by Tim Reed
Educators, firefighters, police officers, librarians, nurses and other public employees already contribute up to ten percent of their salary towards their pensions, and many do not even get Social Security. Despite this, moneyed interests across the country are attacking public pension funds and negatively impacting for decades to come the retirement security of those who have dedicated their lives to public service.
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Wall Street, big banks, and wealthy privateers such as former Enron executive John Arnold and his Arnold Foundation are waging an all-out campaign in states to cut the modest pensions being earned by public servants and replace them with risky accounts that can lose thousands of dollars in the stock market in a single day. These same corporations fail to pay their fair share of taxes due to tax loopholes and giveaways. Yet, instead of eliminating tax breaks for the richest 1% and highly-profitable corporations, many politicians are jumping on the bandwagon and trying to scapegoat public employees for budget shortfalls.
Continue reading to find out more about the current attacks in Arizona, Louisiana, Missouri, Oklahoma and Pennsylvania and about one big win in Kansas.
The Arizona Education Association has become a partner with the Arizona Retirement Security Coalition to help beat back attacks on public employee retirement benefits. Already in the 2014 legislative session more than a dozen bills have been introduced that would negatively impact the retirement of Arizona’s educators, firefighters, police officers and others who have dedicated their lives to public service.
As with many of the states on this list, Arizona’s legislators have partnered with out-of-state interests to help Wall Street profiteers dump your tax dollars into risky 401K plans. These plans do nothing to help ensure retirement security for employees, but they do help line the pockets of big banks and members of groups like former Enron executive John Arnold’s Arnold Foundation.
The profiteers may have a tough road ahead, though, as a recent report from the nonpartisan Grand Canyon Institute [ed note: pdf link] has found that the Arizona public employee pension system is recovering well following the Great Recession, undermining the common “underfunded” fallacy that is often used as an excuse for moneyed interests to get their hands on taxpayer dollars.
According to the Arizona Retirement Security Coalition:
A new study by the Grand Canyon Institute found Arizona’s public employee pension system is on the road to recovery following The Great Recession. The study called “Arizona’s Pensions: On Track to Financial Sustainability with Retirement Security” shows reforms already in place, combined with some longstanding sound Arizona practices, have the state’s pension system on solid ground.
The study also analyzed the legislature’s efforts to replace defined-benefit pension programs with a riskier defined-contribution, or 401 (k), retirement plans, and found that switching to defined-contribution plans would actually increase costs to taxpayers.
“Arizona’s public sector pensions are financially healthy compared to many other states,” said Dr. Dave Wells, research director at the Grand Canyon Institute, one of the report’s co-authors. “Arizona lawmakers have shown great foresight, and the changes that they have already made will strengthen the plans and make them more financially sustainable for the long term.”
“Almost no public pension dollars go to high-end pensions,” Wells continued, addressing the misnomer that Arizona’s teachers, firefighters, police officers and thousands of other public workers receive lavish pension payouts. “In fact, if Sun Devil Stadium were filled to capacity with Arizona public pension recipients, 181 people in the crowd of more than 70,000 would have a pension over $100,000. By contrast, our report shows that most money in private sector 401(k) accounts is concentrated in a small number of very large accounts.”
- Visit the Arizona Retirement Security site
- Follow the Arizona Retirement Security Coalition on Facebook and Twitter
- Download and print the Arizona Retirement Security poster
- Read the Grand Canyon Institute report, “Arizona’s Pensions: On Track to Financial Sustainability with Retirement Security“
Kansas, like many of the states on this list, has been fighting against efforts to shift public employee retirement funds from a defined benefit plan to a risky defined contribution plan. But unlike the others on this list, Kansas has managed to beat back the attacks for the time being.
Earlier this week, the defined contribution plan, HB 2519, was heard by the House Pensions Committee and it opted not to advance the bill, meaning that it will not come up for a full vote. Thanks to the work of the Kansas National Education Association and its coalition partner Keeping the Kansas Promise, retirement security for educators is safe for at least another year.
