambert, I think you'll agree that healthcare costs have risen sharply during the last decade. Were you aware that of the 14% of monies deducted from the employer (the school system) for every dollar of teacher (and administrator) pay has remained at that same 14% rate since 1984? I'm sure that your healthcare expenses now take up more than the same percentage of your paycheck than they did back in 1984, don't they? House Bill 315 not only asks for an increase in the percentage of employer contribution but also asks for an equal increase in deductions from the employee's paycheck. This is a progressive amount that will "top out" in five years with both the employee and employer paying 0.5% each year and, in 5 years, will amount to 2.5% for the employer and 2.5% for the educator.

    In reference to what you mentioned as "generous retirement benefits" above, I have one question. Do you consider paying over $850 per month healthcare premiums ($960 next year) a generous retirement benefit for an 80/20 PPO monthly healthcare premium deducted from many thousands of STRS retirees' monthly retirement check? That's what it now costs to insure myself and my spouse through STRS.

    P.S. Your blog entry to which I am replying is listed below my closing. I do wish to compliment you on your grammar, spelling, and sentence can thank your teachers for that, can't you?


    John Curry

  14. I wish Ms. Bracy would enable commenting on her blog, as it is much more appropriate to have this conversation there. However, her preference is that any dialog with her take place via email, denying everyone else the benefit of the debate, or revealing any opposing perspectives.

    Her two most recent posts on the subject are speeches made by retired teachers to the STRS Board regarding the cost of their health insurance coverage in retirement.

    One is by Alan Wingo, who tells of his experience with cancer, a battle which started in his 29th year of teaching. He completed his 30th year, and then retired. However he has since returned to the classroom, teaching in three different schools.

    Mr. Wingo doesn't give his age, but there's a good chance that even in his 30th year of teaching, he was in his mid-50s. While I have as much empathy as one can have without walking his footsteps as a cancer patient, we need to note that it was his choice to retire. He may not have known what his future capacity to work might have been when he made the decision to retire vs. going on disability, but nonetheless it was a decision he made freely, and from that point forward he began collecting retirement benefits, and living with the consequences.

    Perhaps I am mapping my own situation into Mr. Wingo's. I too had the opportunity to retire at a young age, but in my case, with no retirement benefits of any kind. And so after a glorious 18 months of freedom during which I could buy health coverage via my former employer's COBRA plan, I found that I had to return to the workforce in order to gain access to health insurance.

    It's not anyone else's fault that my health status is such that I can't buy individual health insurance. It's not even a matter of expense - the insurer's won't cover me. Believe me, a nationalized health care system would benefit me greatly.

    Why? Because I wouldn't have to pay for it.

    But somebody will.

    Those somebodies will include my kids, who are just getting started in life, and who have a right to begin life without being encumbered by costs left by the prior generation. Isn't it supposed to be the other way around? Aren't we supposed to sacrifice in order to make things better for our kids?

    It will also include you if you are still working, and your kids as well when they get old enough to join the workforce.

    Life is not without risk, and we aren't all dealt the same cards. Some of us will get cancer and other awful diseases and die before our lives have been fully lived. Others will have bodies that outlive their brains, and spend their last years in the horror (for everyone else) which is Alzheimer's.

    A friend of mine who is one of the nation's experts on healthcare economics says that 80% of a person's lifetime healthcare spending goes to treat the final illness - the battle which, by definition, you will lose every time - after sucking up a huge amount of resources.

    I'm not advocating that when we get old or sick, we should walk off into the woods and die, as is the legend of some cultures. But we have to accept that the burden of paying for our own healthcare is not something which we have the right to dump on others just because we don't want to continue to work.

    Sure, insurance is a good thing when it is viewed as what it is - a risk pool in which you are making a bet that you'll pay less in premiums than you'll get in benefits. Take the total actual cost of all pool members and divide it up over all members. Some win and some lose.

    But when the cost of the treatments rises across the board, we shouldn't surprised that everyone needs to pay more to be part of the pool. If you think you're on the losing end of the bet, drop your insurance and go it alone.

    The solution many want, including the retired teachers in this case, is to force more healthy folks to join the pool, because they will lower the average cost. It doesn't matter that for those who are forced to join the pool, their individual costs will rise.

    What Ms. Bracey, Mr. Wingo and others desire via HB315 is something even less fair. They want you and me to pay more, via our school taxes, to underwrite their risk, and we can't even join the risk pool. Let's call their proposal what it is - a demand for more compensation - and let's negotiate from there.

    I think you could argue that our system of attenuating individual risk has retarded - perhaps even regressed - the evolution of our species. Perhaps our country's epidemic of obesity and diabetes (check, check) is the RESULT of having a healthcare system in which economic risk has been removed. I wonder how differently I might have lived my life had my employer demanded that I stay fit or get out (which is exactly what the military does).

    I've come to accept that my lifetime of choices, and the luck of the genetic draw, has brought me to a point where I must be employed to protect my family from being wiped out should I become seriously ill. I hope that when the time comes to choose between spending huge amounts of money on a fruitless battle, and having faith that God will be gracious in the end, I will be brave enough to choose the latter.