Smoke, Mirrors, and Pension ‘Reform’

Public pensions are under attack across the U.S. From Arizona to Florida, state governors and legislators have been moving to cut pension benefits for retired teachers and other public employees, and enroll new workers in 401K-style “defined contribution” funds instead of traditional, secure “defined benefit” pensions.

But a close look at the numbers shows that pensions aren’t the real problem in these states. Yes, some pension systems are underfunded, either because politicians diverted their required contributions or because investments went sour during the recession. But the real problem, according to a report from “Good Jobs First,” a national policy resource center, is the huge amount of money that states are throwing away on corporate tax cuts, loopholes, and subsidies.

Consider Michigan, where state pension costs add up to about $586 million per year, while the annual cost of Gov. Rick Snyder’s giveaways to corporations near $1.9 billion. Or Florida, where pensions cost the state about $900 million per year, and, thanks to Gov. Rick Scott, wealthy corporations get away with a whopping $3.8 billion. (For additional state figures, visit goodjobsfirst.org.)

The Plot Against Pensions

If you think this just a coincidence, you’re just plain wrong. Rightwing activists, with very deep pockets, are behind these attacks on workers. In Florida, Americans for Prosperity, a group funded by the billionaire Koch brothers, teamed up with lawmakers this spring in an attempt to overhaul that state’s pension fund and protect their own financial interests. ““If the Koch brothers have come into Florida and want to influence how we do our pension system, the only reason I see that they are doing it is for monetary benefit,” explained retired teacher Phyllis Compton. Thanks to the efforts of the unions, the pension-gutting bill was defeated in the final hours of the legislative session.

A recent report from the Institute for America’s Future, called “The Plot Against Pensions,” shows clearly that the Pew Charitable Trusts and the Laura and John Arnold Foundation are working in tandem, especially in Arizona, Kentucky, and Rhode Island, to “manufacture the perception of crisis and press for cuts to guaranteed retirement income.” The Arnold Foundation, which was started by an Enron billionaire, also gave millions of dollars to pay for the one-sided PBS series, “The Pension Peril.” (The good news is that earlier this year PBS returned Arnold’s money and pulled the series when Arnold’s motives came to light.)

NEA believes strongly that retirement security shouldn’t be for wealthy people only. We know public employees have faithfully contributed their fair share to their pensions — typically 8 to 10 percent of their paychecks — and we understand that an insecure 401K-style plan is no substitute for a pension. In addition, one-third of teachers are not covered by Social Security so their pension is their only source of retirement income. (For more about NEA’s positions on educators’ pensions and additional resources, see nea.org/pensions.) But we also believe that it’s vital for educators to speak up and talk about the importance of adequate retirement benefits to elected officials, community groups, family, neighbors, and friends, and work collaboratively to preserve their retirement security.

Here are a few stories from the states:

Illinois: Over decades, politicians in Illinois created the U.S.’s largest state pension shortfall, around $130 billion, by shorting or skipping their required contributions to the pension funds of teachers, nurses, firefighters, and other public employees. But instead of accepting responsibility, last year state politicians passed a new law, cutting pensions for current retirees, while limiting benefits for future retirees.

Illinois Education Association (IEA) President Cinda Klickna promised a fight in return. “We will fight for as long as it takes,” she told IEA members, “so that you have a viable pension that is protected.”

In early 2014, a coalition group called We Are One Illinois, which includes IEA, challenged the law’s constitutionality, pointing out that the Illinois Constitution states that membership in a public pension system is a contractual relationship, “the benefits of which may not be diminished or impaired.”

In July, We Are One Illinois won an important victory in the Illinois Supreme Court, which ruled that health care for retired state workers is indeed a pension benefit protected by the constitution. “Pension reform, RIP?” asked Crain’s Chicago Business Journal. A decision on We Are One’s other lawsuits against the state is expected later this year.

Kansas: Kansans live by two rules: Work hard and play by rules, says the Kansas National Education Association. And Kansas educators and other public employees certainly have done both, especially when it comes to their pension system. Over the past several years, KNEA leaders and members have crisscrossed the state, educating the public and lawmakers about the state pension system, called KPERS, and working to keep the system sound.

Earlier this year, along with their partners in the coalition Keeping the Kansas Promise, KNEA members beat back a bill that would have a 401K-style fund for new hires. It was a big win, but the issue no doubt will return this year.

