Is the golden age of pension reform upon us? Alicia Munnell recently argued that it is, or something close to it. Munnell is the director of the Center for Retirement Research at Boston College, and one of the leading experts on retirement policy in America. In a column published in mid-July, she directed naysayers to regard the many recent examples of public pension systems that have increased contribution rates for current employees or reduced their benefits. These three images from a presentation by the National Conference of State Legislatures show that the former has been much more common than the latter. (For over ten years now, the NCSL has done yeoman's work in tracking state-level pension changes.)
The green in the first image shows how many states have taken action in some way or another. The green in the second, contrasted with the yellow and pink (rose?) of the third, illustrates the gap between states targeting contribution rates vs. actual benefits. This is because, as Munnell notes, "while constitutions and state laws preclude benefit changes, they usually place no restrictions on how much the state can ask the employee to pay."
But, wait, what difference does it make between asking someone to pay more for a benefit and reducing its value?
From a policy perspective, it makes a big difference, because employee contribution rates, just like employer contribution rates, are determined by actuarial assumptions about rates of return. Say a "50/50" employee/employer cost sharing arrangement is determined based on the assumption that their collective contributions will earn 7-8% compounded over a 20-30-years. If the rate turns out to be lower, then it won't be quite 50/50, will it? If the benefit is not reduced, the employer/taxpayer will surely end up paying more than 50%.
A study published in August by the California Public Policy Center found that the average total compensation package of a San Jose worker differs by at least $20,000 depending on whether a 7.5% or 5.5% rate of return is assumed.
Hence, although in principle there should be no difference between reducing benefits or increasing contributions, it would make for better public policy if governments could simply adjust benefits. Until they acquire this freedom, the golden age of pension reform will remain out of reach.
'Reform' pensions? 'Adjust' benefits?
Try changing that to 'steal' and 'welch on'.
THE GOLDEN AGE OF PENSION REFORM IN THE U.S. OCCURRED ABOUT 50 YEARS AGO WHEN STATE COURTS ABANDONED THE IDEA OF PUBLIC PENSIONS AS GRATUITIES, AND FOUND THAT CONTRIBUTORY PENSIONS ARE CONTRACTUAL OBLIGATIONS OF PLAN SPONSORS AND AFFILIATED PUBLIC EMPLOYERS. (P.S. I CONSIDER MUNNEL AN APOLOGIST FOR BREACH OF CONTRACT.)
WHY ARE PUBLIC SECTOR UNIONS IN CALIFORNIA NOT SUPPORTING THE BREACH OF FULLY-VESTED RETIREE PENSION CONTRACTS AS PUBLIC SECTOR UNIONS DID IN COLORADO?
PROOF THAT COLORADO’S GOVERNMENT LIES: COLORADO PERA’S ATTEMPT TO TAKE CONTRACTED RETIREE BENEFITS.
When I was young I held the belief that public service in the United States is honorable, that the United States of America was exceptional in the world, that governments in the United States, while flawed, deserved the respect of citizens.
Now that I am old, I see that I was naive . . . that governmental entities in the United States will intentionally deceive to achieve their goals, and that over two centuries our soldiers have died for a country that will countenance, and even celebrate, base behavior on the part of its public sector instrumentalities.It saddens me, but if this state of affairs persists in the United States . . . Honor is dead.
Some background . . .
You may know that an entity of Colorado state government, Colorado PERA, is attempting to breach its public pension contracts with its retirees. Colorado PERA is attempting a retroactive taking, a “clawback” of accrued, fully-vested pension benefits that were earned by retired PERA members over decades.
Colorado PERA public pension benefits include a“base benefit” that is set at retirement and a “COLA benefit” that adjusts pensions annually to compensate for inflation. The “base benefit” and the “COLA benefit” are set forth in Colorado statutes with identical force of law and legal status.
