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Original article URL: http://bridgemi.com/2012/04/everybody-feels-our-pain/

Talent & education

Everybody feels our pain

From the comments piling up on Bridge’s stories about school-employee pension reform, both here and at Mlive, where Bridge shares content, you’d think…well, you’d think a lot of things. For a topic that involves actuarial tables and lots of numbers, it gets blood boiling like few others.

But if there’s one takeaway I hope every reader gets, it’s that Michigan is not alone in this. For all the muttering about dark GOP conspiracies and high-living lunch ladies, it’s far more important to note our shared pain with states, and to learn from their own reform efforts.

This is a very flattering profile of Rhode Island’s state treasurer, Gina Raimondo, and her one-woman crusade the face the fiscal truth of that state’s public-pension disaster. But look beyond the lovely prose of author David Von Drehle, and the facts speak for themselves: Rhode Island was on the brink of disaster, “teetering like an American Greece,” and Raimondo, a Democrat, engineered the reform package that pulled it back from the edge.

The answer? It should sound familiar:

The plan, after some slight legislative compromises–Raimondo drew a stern line against major changes–ended cost of living increases for at least five years and tied future benefit bump-ups to the overall health of the system. It gradually raised the retirement age to mirror that of Social Security, and it converted a plan of defined future benefits for retirees into a two-headed hybrid: employees will now get a diminished guaranteed pension together with a defined-contribution plan along the lines of a 401(k). Taxpayers also took a hit, underwriting a package to refinance the pension debt. Boldest of all, the changes applied to current retirees, not just future ones.

Von Drehle finds a compelling subject in Raimondo. But the answer appears the same everywhere.

5 comments from Bridge readers.Add mine!

  1. RM

    It’s not just data that’s involved here. The rule of law and fairness are also considerations.

    A school employee takes a job, often with expectation (often written contract) that the job offers lower than average wages but higher than average benefits. That person works 30 years under this contract and forgoes pay in lieu of future benefits: retirement and health care after retirement. Abrogating this contract is nothing short of wrong and also illegal under our Michigan constitution, which doesn’t allow ex post facto laws that abrogate legal contracts.

    Making new rules for new employees is fine. Negotiating contractual (written or just promised) changes with existing employees is fine. But, abrogating contracts is not. It turns the rule of law upside down and is an affront to our values and our democracy.

    We need to look at the source of the pension and health care funding problems. State contribution to these funds stopped in the early 1990s with a pay as you go plan that obviously hasn’t worked. Pay as you go can’t work because there are now fewer students, fewer teachers, fewer staff — fewer workers to pay into the funds. Much of the decrease in workers is caused by lawmakers when they forced school districts to outsource employment to workers who don’t pay into the funds and when they authorized private companies (charter schools) whose employees don’t pay into these funds. In other words, this is a funding crisis created by term limited lawmakers who didn’t and don’t have the knowledge or experience to figure these kinds of thing out.

    Solving these lawmaker created problems by abrogating contracts is not the solution.

  2. Steven Norton

    I was one of those who testified before the Senate Retirement Appropriations subcommittee, and my organization pointed out the problem with SB 1040: the entire cost of restructuring the system was being placed on retirees, current school employees, and students (though their districts). The people of Michigan, who have benefited from our schools and these teachers for years, are not being asked to help solve the problem and keep promises made to those who have served our state.

    In another article, you quote Rep. Rick Olson as saying that the only options are higher contributions from emploiyees, reduced benefits, or a “magic money tree.” No magic is necessary. What is necessary is the political will to say that we all need to step up to help solve this problem. Regarding Rhode Island, Ms. Derringer’s article quotes Time Magazine:

    Taxpayers also took a hit, underwriting a package to refinance the pension debt.

    I suggested something very similar in my testimony. Committee members made it clear that they would never consider something like this. I find this to be short-sighted and mean-spirited, pitting as it does teachers against students. It also makes me doubt that fixing the pension system in a fair way is their main motive in writing this legislation.

  3. Paul

    The sole objective of the Repug legislature and Snyder is to destroy public education, public services and the public penal system, in favor of privatizing it all, in accordance with corporate mandates as promulgated thru ALEC. Experience has shown us that turning not for profit public endeavors over to for profit corporations produces the lowest common denominator results. Corporate executives are loath to spend revenue to produce the best product unless held to account by laws and regulatory agencies. Why else the push to dismantle such requirements in anticipation of taking over gov’t responsibilities? One of the most disastrous examples is the oil well blowout in the Gulf of Mexico which was caused by corporate irresponsibility and lax oversight by a gov’t regulatory agency.

