Posted on January 20, 2011 by Seth Borden

Bloomberg: U.S. Governors Confront Public Sector Unions

Excerpt from today's Bloomberg.com, "Public-Worker Unions Confront U.S. Governors Over Benefits in Role Switch":

Pension Rollback

In New Jersey, with a projected $54 billion gap between assets in its pension and payments promised retirees, Republican Governor Chris Christie wants to roll back a 9 percent benefits increase enacted in 2001 and raise the retirement age to 65 from 62.

“Benefits are too rich and contributions are too small,” Christie said in his Jan. 11 State of the State speech. “The system is on a path to bankruptcy.”

Christie, 48, has also clashed with teachers. He’s sought to cap school-superintendent pay and wants salaries and tenure linked to student performance. The governor’s chiding of a teacher about union unwillingness to accept a one-year pay freeze became a popular Internet video.

In New York, Democratic Governor Andrew Cuomo, 53, with a $10 billion projected budget gap, has called for a one-year state-wage freeze and is mobilizing business for a media campaign supporting his agenda. California’s Brown, 72, confronting a $25.4 billion deficit over the next 18 months, wants to cut employment costs by as much as 10 percent in part with the unpaid days off.

Bargaining Rights

The strongest challenges to unions come from newly elected Republicans such as Wisconsin’s Walker, 43, and Ohio’s Kasich, 58. They were part of a November election wave that now puts their party in control of 25 legislatures and 29 governorships. In addition to proposals to cut wages and benefits, both are seeking to curb workers’ collective-bargaining rights.

“The scope of these attacks is unprecedented,” said Naomi Walker, the Washington-based director of state-government relations at the AFL-CIO, the nation’s largest union organization.

While labor unions haven’t said they will withhold campaign money from Democratic candidates who have been traditional allies, actions such as those of Brown and Cuomo could temper the enthusiasm of union voters, Walker said.

“These things will certainly impact whether working families get involved in their political campaigns,” she said.

Unions should use teachers, firefighters and active-duty police as spokesmen so there is “a sympathetic face attached to the issue,” said Chris Lehane, a California-based Democratic strategist who worked on the 2000 Al Gore presidential campaign.

Read the entire piece here.

Tags: , ,
Posted on January 7, 2011 by Seth Borden

Congressman Introduces House Resolution Opposing Bailout of State and Local Pension Funds

On the first day of the new Congress, Rep. Jason Chaffetz (R-UT) introduced a House Resolution:

Expressing the sense of the House of Representatives that the Federal Government should not bail out State and local government employee pension plans or other plans that provide post-employment benefits to State and local government retirees.

The Resolution lays out a litany of financial challenges facing the federal government, state and local governments, Social Security and related trust funds, and various government employee pension funds.  Most critically, the Resolution asserts:

numerous State and local government employee pension plans have offered overly generous retirement benefits to its employees and are in dire financial situations with combined unfunded liabilities up to $3 trillion...

Substantively, the Resolution declares:

(1) the Federal Government should not bailout State and local government employee pension plans and other post-employment benefit plans; and

(2) State and local governments should immediately institute reforms to their employee pensions plans, including replacing defined benefit plans with defined contribution plans.

As this is a simple Resolution, it will not advance toward promulgation as an actual law.  The result of a House vote on this, however, may very well impact how state and local government approach what has become an extremely pressing issue.

More Resources and Commentary:

Tags: , , ,
Posted on August 17, 2010 by Seth Borden

WSJ: Is Union Pension Bail-Out Moving Up Congressional Agenda?

The Wall Street Journal (subscription) ran a piece this weekend highlighting again the dire state of multi-employer pension plans in the U.S.  THe WSJ criticizes the Create Jobs & Save Benefits Act of 2010 (S. 3157), introduced by Senator Bob Casey (D-PA) back in March:

Congress is gone for August—heaven be praised—but that hasn’t stopped unions from quietly mobilizing to push through a big new priority this fall: a pension bailout. Big Labor is going Code Red on the issue, in the face of a looming accounting change that would force companies to confront the Ponzi-style nature of multi-employer pension plans.

We wrote in June about this class of some 1,500 union-run retirement vehicles, in which companies across an entire industry pay into a single pension pool. Hundreds of these multi-employer pools are badly underfunded, thanks to years of labor funneling money into new pay and benefits, rather than into the funds for retirees.

The big problem with these plans is that when one company in the pool goes out of business, the other companies remain on the hook for the cost of the plan. These spiraling liabilities inspired Pennsylvania Senator and Big Labor favorite Bob Casey to introduce legislation to cordon off “orphaned” pensions—those for which an employer has stopped contributing or withdrawn from the plan—and drop them on the federal Pension Benefit Guaranty Corporation.

The PBGC is already significantly underfunded and taxpayers are its ultimate backstop. Yet the Casey bailout could dump as much as $165 billion in new liabilities on the PBGC, while multi-employer plans would get a clean bill of health. What a deal…

In a press release, Senator Casey blamed the pension crisis on the current recession, and on employers who ceased making contibutions and closed as a result.  While the current environment certainly has not made matters any better, the serious underfunding of multi-employer pension plans pre-dates the present state of the economy.  In the summer of 2008, Hudson Institute fellow DIana Furchtgott-Roth highlighted this serious problem in a research paper entitled "Union vs. Private Pension Plans: How Secure Are Union Members' Retirements?"  She studied and reported alarming rates of underfunding as of 2005.

There were critics of the Employee Free Choice Act who believed that bill was motivated primarily by the potential benefits to underfunded pension fund brought about increased union density.  In any event, whether by such indirect or more direct legislative or regulatory action, it appears that addressing the state of multi-employer pension plans will become a hotter topic in the very near future.

More commentary:

Tags: , ,