Other view: Public pension bailouts: Keep eye on politicians
It’ll cost you, taxpayers. A legislative commission voted in late March to advance proposed fixes for weakened public-worker pensions, including about $7 million per year from the state to help restore to full funding the plan for St. Paul public school teachers — a process expected to take 25 years.
It’ll cost you, taxpayers.
A legislative commission voted in late March to advance proposed fixes for weakened public-worker pensions, including about $7 million per year from the state to help restore to full funding the plan for St. Paul public school teachers — a process expected to take 25 years.
Lawmakers and plan administrators deserve credit for careful attention to the state’s public-worker pensions and to addressing the problems with measures that also include increased contributions, making retiring early and returning to work after retirement less attractive, and other cost-saving measures. The repairs of recent years are significant.
But the remedies should come with a loud note of caution for the public: Public-employee pension funds are under the influence of politicians — who, as they apply the remedies — have the power to do favors and solve problems with somebody else’s money: ours.
The Legislative Commission on Pensions and Retirement, which also approved $6.3 million per year in state aid for the plan for Duluth teachers, got what amounts to a reality check in testimony from retired Rockridge Elementary Principal Tom Threinen. He told lawmakers the additional contribution costs for the district will result in the loss of at least five teaching positions and make it harder to reduce class sizes and increase offerings, as both the Duluth News Tribune and St. Paul Pioneer Press reported.
“The pension fund problem is a real one, but it’s one we as adults created, and it’s wrong to solve that problem on the backs of kids in Duluth,” Threinen said.
He urged commission members to study the bigger issue of the state’s $16 billion in unfunded pension liabilities. “The longer we wait, the larger the problem will become and more distasteful the choices will become,” Threinen said.
The teacher-pension funding proposals are among several pension repairs the full Legislature is to consider this session.
The situation got lawmakers’ attention, in particular, after the Great Recession put significant pressure on public-worker pensions. With the coming age wave of retiring Baby Boomers, we in Minnesota and across the nation likely will see even more pressure, with repair measures becoming a staple of legislative sessions. The pressure to closely monitor pension plans should only intensify.
In contrast, according to Pioneer Press reporting by MaryJo Webster, Wisconsin’s public worker pensions remained nearly fully funded after the 2008 stock market collapse. The Wisconsin Retirement System, which serves more than 500,000 working, retired and former public employees, has been touted by at least two national studies as the most successful large public pension fund in the nation.
“Many factors likely played a role in why one state’s approach worked and the other’s didn’t,” Webster wrote. “But one key difference stands out: Wisconsin retirees are promised a minimum annuity, but the total they receive can go up when investments exceed expectations. That extra ‘dividend’ also can be cut when times are bad. Under Minnesota’s former approach, the benefit could go up but never could be cut back. … Being able to take away $4 billion in dividends across the past four years is one of the key reasons the Wisconsin Retirement System did not take on additional unfunded liability when it took a huge loss in the 2008 stock market.”
In the debate about public pensions, often discussed is the value of moving away from the “defined benefit” plan that most public-worker retirees enjoy to “defined contribution” plans, such as the 401(k), as much of the private sector has.
Private-sector workers, too, are watching. Folks who also lost sizable portions of their own retirement incomes in the downturn ultimately will help replace dollars in the plans of public workers.