At a Washington conference this morning, panelists from the National Public Pension Coalition shifted attention away from the public-sector pension crisis and toward the private-sector pension crisis.
The private-sector problem is real. But the panelists' approach to it highlighted the problems in the public sector.
Future private-sector retirees face a potential $8 trillion savings shortfall, one speaker, Hank Kim of the National Conference on Public Employment Retirement Systems, said.
True enough. But Kim's proposed fix for this hole contains a lesson for public-sector stewards and taxpayers. Kim says that public-sector pension plans work so well that states should invite private-sector workers to join them.
But Kim's state-run "retirement security for all" plan would differ significantly from traditional state-run pension plans.
For one thing, according to the plan specifics, this "public-private partnership" hybrid would assume that members retire at the age of 65, with no subsidy for early retirement.
Yet in New York, the state retirement age is 62. Gov. Andrew Cuomo wants to raise it to 65, but he could face a fight. In New York City, uniformed workers can retire after 20 years, even if they're still in their 40s.
Plus, Kim's private-public plan differs from public-sector plans when it comes to expected investment performance.
Remember, public pension plans invest money now to pay future benefits. If the plan managers think the markets will perform really well, they have to put less money aside now. If they think markets won't do so well, they -- meaning mostly taxpayers -- have to put more money aside now.
Kim's plan would aim to err on the side of conservatism in this respect, assuming only a 7 percent return.
Yet many state plans assume higher rates. New York State's public-pension plans assume a 7.5 rate of return. New York City's plans assume 8 percent.
For public-sector plans to lower their estimated rate to 7 percent would be a good idea. But it would exacerbate current woes, and taxpayers would have to put more money aside now.
Not to worry, though. One panelist, Dean Baker of the Center for Economic and Policy Research, says that the public-pension crisis is a "crisis that has been invented." Baker said further that for states, including "the state of New York," any shortfall in market returns "really doesn't matter."
Baker meant that the shortfall doesn't matter to retirees, whose benefits the state guarantees.
But it does matter for taxpayers. In the past 10 years, New York State and local taxpayer contributions to public pension plans have risen nearly 16-fold, from $263,846 in 2002 to nearly $4.2 billion in 2011.
Those figures don't include New York City. In the five boroughs, taxpayer contributions have gone from little more than $1 billion a decade ago to $8.4 billion this year.
This crisis is real to taxpayers and to future economic growth. The state and city must starve the economy of the infrastructure it needs so that it can pay pensions.
To find out whether the crisis matters to retirees, though, Baker should have turned to his fellow panelist, Dolores Bresette. Bresette is a retiree of the state of Rhode Island.
Late last year, Rhode Island took steps to reduce its future pension deficit. One of those steps was to cut cost-of-living increases for current retirees, including for Bresette.
As Bresette said, this is real money out of her pocket -- about $70 each month, or "a week of groceries" for herself and her husband. Bresette is nervous that she won't be able to pay for her granddaughter's dance lessons anymore. If inflation rises, the loss to her will be even greater, something that she realizes. "My pension is my lifesavings," she said.
Bresette has seen her benefits cut because the pension crisis is real.
State and local taxpayers are rightly concerned that without change, they will have to spend so much money on public-employee benefits that they won't be able to afford much else. Public workers, in turn, should be concerned about voters' new-found concerns.
The conventional refusal to acknowledge the problem ensures that more people will one day face what Bresette has faced: a cut in benefits with no fair warning.