According to the most recent KNEA Issues:
The House Pensions Committee opted not to advance a bill – HB 2519 – changing KPERS from a defined benefit pension system to a 401k-style savings plan. The bill was strongly opposed by KNEA and the other members of the Keeping the Kansas Promise Coalition.
One of the motivating factors in the decision was the fact that such a change would increase the state’s obligation to what would be a two public employee retirement systems. The state would still have its full obligation to current employees plus paying of the unfunded liability while at the same time supporting a new system.
The sponsor of the bill, Representative Rubin, commented that he felt it important to debate the bill in committee because he feels ultimately defined contribution needs to happen. The issue likely goes nowhere in the 2014 session, but it will probably be back in the future.
- Visit Keeping the Kansas Promise
- Follow Keeping the Kansas Promise on Facebook and Twitter
- Keep up to date on the latest KNEA priorities with the KNEA Issues digital magazine
- Follow KNEA on Facebook and Twitter
Public employee retirees across Louisiana have seen a raft of changes to their retirement system over the last several years. Many of these changes were intended to improve the financial stability of the Teachers’ Retirement System of Louisiana. Despite these changes, lawmakers are still peddling the well-worn and misleading claim that the state retirement system is in crisis.
Louisiana Association of Educators Government Relations Specialist Shane Riddle took on those claims in the most recent edition of the LAE Voice:
Over the past couple of years, Louisiana’s public pension systems have come under intense scrutiny and attack, primarily on the issue of total retirement debt, also known as unfunded accrued liability (UAL). Many reports have circulated claiming that public pension systems in Louisiana are unstable, mismanaged, and improperly funded. The fact is Louisiana’s pension systems are some of the best-managed and most stable funds in the country.
Over the past seven years (possibly more) many “real” pension reform measures have been passed by Louisiana lawmakers that are saving millions of dollars and making the TRSL pension system more cost effective and sustainable. Between 2007 and 2011, many of these pension reform measures included increasing the employee contribution rate, increasing retirement eligibility requirements, increasing retiree COLA eligibility from age 55 to 60, restructuring liability payments to reduce future payments, prioritizing excess investment earnings to debt reduction, requiring a two-thirds legislative approval of retirement provisions with an actuarial cost, and increasing the cap on salary spiking.
While it’s true that the TRSL is well-managed and stable, it’s also important to understand how vital retiree income from public pensions is to the economic stability of communities across Louisiana. A report recently released by the Louisiana Budget Project called Pensions in the Parishes highlights how important public pensions are to the economy of Louisiana. The report reveals how pensions are especially crucial to the economic health and retirement security of smaller, more rural parishes. In some parishes, pensions account for as much as 2.5 – 3 percent of all personal income.
Are public pension systems in Louisiana in a crisis? Substantial evidence and research clearly shows that Louisiana public pensions are stable, well-managed, and properly funded. So I would say no, Louisiana public pension systems are not in a crisis, and as the Louisiana Legislature begins another session on March 10, lawmakers must be reminded of these facts.
- Visit the Teacher Retirement page at the Louisiana Association of Educators
- Read more about public employee retirement in the latest LAE Voice
- Follow LAE on Facebook and Twitter
The Missouri National Education Association has recently joined with retirement security advocates across the state to form the Protect Missouri Retirement coalition to help beat back the attacks on public employee retirees and their pension benefits. Out-of-state conservative activists including the Pew Charitable Trust and the Laura and John Arnold Foundation (run by former Enron executive John Arnold) have recently stepped up their attacks to try and get public employee retirement funds out of the hands of the employees, and into the hands of private businesses.
The most recent move in this attack was the introduction of HB 1682, which move retirees out of defined benefit plans, and into a “hybrid” plan that includes risky 401K investments that do nothing more than line the pockets of John Arnold’s moneyed friends.
According to Protect Missouri Retirement:
Recent legislation filed by Rep. Andrew Koenig would move new state employees and highway workers into a cash-balance style pension plan. Proponents argue that these plans strengthen retirement systems while giving public workers low-risk benefits. A closer look into the math behind the message shows that in the long run, these hybrid plans cost more to fund and produce less investment income than traditional defined benefit (DB) plans, which lead to a larger chunk of unfunded liabilities.
