Posted by AzBlueMeanie:
Will the Arizona Republic, which recently published a multi-part "investigative report" on public employee pensions based largely upon biased research and liberal quotations from the anti-union Goldwater Institute (as if they have any credibility), publish this report from McClatchy Newspapers? Why employee pensions aren't bankrupting states:
From state legislatures to Congress to tea party rallies, a vocal backlash is rising against what are perceived as too-generous retirement benefits for state and local government workers. However, that widespread perception doesn't match reality.
A close look at state and local pension plans across the nation, and a comparison of them to those in the private sector, reveals a more complicated story. However, the short answer is that there's simply no evidence that state pensions are the current burden to public finances that their critics claim.
Pension contributions from state and local employers aren't blowing up budgets. They amount to just 2.9 percent of state spending, on average, according to the National Association of State Retirement Administrators. The Center for Retirement Research at Boston College puts the figure a bit higher at 3.8 percent.
Though there's no direct comparison, state and local pension contributions approximate the burden shouldered by private companies. The nonpartisan Employee Benefit Research Institute estimates that retirement funding for private employers amounts to about 3.5 percent of employee compensation.
Nor are state and local government pension funds broke. They're underfunded, in large measure because — like the investments held in 401(k) plans by American private-sector employees — they sunk along with the entire stock market during the Great Recession of 2007-2009. And like 401(k) plans, the investments made by public-sector pension plans are increasingly on firmer footing as the rising tide on Wall Street lifts all boats.
Boston College researchers project that if the assets in state and local pension plans were frozen tomorrow and there was no more growth in investment returns, there'd still be enough money in most state plans to pay benefits for years to come.
"On average, with the assets on hand today, plans are able to pay annual benefits at their current level for another 13 years. This assumes, pessimistically, that plans make no future pension contributions and there is no growth in assets," said Jean-Pierre Aubry, a researcher specializing in state and local pensions for the nonpartisan Center for Retirement Research at Boston College.
In 2006, when the economy was humming before the financial crisis began, the value of assets in state and local pension funds covered promised benefits for a period of just over 19 years.
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"On the whole, the pension system isn't bankrupting every state in the country," Aubry said.
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Defenders of the public pension system say anti-government, anti-union elected officials and interest groups have exaggerated the problem to score political points, and that as the economy heals, public pension plans will gain value and prove critics wrong.
"There's a window that's closing as market conditions improve and interest rates rise, the funding of these plans is going to look better than depicted by some," insisted Keith Brainard, the director of research for the National Association of State Retirement Administrators in Georgetown, Texas.
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[T]wo out of every three public-sector workers aren't union members.
The Bureau of Labor Statistics reported in January that 31.1 percent of state public-sector workers were unionized in 2010, compared with 26.8 percent of federal government employees. The highest percentage of unionization, 43.3 percent, was found in local government, where police officers and firefighters work. Teachers can fall into either state systems or local government.
Ironically, in Wisconsin, where Republican Gov. Scott Walker is trying to weaken public-sector unions and reduce pension benefits, he's exempted police and firefighters, who are among the most unionized public employees. And Wisconsin's public-sector pension plan still has enough assets today to cover more than 18 years of benefits.
The most recent Public Fund Survey by the National Association of State Retirement Administrators showed that, on average, state and local pensions were 78.9 percent funded, with about $688 billion in unfunded promises to pensioners. Critics suggest that the real number is at least $1 trillion or higher, using less-optimistic market assumptions.
The unfunded liabilities would be a problem if all state and local retirees went into retirement at once, but they won't. Nor will state governments go out of business and hand underfunded pension plans over to a federal regulator, as happens in the private sector. State and local governments are ongoing enterprises.
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Another misperception tied to the pension debate is that while the private sector has shed jobs during the economic crisis, state and local government employment has grown — and pensions along with it.
Since September 2008 — when state and local government employees numbered 19,385,000 and the economic crisis turned severe — the governments' payrolls shrunk by 407,000, to 18,978,000 this January, according to Bureau of Labor Statistics data.
When calculating from December 2007 — the month that the National Bureau of Economic Research determined was the start of the Great Recession — state and local government employment has fallen by 703,000 jobs amid a downturn that cost the nation more than 8 million jobs overall.
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Also fueling backlash is the perception that state and local workers don't contribute to their own retirement funds the way private sector workers do.
Three states have non-contribution public pension plans — Florida, Utah and Oregon.
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Those notable exceptions aside, most states require employee contributions. The midpoint for these contributions for all states and the District of Columbia is 5 percent of pay, according to academic and state-level research. That contribution rate climbs to 8 percent for the handful of states whose workers or teachers are prohibited from paying into the federal Social Security program.
By comparison, private-sector workers shoulder a bit more of the burden.
In its data for 2010, Fidelity Investments, the largest administrator of private-sector 401(k) retirement plans, showed employee contribution rates in its plans averaged 8.2 percent of pre-tax pay.
Separately, the Employee Benefits Research Institution estimates that most private-sector employers match up to 50 percent of employee contributions up to the first 6 percent of salary.
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