The only thing worse than a lame duck governor is a governor who decides to leave her Executive Office attempting to do more harm than she did while serving. That seems to be Governor M. Jodi Rell’s intent. Just read her Sept. 12 News Junkie editorial “Retiring The Decades-Old Practice of Unfunded Liabilities,” in which she outlines recommendations for shoring up the state’s unfunded health and pension liabilities.
Rell starts by calling Connecticut’s retirement benefits program a “covenant state government has made – and rightly so” but then immediately proposes breaking that covenant by slashing benefits for current employees and eliminating pensions altogether for new employees.
She brags about the near billion dollars in savings reached in 2009 through a new collective bargaining agreement with state employees – then proposes nothing less than tearing up that agreement.
Having convened the Post-Employment Benefits Commission (on which I sit), the governor chose to waste a rare opportunity to produce a measured and thoughtful approach in solving the liability issue, and helping to reduce the budget deficit as well. Instead, she released a purely political document before members of that very commission could vote on its content.
Governor Rell’s proposals fail to consider the simplest of solutions and choose, as an alternative, recommendations that cost the state and working families more. Her plan won’t work, and here’s why.
Many experts agree that the most direct way to reduce the unfunded liability is to fund it. State Treasurer Nappier and State Comptroller Wyman have both written to the OPED Commission providing actuarial data to show that a “modest” funding program would result in significant reductions to the liabilities over the long-term. They predict that an initial one-time payment of $410 million and a $50 million dollar annual payment into the healthcare fund would result in a reduction of $6.7 billion and a reduction to the annual required contribution by $400 million. Those are direct and immediate savings.
When it came time for Governor Rell to address the retirement fund, she failed to separate the Tier I employees from Tier II. This is a vitally important distinction to make because Tier II benefits are much less generous and amount to 4.7 percent of payroll. The Governor’s plan to reduce these benefits will do little to impact the overall liability issue.
Governor Rell knows this. In fact, if she were truly interested in dealing with the state pension and retiree healthcare plans’ unfunded liabilities, she would have recommended using some of last year’s budget surplus to reverse recent pension fund deferrals to the unfunded liability. Instead, she called for cancelling bonding in the current year’s budget, which produces far less bang for the taxpayers’ buck.’
Rell ends her piece calling for “serious and open dialogues toward finding solutions.” I could not agree more. Real pension plans are an economic engine for Main Street. According to a 2009 study by the National Institute on Retirement Security, state and local public pension plans had a total economic impact of more than $3.2 billion and supported more than 18,530 jobs that paid more than $1.4 billion in total compensation to Connecticut’s workers.
Let’s be clear. Our crisis is not that public service workers have decent pensions in the form of defined benefit plans; it is that so many other employees do not. Real pensions are proven to be more effective and less costly than defined contribution plans such as a 401(k)s. Defined contribution plans are, at best, savings plans, not retirement plans. What’s more, those plans are skewed to help the wealthy shelter their tax exposure, while the working class has no such luxury. The money workers put into 401(k)s is more likely to be depleted by personal economic hardship, leaving them with next to nothing when they retire.
Playing the “pension envy” card makes for good headlines, and helps Tom Foley’s gubernatorial campaign, but it doesn’t make for good public policy. It won’t create good jobs in our economy. And it won’t solve the problems facing states like Connecticut that have failed to keep up with their pension obligations.
The people of Connecticut deserve better than political grandstanding and shallow electioneering.
Sal Luciano is Executive Director of Council 4 AFSCME, representing 35,000 workers in Connecticut.