Update: The GOP war on public employees

Posted by AzBlueMeanie:

I told you about the Secret GOP plan to push states to declare bankruptcy and smash unions in The corporatocracy's war on government and labor. If states are permitted to default on pension obligations and to file bankruptcy, as municipalities are entitled to do, it can lead to the wholesale destruction of publice employee pension plans. Don't think this can happen? Think Again.

The New York Times has an illustrative example of the worst case scenario today in a report about the city of Prichard, Alabama. It's city employee retirees were left destitute after the city defaulted on its pension plan. Alabama Town’s Failed Pension Is Warning to Cities and States:

This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.

Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.

* * *

The situation in Prichard is extremely unusual — the city has sought bankruptcy protection twice — but it proves that the unthinkable can, in fact, sometimes happen. And it stands as a warning to cities like Philadelphia and states like Illinois, whose pension funds are under great strain: if nothing changes, the money eventually does run out, and when that happens, misery and turmoil follow.

It is not just the pensioners who suffer when a pension fund runs dry. If a city tried to follow the law and pay its pensioners with money from its annual operating budget, it would probably have to adopt large tax increases, or make huge service cuts, to come up with the money.

Current city workers could find themselves paying into a pension plan that will not be there for their own retirements.

* * *

So the declining, little-known city of Prichard is now attracting the attention of bankruptcy lawyers, labor leaders, municipal credit analysts and local officials from across the country. They want to see if the situation in Prichard, like the continuing bankruptcy of Vallejo, Calif., ultimately creates a legal precedent on whether distressed cities can legally cut or reduce their pensions, and if so, how.

“Prichard is the future,” said Michael Aguirre, the former San Diego city attorney, who has called for San Diego to declare bankruptcy and restructure its own outsize pension obligations. “We’re all on the same conveyor belt. Prichard is just a little further down the road.”

Many cities and states are struggling to keep their pension plans adequately funded, with varying success. New York City plans to put $8.3 billion into its pension fund next year, twice what it paid five years ago. Maryland is considering a proposal to raise the retirement age to 62 for all public workers with fewer than five years of service.

Illinois keeps borrowing money to invest in its pension funds, gambling that the funds’ investments will earn enough to pay back the debt with interest. New Jersey simply decided not to pay the $3.1 billion that was due its pension plan this year.

Colorado, Minnesota and South Dakota have all taken the unusual step of reducing the benefits they pay their current retirees by cutting cost-of-living increases; retirees in all three states are suing.

No state or city wants to wind up like Prichard.

Continue reading Alabama Town’s Failed Pension Is Warning to Cities and States.

UPDATE: Keep the above in mind when reading the politically biased reporting in the Arizona Republic, which is a tool for the Goldwater Institute and other anti-tax conservative think tanks, Arizona legislators reveal strategy to reform pension systems:

Arizona legislative leaders and state public-pension managers are calling for an array of statutory changes in the coming legislative session to fix Arizona's financially struggling retirement systems.

Proposed fixes include having taxpayer-funded government employers and their employees pay more into the pension programs and banning return-to-work programs that allow police officers, firefighters and teachers to retire while staying on the job, giving them a pension check and a paycheck.

Lawmakers also may consider abolishing the pension system for elected officials and could send a ballot measure to voters in 2012 to change a provision in the state Constitution that now protects public-employee pensions by stating that benefits "shall not be diminished or impaired."

Various proposals are expected to be considered after the Arizona Legislature convenes Jan. 10. They come in the wake of The Arizona Republic's November investigation into Arizona's six public-pension systems. The newspaper found questionable pension practices such as so-called double-dipping by hundreds of Maricopa County educators; retired elected officials earning more in retirement than when they served in office; and large pensions paid to felons.

Problems identified in the series have contributed to spiraling public costs to maintain the systems. Over the past 10 years, total costs ballooned 448 percent, to $1.39 billion, last year.

"We have to fix the problems with the current systems. The systems are too rich," said incoming Senate President Russell Pearce, R-Mesa.

House Speaker Kirk Adams, R-Mesa, a key advocate for change, said lawmakers must at least be willing to end their own pension program, which offers the best benefits among Arizona's six public-pension programs.

"That should be our first order of business," Adams said. "It's disproportionately generous in a system that's already generous."

Continue reading Arizona legislators reveal strategy to reform pension systems.