  4. Chuck Fellows

    Paul is absolutely correct. The mandate is to eliminate public service at every turn based on an illusion that the private sector can do it better, faster and cheaper.

    One need look no further than out nations experience with private contractors replacing military personnel. Worse, slower and more expensive.

  5. Al Moncrief

    It’s amusing that Raimondo is considered some sort of champion of pension reform. Her pension bill was prima facie unconstitutional and will be struck down in the courts. Conservatives should be singing the praises of Sen. Lillenquist of Utah and his prospective, legal, moral pension reforms. No lawsuits in Utah and the pension burden is slowly dropping.

    FOR THE EDIFICATION OF THOSE WHO WOULD ABANDON CONTRACT LAW IN RHODE ISLAND, THE RECENT RULING:

    “The case law does not preclude but rather supports this Court’s holding that Plaintiffs, as ten-year veterans of the State, possess a contractual relationship with the State pertaining to retirement allowances and COLA benefits which are not subject to collective bargaining.”

    Here’s an update on Colorado’s pension theft lawsuit:

    COLORADO PERA PENSION THEFT LAWSUIT SCHEDULE AND HOW TO HELP.

    The group fighting the Colorado Legislature’s theft of contracted pension benefits (saveperacola.com) posted a Colorado Court of Appeals schedule on their website today (as follows):

    “We have received notice of the following scheduled dates for the lawsuit:
    4/23/12 – Appellees to Supplement Record
    5/29/12 – Appellee’s Answering Brief
    6/12/12 – Appellant’s Reply Brief

    PERA and the State of Colorado are the appellees. Gary R. Justus et al are the appellants.”

    Saveperacola also posted a request for help from Colorado PERA members, retirees and any others who support the rule of law in the United States. Saveperacola is raising funds for attorney fees to combat the theft of retirement benefits that were earned by PERA members over decades.

    Are you a PERA member or retiree? Have you paid into PERA for many years? Do you expect the Colorado Legislature and Colorado PERA to honor their contractual obligations to you?

    Well, your expectations are not grounded in reality.

    It is pathetic, but the Colorado Legislature and Colorado PERA will not honor their legal commitments to you short of a court order. That has become quite clear during Colorado PERA’s political, legal and lobbying campaigns.

    If Colorado PERA members and retirees do not act, our interests will be brushed aside.
    In a nutshell, the Colorado Legislature and Colorado PERA are trying to avoid their debts to public employees.

    The Colorado Legislature has the ability to “define” a pension “crisis” into existence and then attempt to use that “crisis” to justify the breach of pension contracts.

    The Legislature can create a funding “crisis” by skipping its annual required contributions to the PERA trust funds. For a decade the Colorado Legislature has done just that. It has ignored the level of contributions that it must make every year to the PERA pension in order keep it financially sound. This level of annual contributions (called the ARC) is determined each year by Colorado PERA’s actuaries. To date, the skipped contributions exceed $3.5 billion. Just this week the Colorado Legislature is skipping in annual required pension contributions in order to provide $100 million in discretionary tax relief. Having ignored its obligations for years, the Legislature would like to compensate for its negligence by essentially stealing money from Colorado PERA members and retirees.

    The Colorado Legislature and Colorado PERA are also trying to use the volatility of investment markets to justify their breach of contracts. Remember that Colorado PERA members and retirees are members of a defined benefit plan. They do not bear any “market risk.” In a defined benefit pension, “market risk” is borne by the sponsors of the plan, that is, the State of Colorado and Colorado local governments. The Colorado Legislature and Colorado PERA want to retroactively change the terms of our statutory pension contract.

    Here’s a quote from the new post on the saveperaacola website:

    “Remember, the bottom line here is that unless we prevail in this lawsuit, PERA is off the hook for keeping the promises it made to every member and retiree.”

    What can you do? Go to the saveperacola.com website, click on the “Support” tab, and send them a contribution. Call or e-mail every PERA member and retiree you know and ask them send support. Call your public employee union representatives and ask them how they can stand idly by while the state attempts to breach its contracts with public employees. Their public sector union colleagues across the country are aggressively defending the pension rights of their members.

    To follow developments in the Colorado pension theft lawsuit sign up as a Friend of Save Pera Cola on Facebook.

    Have your friends sign up as Friends of Save Pera Cola. Copy this post and e-mail it to PERA members and retirees you know.

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