Real Person Account of Pension Advisory Group
G.B. Short’s letter to the ProJo is worth highlighting. He went to the Pension Advisory Group meeting about which I’ve already expressed some skepticism. Let’s just say his first hand, real person account does little to alleviate my reservations. First, about the makeup of the members:
Early on in the meeting it was stated that this board was set up “to represent the interests of all Rhode Islanders,” a sentiment the organizers expressed more than once. With that, my first instinct was to look at the makeup of the board as members introduced themselves. Of those appointed, four are union leaders from the public sector — a disproportionate weighting at the outset, even acknowledging that labor will have to participate in the final solution and should have a voice.
There was not one clearly identified advocate for the taxpayer, while there should have been several. There were advocates for business and industry. And as the three academic members of the board are probably slated to receive pensions from their institutions I cannot count them to be unbiased….There was not one advocate for non-public union retirees…Certainly non-public union interests should have been present, as well, since many of these wage earners will also be substantially impacted through taxes on their income. One member of the board is retired, but his role as a president of the North Providence Federation of Teachers certainly disqualifies him as an independent advocate for retirees. When I questioned the board’s makeup after the meeting, I was told he was proposed to fill that [ie; the “retiree’s”] role.
Short also provides some context surrounding the line I focused on in my prior post, “I don’t think the private sector is what we want to emulate.”
[M]ost of the board’s members, if not all, based on their current employment status, will likely draw a pension from their institution or union. This is an educated guess. As potential pensioners, board members quickly showed a bias in their expectations of what the benefits of a pension should be.
For instance, the discussion came up early on as to what income a retiree should expect a pension to provide for the rest of their lives. It was quickly settled by common agreement that about 80 percent of previous income was the expected norm…I can tell the board members that as one who had to provide for his own retirement, an 80 percent salary drawdown on your investments is an astoundingly good return, if not reckless, on your lifetime savings and investments going forward for the rest of your life, and one most of us who worked for a living privately can only dream about.
Amazingly, in the early phase of the meeting, I heard one expert participant from academia reject any alternative to a defined-benefits plan (a plan where the employer guarantees your future income for the rest of your retired life), declaring that employee contribution plans (i.e., a 401 [k]), which most of us in the private sector have, are “not anything we want to duplicate,” as Ms. Gregg reported.
I waited for someone on the board to challenge that statement. Not one single board member commented!