Taking from AFSCME to Pay the Teamsters

AFSCME Council 94 President J. Michael Downey has an op-ed on yesterday’s opinion pages in which he makes a couple of flawed analogies in trying to convey his point (emphasis added):

State workers pay a lot of money for their pensions. We put 8.75 percent of each paycheck into the pension fund — higher than any other state employee in the country pays for this kind of plan. This contribution rate covers 85 percent of the pensions’ normal costs. Slashing the pension plan that we have been paying into for decades is And if Governor Carcieri gets his way, he will be no better than Bernie Madoff or anyone else who succeeded in swindling working families out of their hard-earned money. …
It takes 10 years of service to become vested in the state employees’ pension system. After a worker pays into the system for a decade, his or her benefits are supposed to be guaranteed. But the governor’s proposal would change the rules for all state employees and teachers who retire after April 1. Changing our pensions so drastically after many years of contributory service is similar to a bank’s trying to tell you that you don’t own your home after you have made faithful payments for 30 years. To suddenly change the pension system for people who contributed to the system and played by the rules is just plain wrong.

In the first instance, changing the pensions is more like a bank’s changing the interest rates over time, which we all tolerate every day. In the second instance, vestment isn’t full ownership. It’s more akin to allowing a homeowner to borrow more money based on 10 years of equity; the bank still owns the house for 20 more years. And at any rate, the town could raise taxes, or some other expense could go up changing the totality of the arrangement that the buyer initially expected.
We can put that all aside, though. Let’s accept Downey’s premise that the government is responsible for promised retirement benefits. That doesn’t mean that it has to find the money by raising taxes. It could also reduce other employee benefits to compensate. It could, for example, take a dollar-for-dollar reduction in healthcare, perks, salaries, and so on, in order to honor its deal with vested retirees. Downey calls pension reductions “stealing from workers.” I can imagine what he’d say to the proposition of taking from them in order to give back to them.

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Tom W
Tom W
12 years ago

>This contribution rate covers 85 percent of the pensions’ normal costs.
Huh?
Sounds like actuarial analysis from the Joseph Goebbels School of Math (“if you tell a lie often enough eventually people believe it’s true”).
Please explain the 7 billion unfunded liability on top of the hundreds of millions (if not billions) that the taxpayers have already put in.

John
John
12 years ago

Why is it that when the GA was ADDING benefits like COLAs and lower service requirements (from 30 years to 28 for teachers) the unions have no problem with changing the “promise” made to those vested in the program. When the direction is reversed, they scream that they are being cheated out of something. I hate it when that happens.

Defined pension?
Defined pension?
12 years ago

The entire concept of a “defined pension” in itself is not true. By defined, do we mean never changing? The system has constantly changed since its inception 80 years ago with new promises by politicians that we have never been able to keep. Let’s keep on making new promises that we cannot keep.
How about a free education at Brown University for all public workers?
But what may happen when it comes time to fullfill the promise, is what is occuring in that Cal. town that just went bankrupted. Now all promises may also be restructured.
Public employees need to wake up.

Monique
Editor
12 years ago

“Why is it that when the GA was ADDING benefits like COLAs and lower service requirements (from 30 years to 28 for teachers) the unions have no problem with changing the “promise” made to those vested in the program.”
Good point. Precedent is no problem. The benefits would be modified in exactly the same fashion as they were in numerous instances in the past.

Tom W
Tom W
12 years ago

If some state employee with 17 “years of service” decided to quit today under the current system, they’d be entitled to some sort of pension, but not as much as if they’d served out 30 years.
That is why a pension freeze is the fair compromise.
Whatever “benefit” under the existing service was earned as of the freeze date would be kept, but no more accruals going forward.
If state employees and teachers were still working at the same pay rate as they were on the day they were hired I’d have more sympathy for the argument that there can’t / shouldn’t be any reductions to whatever pension benefit system was in place on the day they were hired (or hit initial “vesting”).
If state employees and teachers have a beef, it’s with their union bosses that didn’t watch the store to make sure that the pension system was adequately funded. If they had this whole subject probably wouldn’t even be on the radar.

michael
michael
12 years ago

I get a free Brown University education? Damn.

John
John
12 years ago

Poor J. Mike.
The union members that look to him for leadership, (and his colleagues at the NEA, AFT, and other public sector unions), and have trusted that leadership all these many years, are now rapidly getting a clear picture of what has been going on, and the stark situation they face today.
Absent the much hoped for bailout of RI’s public sector pensions by taxpayers from the other 49 states (via the Feds), there are three choices:
1. Cut welfare spending to fund a big increase in state contributions to the pension funds. But we all know that the poverty crew will never vote for that.
2. Raise taxes through the roof, or try to sell some assets in order to fund big contributions to close the nation’s biggest (on a percentage basis) public sector pension funding gap. But we all know that (a) the poverty crew will want its share of any revenue gains, and (b) a big tax hike might very well result in lower, not higher tax revenues, because more of the base will flee the state.
3. Reduce the funding gap by cutting liabilities, via various changes in the benefit structure, such as older minimum retirement ages, no COLAs, paying a bigger share of retirement health care costs, etc.
That’s it. Those are the only choices. Attention union members: the people who you elected as leaders have brought you to this point, either out of ignorance or malice. The only interesting question is what you are now going to do about it. (Hint: electing Bob Walsh governor isn’t the answer…)

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