Posted 5 years ago on March 25, 2012, 8:06 a.m. EST by flip
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So, what are we going to do about those big fat pensions collected by public employees? You know, those retirement benefits that supposedly are threatening to bankrupt state and local governments everywhere. What to do? That's easy. We can make that problem disappear quickly – just like that! We need only realize that the problem simply does not exist, despite the claims by rabid anti-union forces and the many people who they've duped. Here's the basic situation: Anti-union forces are attempting to weaken the public employee defined pension plans that provide employees a specific monthly payment on retirement. The plans cover about five million older Americans, providing money that many drawing benefits very much need to escape poverty and stay off government assistance. Those receiving the benefits, many at rates granted originally in lieu of pay raises, in turn create more than $358 billion in economic output nationwide and create more than 2.5 million jobs. State spending on pensions amounts to no more than 4 percent of the state budget, on average. In most states, employees must contribute up to 8 percent of their wages to their pension fund, a bit more than private employees contribute toward their pensions. You should also know that, despite what you may have heard, government pension funds are not going broke. They in fact have been growing as Wall Street has been doing better. Those basic facts and others that are often lost amid the anti-pension clamor from those on the political right who would just as soon do away entirely with pensions, But they were laid out clearly by panelists in a forum earlier this year sponsored by the National Public Pension Coalition. Panelist Dean Baker, an economist who's co-director of the Center for Economic and Policy Research, noted the concern that pensions are endangering government services stems from "a crisis that has been invented" by employer groups. Baker said the make-believe crisis stems largely from the 2008-09 market crash. That caused an estimated $800 billion of the $1 trillion shortfall in pension plans, but he said the plans should be able to recoup their losses. But what of the public employees supposedly drawing pensions of $100,000 a year, or even more? As panelists pointed out, they're pretty much make-believe, too. Then how much do they make? In New York, as another panelist, New York State Controller Thomas DiNapoli reported, the average pension, including those of police and firefighters, is just a little over $19,000 a year. Three-quarters of New York's pensioners overall get less than $30,000 a year, and less than one-half of 1 percent get more than $100,000. Panel member Janet Cowell, North Carolina's state treasurer . said the average pension in her state is a mere $22,000 a year. She said fewer than 300 retirees get $100,000-plus pensions – "and some of those are basketball coaches. Rhode Island retiree Dolores Bresette, a voice from the trenches, as it were, told her unfortunately not uncommon story to the panel. She said "I worked for the State of Rhode Island for 37 years and contributed 9 percent of my salary to my pension fund. Now, after years of saving and preparing for my retirement, so much of what I and thousands of other public workers were promised is being taken away." That's because of last November's enactment of a "Retirement Security Act" which, among other things, suspended cost-of-living adjustments for Rhode Island retirees indefinitely. "There are real human implications of the current efforts to dismantle public workers' pension funds", Bresette declared, "and people in Washington and the country need to see that." She and other panelists warned that "in addition to the human implications there are serious social and economic consequences that will develop over the long term if the shift away from defined-benefit pensions continues. Instead of dismantling public employee retirement systems, policymakers should be working to improve retirement security for the private sector workforce." Policymakers will soon face another major crisis related to retirement benefits, noted panel member Hank Kim, an expert on public employee retirement systems. He said that overall, pension funds covering privately employed workers now contain more than $8 trillion less than they'll soon owe retirees. If pension benefits are denied or reduced as a result, that could very well cause a significant segment of the 75 million baby boomers to delay retirement. Which would put them in competition for jobs with 80 million younger workers, the so-called millennials, over the next 10 to 15 years.
That could also cost taxpayers. For, as panelist DiNapoli said, if needy retirees couldn't find jobs that would provide them enough to live on, the government would ultimately have to provide them welfare grants.
The pension opponents wouldn't be left with much of a choice. They'd have to abandon their anti-pension position or agree to tax increases which, as you might imagine, they don't much care for.
Either way, we'd be winners.