by Walter Brasch
AR Senior Correspondent
March 31, 2011
OBAMA'S MISSING IN ACTION IN LABOR STRUGGLE
TRENTON, N.J. -- All across the nation, the states are the battleground for conflicts on public pensions. While the federal government has taken aggressive steps to save, for example, UAW pensions in the automobile industry, it has rarely reformed federal pension systems (Congress belongs, of course, to those funds). In all of this, we are bearing witness to state governors' attacks on public pensions.
For several years the Hall Institute of Public Policy in New Jersey has conducted studies of New Jersey public pensions. Its major report, done more than three years ago, chronicled the bipartisan mismanagement of public monies by lowering the age or years of service (or a combination), not contributing its share to the Investment Fund, and raising benefits to try and convince the unions to vote Republican. The unions, being the greedy entities they are, took the money and voted Democrat mostly anyhow.
The Investment Council, which the institute was critical of, invested in financial houses just as most of Wall Street was pulling out of those investor groups. The Board did that not once but twice, so the gap between liabilities and assets jumped to over $56 billion. Suddenly the state legislature wondered what was going on.
The unions, even those with members on the board, began to be concerned about their pensions and the state's investment of their money. While two governors in a row warned that the pensions were underfunded, their administrations still offered little or nothing each year of the percentages they were committed to pay.
Added to the liabilities for the pensions are policies that the state of New Jersey committed itself to - lifelong medical converge for retired employees. The liability for that obligation is more than the pension shortfall. Legislators, many of whom had approved these sweetheart deals were shocked, shocked to find out that there was a problem.
Employees from public television (which never covered state problems very well) were state employees and on the pension system; even the League of Municipalities had some of its executives on the state pension payroll!
The state institutionalized "don't ask, don't tell." Some legislators and administrators were collecting more than one pension. Not only were some double-dipping or triple-dipping, but they were dipping their toes into the pension pond again and again.
Now, in turn, it was the unions' chance to be shocked. They had been contributing faithfully, and in some cases were worried by the public anger as the hogs hit the trough. Most criticism is aimed at the teachers, of course, but if one carefully calculated the pension of teachers it seems less a problem than meets the eye. A 25-year veteran whose average earnings over their top three years was about $60,000 a year will get about half that as a pension. Not a lordly sum, but the medical insurance is a more generous benefit that one can get elsewhere, and will become more important over the decades.
Some states are moving from defined benefits to a 401-K paradigm. But in the market collapse of 2008, many investments in the market dropped severely - exactly when a legion of people wanted to retire. Privitization is not a cure all for any of the pension and benefits problems that now lay before the public.
So, as we face problems because of declining tax revenues - employment opportunities are few, investment policies are uncertain, and the cost of living is about to rise - we continue to look for a villain. The public's responses are to make public pensions a device to turn the middle class against the middle class.
AR Correspondent Michael Riccards is a political scientist, writer, and professor, and winner of Fulbright, Henry Huntington and National Endowment for the Arts fellowships. Riccards has been the president of three American colleges and has writes on public policy, the political process, and the American presidency.