In its attempt to breach retiree contracts Colorado PERA has created a contrivance.The contrivance that Colorado PERA is using is that somehow the “base benefit” is a contractual obligation, but the “COLA benefit” is not a contractual obligation, in spite of the fact that both pension benefits are set forth in law in an identical manner.What this boils down to is attempted, unabashed, theft by government.
Whether or not Colorado PERA’s attempt to take fully-vested public pension benefits from PERA retirees is ultimately successful in the courts, one fact has been incontrovertibly established . . . Colorado PERA, as an instrumentality of the State of Colorado, is an organization that will lie to achieve its policy goals.
This is a sad fact for the many employees of Colorado PERA, for the trustees that have served on the Colorado PERA Board of Trustees over 80 years, and for the thousands of PERA members and retirees.
And now, the proof of the deceit . . .
Colorado PERA has told us, in writing, that the PERA COLA benefit IS a contractual obligation of PERA . . . and then, after initiating their attempt to breach contracts, Colorado PERA has told us, in writing, that the PERA COLA benefit IS NOT a contractual obligation of PERA.Both of these statements cannot be true.
Colorado PERA in a written document, to the Colorado General Assembly’s Joint Budget Committee on December 16, 2009 states that the PERA COLA benefit IS a contractual obligation of PERA:
“The General Assembly cannot decrease the COLA (absent actuarial necessity) because it is part of the contractual obligations that accrue under a pension plan protected under the Colorado Constitution Article II, Section 11 and the United States Constitution Article 1, Section 10 for vested contractual rights.”
Link:
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
Colorado PERA on page 23 of its May 6, 2011 “Reply Brief” in the pension case Justus v. State states that the PERA COLA benefit IS NOT a contractual obligation of PERA:
“Plaintiffs seek to create a contract right that has never existed—an unchangeable COLA for life triggered (inconsistently) by either the date of their retirement or ‘full vesting.’”
Link:
http://saveperacola.files.wordpress.com/2011/06/2011-05-06-pera-defendants_-reply-in-support-of-summary-judgment.pdf
That is simply unbelievable.
In one document PERA writes "the contract right has never existed."In the other they write that the COLA benefit is a contractual obligation protected under the Colorado and US constitutions.
When PERA writes that they need "actuarial necessity" to take the COLA benefit, they are not denying that it is a contractual obligation, in fact, it is an admission of the contractual nature of the COLA benefit.
For further information regarding Colorado PERA’s attempt to take fully-vested pension benefits from retirees visit saveperacola.com or Friend Save Pera Cola on Facebook.
Quoting ..."Hence, although in principle there should be no difference between reducing benefits or increasing contributions, it would make for better public policy if governments could simply adjust benefits. Until they acquire this freedom, the golden age of pension reform will remain out of reach."
That suns it up correctly, but certainly not strongly enough.
Taxpayers MUST MUST MUST press for Public Sector "Total Compensation" (cash pay + pensions + Benefits) no greater than they get. And with cash pay in the Public and Private Sectors very close (per the US Gov't BLS), there is ZERO justification for greater pensions and benefits. This alone justifies reducing future service pension accruals for CURRENT Public Sector workers by AT LEAST 50% (MORE for safety workers).... as THAT'S how excessive they currently are.
In the States where such reduction cannot legally take place, equivalent employee contribution increases (even where 20% of pay) should be implemented. In the few States when neither benefit reductions or contribution increases are allowed, cash pay should be reduced, and if that is not possible, then it must be frozen even for 10-20 years if necessary.
Private sector taxpayers have been hoodwinked long enough. It's WAY past time to fix this inequity 100%, not the 5-10% piddling around the edges as the Unions want and their beholden politicians unfortunately support.
You really didn't think that Gov. Moonbeam and his Double Dealing
Democratic Cohorts would Stab their Union Bosses in the Back, Did Ya ???
Only one way out of this !!! Declare Martial Law and Nationalize the
National Guard and Arrest All the Democrats and Union Bosses on RICO
Conspiracy Charges !!!
Read more here: http://www.sacbee.com/2012/09/07/4795595/governor-has-one-choice-veto-ab.html#storylink=cpy