Evidence from other states shows that in some cases unfunded liabilities associated with closed DB plans have nearly doubled. In Alaska, this move forced actuaries to increase the contribution rate from 12.39% of salaries to 22.48%. In West Virginia, the low investment returns caused by the switch to a 401(k) prompted the state to switch back to the traditional DB structure.
In Missouri, experts predict that switching the plan structure would drive up costs as well. The fiscal note response from the Missouri State Employee Retirement System (MOSERS) shows that under the proposed hybrid plan, the state would be forced to kick in approximately $20 million more in employer contributions (1.69% of total MOSERS payroll) over the next three years. Actuaries project that over a ten-year time horizon, contribution expenditures will increase by approximately $151 million.
- Keep up with all the latest pension news at Protect Missouri Retirement
- Sign up for the Protect Missouri Retirement email
- Sign the petition to help fight back against attacks on retirement security
- Follow Protect Missouri Retirement on Facebook and Twitter
Oklahoma, like many of the other states on this list, is currently engaged in a fight to keep public employees on a defined benefit plan, instead of a risky defined contribution plan that leaves retirees at risk to fluctuations in market values. The Oklahoma Education Association has joined with other public employee organizations to form the Keep Oklahoma’s Promises coalition and fight back the attacks on retirement security.
According to the Oklahoma Education Association:
Under the current defined benefit plan:
- The employee, the school district and the state contribute to the employee’s retirement account
- The Teachers Retirement System invests that money to help fully fund retirement for everyone
- Upon retirement, the employee is guaranteed a certain dollar amount in monthly retirement payments for life
Under Treasurer Ken Miller’s defined contribution plan:
- The employee, the school district and the state contribute to the employee’s retirement account
- The employee or the state will choose investments that grow or shrink, depending on the stock market
- Upon retirement, the employee will receive only the money accumulated in the account. The monthly payments last only as long as the money
- Visit the Oklahoma Education Association Protecting Education Pensions page
- Sign the Keep Oklahoma’s Promises petition
- Download and share the Oklahoma Retirement Security flyer
- Follow Keep Oklahoma’s Promises on Facebook
The latest in a raft of proposals from Pennsylvania Governor Tom Corbett on public employee pensions is his plan to reduce the amount of money that the state and school districts are required to contribute to the fund. Lowering these contributions will simply widen the gap between the full, actuarially required, contribution and the actual contribution from the states and districts, negatively impacting the long-term viability of the retirement system. By reducing the amount of money that the state and schools districts are required to pay into the plan, he is essentially putting the retirement security of Pennsylvania’s public servants on a credit card with the hope that future taxpayers will pick up the tab.
Not only does this plan ignore the fact that educators and other public service workers have already negotiated the required state and district contributions, but it will put the security of future retirees at risk. Simply reducing the amount of money going into the fund will inevitably hurt its long-term viability and create an artificial pension crisis, leaving future taxpayers with the bill. And what is Corbett’s solution to the “crisis” he himself created? Taking the state retirement fund out of the hands of the voters and giving control to his affluent friends.
As the Pennsylvania State Education Association recently pointed out:
Gov. Tom Corbett recently unveiled his proposed state budget for 2014-2015. The governor’s pension plan shrinks the state’s and school districts’ payments to PSERS, putting part of these payments on a credit card, costing taxpayers billions more in the long run, and jeopardizing YOUR retirement security.
This is the same “rob Peter to pay Paul” approach that started the pension problem in the first place, and a practice that the administration criticized just last year.
Please oppose the governor’s plan to increase the unfunded pension liability by once again kicking the can down the road.
- Find out more at PSEA.org
- Get all the facts and statistics on public pensions in Pennsylvania at the Keystone Research Center
- Email your elected officials and tell them to oppose Gov. Corbett’s plan to shortchange pension funds