What appeared post-election to be an opportunity for reform of the public pension fiscal sinkhole has devolved into pure theatre. It took decades for the issue of government worker pension abuse to enter the public conscience, and now that it's out there, the political class is doing everything it can to deny the problem even exists. While our economy is in tatters - due largely to bad government policies - the only Baby Boomers who get to retire on time are the ones who work for the government.
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While our economy is in tatters - due largely to bad government policies - the only Baby Boomers who get to retire on time are the ones who work for the government
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No problem, really?
Conservatives and Tea Party activists need to follow this instructive political drama as it unfolds over the 2011-2012 legislative session. First off, forget what the Star Tribune said about Minnesota not having a pension problem. If there's no problem, then why are the funds asking for higher taxpayer contribution rates on top of the ones they got in 2005, 2006 and 2010? Those increases added billions in new taxpayer dollars to shore up depleted pension funds and they were not enough.
If there's no problem, then why did the Pension Cartel (unions and their kept legislators, lobbyists, plan administrators and membership groups) endorse the 2010 reform provision to cut COLA increases - an action that they knew would land them in court and cause many a well-heeled government pensioner to bust a blood vessel?
If there's no problem, then why did the Democrats agree to study language to convert the Cadillac system to a pathetic private-sector style 401(k) system? And why did they ratchet back the interest on refunds and reduce accrual rates and cut deferred annuity augmentation rates and eliminate interest for reemployed annuitants and increase vesting periods and increase early retirement reduction factors?
Huh? Why'd they do all that if there's no problem? (And rest assured - the many tweaks of the 2010 "reform" legislation did little to solve the problem.)
It's up to you, Freshmen
If anything is going to happen this session, it is going to be up to the GOP freshmen to vote as a block and stick up for the taxpayers like they said they would. To make it easy, freshmen need only remember this: no new taxpayer contributions to government pensions. Period.
Any bill that jacks up the employer contribution to public pensions should be a no vote. The Freshmen should also introduce a bill to repeal the taxpayer contribution hikes that were included in the 2010 pension bill. And when the opportunity arises on the House and Senate floors, they should force a roll call vote to repeal the 2010 taxpayer contribution hikes.
Incumbent politicians and unions made this mess, let them figure out how to fix it. Just leave the taxpayers out of it. They have enough to deal with without being forced to cough up more for the governing class.
Defined contribution reform is phony reform
Incumbents are all hot to trot over the defined contribution reform. But that's fraught with problems for the taxpayer as long as any employer matching contribution is part of the plan. The pension plan actuary Mercer ran some estimates of the cost of converting from DB to DC and the numbers are staggering. Between now and 2020 the new costs are $2.7 billion on top of all the other new money being feathered in under current law. The numbers assume that the taxpayers will continue to play Mommy and Daddy for government workers by contributing five percent of payroll to the new DC plan while fully funding the existing DB plan.
Here's the real fix: No employer contribution to the new defined contribution plan for new employees, no taxpayer contribution increases for the current defined benefit plans and shave existing DB benefits down to the bare legal minimum. Do the math.