In some areas, the system works in a blatantly self-interested way. Take Baltimore, where the police and firemen pension board recently passed a pension increase that, according to the Baltimore Sun, was “whopping,” due to “[h]eavy stock market losses.” The city allows policemen and firemen to retire after 20 years, with a pension equal to 50 percent of their salary. So a public employee can retire at age 40, work elsewhere and draw a pension. Even “better,” the city gives retired employees a permanent pension increase when the city’s retirement fund annual performance exceeds a certain percentage, but does not reduce pension payments when the fund loses money–as, of course, it has in the past two years, just as practically every investment fund has. And “best” of all, the Baltimore pension fund is run by those receiving pensions. Its chairman is also the head of the city’s firefighters union.

This is from Northwestern University law professor Fred McChesney’s Econlib article, “Government Pensions: Such a Deal,” posted today.