Pension Reform: Washington Labor Leader Is Right – It Is ‘Class Warfare’


Union leader Greg Devereux was right about a debate in the March 2012 special session of the Washington State Legislature. A budget proposal to reform the lavish pension system for Washington state public employees was an indicator of class warfare – between the have-nots and the ruling class.

The have-nots: The countless stressed business owners, the financially burdened self-employed, under-employed workers, job-seekers, retirees struggling to survive, and others.

The ruling class: Washington state, county and city public employees, their union leaders and many politicians. In other words, public sector employees who profit from the system.

Mr. Devereux, who opposes government-employee pension cuts, is executive director of the Washington Federation of State Employees. He made the class warfare accusation, which was reported by The News Tribune (TNT) in an article entitled, “Are pension cuts ‘class warfare’ or ‘reform’? Lawmakers differ.”

Actually, pension reform has long been an issue. The Washington Policy Center once suggested passage of a constitutional amendment to solve the issue (See Common Sense Needed for Washington State Pension Reform).

Pension reforms were also advocated by State Treasurer Jim McIntire in 2010.

Washington state lawmakers are still getting sore toes from kicking the budget can down the road. Following an unproductive legislative session, the state Legislature was called into a second special session supposedly to balance the state’s budget.

You’ll recall the legislative session didn’t result in a balanced budget. Nor did the fall 2011 special session of the Legislature.

A major stumbling block: The lucrative pensions paid to 40,000 public employees. Public employees receive on average 74 percent higher pension benefits than workers with retirement plans in the private sector.

Republicans introduced a plan that would save $2.3 billion over 25 years. One component would have omitted a $143 million pension payment to reduce liability, and funds the payment after reducing benefits to future state workers.

“It’s a big net gain for taxpayers, and an excellent example of the sort of policy changes we should be making to improve the state’s long-term financial outlook,” TNT quoted Sen. Joseph Zarelli, R-Ridgefield.

TNT reported the proposal includes these provisos:

  • Creates future savings by eliminating an early retirement benefit for state government and school employees hired after July 1.
  • Leaves intact the law that requires new state workers, teachers and school employees to pick from second- and third-generation pension plans.
  • Earmarks any savings to pay down the $3.2 billion of unfunded liability in the older Public Employees’ Retirement System Plan 1 and Teachers’ Retirement System Plan 1 that closed years ago to new workers.

As expected, Gov. Chris Gregoire didn’t like the skipped payment component of the proposal.

But here’s the irony: You’ll recall she has signed such budgets in previous years.

The good news is that Gov. Gregoire supported Sen. Zarelli’s ideas that would leverage savings to pay older pension plans. She also warned she’d veto or won’t sign many of the passed bills into law until lawmakers compromise on a balanced budget.

Not to just pick on the Washington state lawmakers, go to Google News. You’ll see countless stories about public employee pension plans that are plagued by overgenerous benefits and chronic under-funding.

You’ll also see the Zarelli proposal did not originate in Washington state. New York gets it and will reduce benefits for new public employees. The lawmakers recently passed pension reforms saving $80 billion over the next three decades.

This was the Washington State Legislature’s third shot at balancing the budget. Will the third time be the charm? No.

As of March 8, 2013, Washington state pensions had an unfunded gap of $31 billion, according to Seattle Times business reporter Drew DeSilver:

An analysis by The Seattle Times suggests that the system’s promised benefits are much bigger, and its real assets smaller, than official numbers indicate.

The analysis, using market-based data and methods, pegs the total gap between the present-day value of future benefits and assets on hand at more than $31 billion.

Meantime, Mr. Devereux needs a cup of coffee. A strong cup. Otherwise, in his class warfare, he won’t get his wish. There isn’t enough tax revenue among the have-nots to fund his members’ lavish pensions.

From the Coach’s Corner, here’s a public policy question: Will State Lawmakers Heed New SBA Data, Small Business Concerns? 

“Ancient Rome declined because it had a Senate, now what’s going to happen to us with both a House and a Senate?” 

-Will Rogers

 

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

 

Common Sense Needed for Washington State Pension Reform

Updated March 19, 2012

It’s no secret that Washington state has a nightmarish budget deficit. Lawmakers have consistently failed to solve the red ink, which is exacerbated by lavish public-employee pensions.

My two salient concerns:

1.  Public-sector pensions are on average about 74 percent higher than the private sector.

2.  The Legislature has been delinquent in funding them in the billions of dollars.

But lawmakers aren’t exactly shy about high spending and taxes.

Fortunately, I’m not alone in sounding the alarm. Concerned analysts also include Jason Mercier of the Washington Policy Center, www.washingtonpolicy.orgin a 2010 Op Ed in The Seattle Times.

“According to the state actuary, two of Washington’s nine pension plans are already in the red with unfunded liabilities totaling nearly $7 billion,” he reminded readers. “This does not include an additional $8 billion in unfunded post-retirement benefit liability, primarily for retiree health care. Unlike pensions, however, these other retirement benefits are not a contractual right, meaning the Legislature has the ability to make changes as necessary.”

He, too, understood the adverse pension impact on the state’s budget.

“Already our state is facing nearly a $6 billion projected budget shortfall for 2011-13. Included in these projections is the need for additional pension contributions” Mr. Mercier wrote. “The state’s Office of Financial Management projects that an additional $700 million in pension payments above the base will be required in the 2011-13 biennium.”

The forecasts proved to be accurate.

He further stated that pension costs will continue to grow – to $1.2 billion during the 2013 to 2015 budgeting cycle.

“To help avoid kicking the pension liability can further down the road while putting the state’s credit rating in jeopardy, it may be time to pass a constitutional amendment that forces state officials to make the required pension payments and creates a higher threshold to provide enhanced benefits,” he observed. “While funding these past pension promises may crowd out other spending, the alternative puts taxpayers in a worse position.”

He offered another vital solution:

“Meanwhile, legislators must stop enhancing retiree benefits until all the state’s pension plans return to healthy status,” Mr. Mercier explained. “Exacerbating taxpayer exposure while billions in unfunded liabilities exist is the height of irresponsibility. It may also be time for additional reforms to help minimize future pension liabilities.”

It’s also worth noting that constitutional pension reforms were advocated by State Treasurer Jim McIntire.

Amen.

From the Coach’s Corner, here’s another piece on pension reform: Washington Labor Leader Is Right – It Is ‘Class Warfare’.

“Pension reform can be hard to talk about. In the long run, reform now means fewer demands for layoffs and less draconian measures in the future. It’s in the best interest of all Californians to fix this system now.” 

-Jerry Brown

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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

Seattle business consultant Terry Corbell provides high-performance management services and strategies.