Monday, June 11, 2012

Truth Telling 101 ... Politicians Mislead Teachers and Taxpayers Alike

 Statement of the Problem

There have been several recent comments from President Obama about the need to hire more teachers and thereby help get the economy moving forward again. (See "An Essay on Vote Getting 101 ...." posted June 10.)

In addition, there have been recent comments by Governor Quinn of Illinois about the need for local school districts to fund teacher pensions rather than ask the state to do so. (See "Pension Costing in Illinois ..." posted June 7.)

Of course, lots of other politicians at various levels and in various positions are saying similar things. But they're either confused, mistaken or lying when they say these things today. And whatever the reason, they're certainly misleading We the People.

So let's just set forth the plain vanilla KISS truth about all this stuff. OK?

Harsh Truth .... Cash versus Accrual Accounting and Expenses

My take is both the President and the Governor, as well as their allies, are seriously misleading the American public, taxpayers and teachers alike. And whether it's intentional or not, the record needs to be set straight. Here's the truth of the matter.

In practical terms, both pension and active teacher payments represent salary expenses. The money comes out of the same pot, aka the taxpayers.

It wasn't always as expensive as it is today, at least accounting wise, since pension recipients weren't so numerous and cash outlays weren't so heavy. Since promises to pay future pensions largely weren't funded, salaries paid to teachers represented the bulk of the government's cash outlay. That's what the taxpayers paid. And because the government accounts for its expenses using the cash method of accounting, unlike private sector companies, the future payment obligations were unrecorded as future liabilities. That's not the right way to do things, but that's the way it's done by the government.

Now that government workers are retiring in big numbers, heavy cash outlays are being made. In some cases, they may have to double.

Hence, this cash outlay versus total accounting accrual charge distinction is vitally important to understand for the taxpayers and teachers as well, even if the various politicians either don't understand it themselves or don't want We the People to understand it. But we do want to know what's going on, and so we will try to explain it herein as best we can.

An Example ... KISS Rules Apply.

Assume I began teaching 30 years ago at a salary of $100 annually and that after 30 years, I have just retired with a lifetime pension equal to my total salary earned during those 30 years.

To keep the illustration simple, we'll also assume that I received no raises, made no retirement contributions. and that there was no inflation during that 30 year career. Thus, $100 was $100 then and it's also an equivalent amount now. Therefore, we'll further assume that my replacement teacher is also being paid $100 annually.

Cash paid goes from $100 to $200 annually. That's what hits taxpayers. A double.

In other words, taxpayers were paying $100 for my teaching position and now are paying $200 for that same position, assuming no growth or shrinkage in the number of teachers per student. KISS rules again.

Today's Confusion About Stimulus, Cutbacks, Austerity and Such

President Obama and others who want more teachers in the classroom now are interested in limiting the public discussion to the number of classroom teachers.

Meanwhile, Illinois Governor Quinn and others who want the school districts to take responsibility for pension benefits are interested in limiting the discussion to dollars paid to those active classroom teachers.

But it's the total dollars paid that matter to taxpayers.

Accordingly, it's necessary to connect the dots of the total all-in costs for actively working teachers to the total costs for retired teacher payments. Persons to dollars in terms of dollars per teacher, active workers and retirees included.

That's the only legitimate way to see things from the view of taxpayers as well as the individual  teachers. But it's certainly not how the politicians want us to see things.

To repeat, President Obama says we need to hire more teachers to assist educational efforts and that by so doing we'll help stimulate the economy and keep teachers in the classroom at the same time.

The Political Shell Game of Scamming both Taxpayers and Government Workers, including Teachers

And that's where the total number of  people employed versus the total dollars paid scam comes into play.

Taxpayers are already paying $100 for the teacher. Paying another $100 for me will simply DOUBLE the dollars flowing from taxpayers to working and retired teachers.

But we have no money to double expenditures for teachers unless we increase taxes dramatically or borrow even more money from  the Chinese, assuming they are still willing to loan it to us. In that event of borrowing more, the scam is on future taxpayers. Either way it's a scam. And either way, it's an extraordinary disservice to teachers, too.


In simple language, the President is talking only about the numbers of people in the classroom. But in terms of the total payments to teachers, both those in the classroom and for those retired as well, the accurate way of viewing the matter is total government dollars paid to teachers, active and retired.

In our KISS example, taxpayers in essence are being asked to double their taxes in order for the government not to have to reduce the number of teachers in the classroom by 50%.

Yes, you heard that right. Either double the taxes or reduce the teachers by half. That's simple math.

And it's not just the teachers. It's police, fire fighters, administrative personnel and other government workers as well.  And that's why I believe both teachers (and the rest of the government workers like police, fire fighters, office workers and such) and taxpayers alike are being taken for a ride by our "caring" politicians.

And I further believe that the politicians will attempt to escape totally any responsibility for the damage they've done. They'll do this by obfuscating and by pitting the plight of the public sector worker against the "billionaire" taxpayers.

But We the People must not allow the politicians to prevail. We've been misled for far too long and the charade needs to cease.

What To Do?

There is no easy answer to any of this, but the problem is still a simple one.

Politicians at various levels made retirement benefit promises to government workers, including teachers, on behalf of the taxpayers, but the costs attached to those promises were never quantified  or disclosed to taxpayers. The taxpayers never saw the increased taxation coming. And the government workers never saw it coming either.

Our problem isn't that we're not now paying for enough teachers or other public sector workers. Our problem is that we're being asked to adopt a  2 for 1, aka taxpayer double, payment formula now since the cash was never set aside to be able to meet those promises to that teacher 30 years ago.

Thus, we pay me to stay home, we pay my replacement a similar amount to teach what I used to teach, and we want the taxpayer to make up the difference.

At least that's what the politicians want us to do. And keep our mouths shut and re-elect them, too.

As I see it, that's the politicians' "plan." If you agree, pass the word.

Thanks. Bob.

No comments:

Post a Comment