Missouri: In 2014, the Missouri National Education Association joined forces with other labor allies to form the Protect Missouri Retirement coalition—and just in time. Last spring, with the Arnold Foundation at their back, state lawmakers attempted to move public employees out of their pension system and into 401K-style funds. It didn’t make sense. We know from experience in West Virginia and Alaska that a switch from state pensions to “defined contribution” plans ends up costing the state more (that’s why West Virginia has switched back to a defined-benefit plan). But it doesn’t have to make sense — just money — for the enemies of public pensions.

Pennsylvania: First Gov. Tom Corbett gutted education funding to the tune of $1.1 billion since 2011. Then, he slashed corporate taxes, costing the state $12 billion in revenue over the past four years. And now he expects Pennsylvania taxpayers to believe him when he says that the cost of public pensions are at the root of the state’s financial ills.

Corbett’s latest pension proposal would cut state pensions by 40 percent, while also moving future employees into 401K-style direct-contribution plans. But the Keystone Research Center points out that “corporate tax breaks have a bigger impact on the state budget than pensions.” Keystone also notes that, during the last decade, Pennsylvania employees contributed nearly twice as much to their pensions as their employers.

“This is the exact same kind of bad policy that created Pennsylvania’s pension debt in the first place,” said Pennsylvania State Education Association (PSEA) Vice President Jerry Oleksiak. “The fact that the governor wants to repeat the same mistake is baffling.”

Tim Reed contributed to this report.

Get Involved!
State coalitions, involving NEA affiliates, are working collaboratively to protect the retirement security of public employees. Many have petitions to sign, and other resources for educators who would like to help defend their pensions. If you don’t see your state on the short list below, call your state association or check out the National Public Pension Coalition at .

  • I find it paradoxical that NEA publishes stories like this, yet when I called your office to complain that my local and state chapters were doing nothing about our unfunded retirement in Kentucky, I got one voicemail back that was incomplete. Our local (Jefferson County Teachers Association) and our state chapter KEA, have voted in their executive boards to not back a lawsuit some of us union members are pursuing. They have effectively cut off discussion to the rank and file.

    I am disgusted with my Governor and state Legislators for not funding our retirement adequately. I am disgusted with our retirement system administrators for being silent on this issue, and I am totally disgusted with Bren McKim, JCTA president who has known about our underfunded retirement for six years and did nothing until a group of us forced him to get involved.

    What am I paying close to 900-dollars a year dues for? I realize my words will just get sucked into your black hole, so when we file our suit maybe we should name NEA, KEA and JCTA as defendants along with our state because you have done NOTHING for us.

  • David Sirota has written a lot about this issue as well – the pension “crisis” is definitely a manufactured one (see http://ourfuture.org/wp-content/uploads/2013/09/Plot-Against-Pensions-final.pdf).

  • I find your article quite informative and ironic. When the 2010 Democratic legislature and governor in Colorado contrived to pass Senate Bill 10-001, which cut fully vested retiree annual benefit increases from 3.5% to a maximum of 2.0%, the public employee unions, including my own Colorado Education Association, were right there urging them on through their many lobbyists. The bill passed the Colorado House by just 4 votes, so CEA alone could have stopped the bill from passing. We sued and lost in district court, mostly won in appellate court, and then recently lost in the Colorado Supreme Court. It seems that contrary to Colorado PERA’s long standing claims that, “of course you have a vested contract right to our benefits and the annual increases,” in reality, we don’t have such a contract! Now, rather than a true defined benefit plan (DB), we have a gratuity plan where the legislature can change our benefits on a whim. That’s much worse than a defined contribution plan (DC)! What influence does NEA have over state affiliates that openly contradict the NEA resolutions on support for our pensions??? I’m a lifetime member of DCTA/CEA/NEA-R, so quitting is not an option. But I am warning NEA members in other states, don’t allow your state association any room to follow in Colorado’s footsteps. Be active and assume nothing. Keep tabs on the out-of-state money (e.g., Arnold Foundation) that studies “pension reform.” They are after your pension dollars and will get them if you are not organized in advance to stop them. And beware of your pension system’s “support groups” which may have been already co-opted by the pension thieves. Learn more at our website. Ask for advice if you need to.

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