Pat Quinn's Pension Problem

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Pat Quinn's pension reform is unpopular with everyone, whether on the right or the left. And so it should be, since it was the product of intentional neglect and underpayment by Republicans, pressure by bond rating agencies who shouldn't be allowed to participate in this debate, and a budget that was already sliced to the bone.

So Quinn put pensions on the table, sliced the cost of living increases for some public employees, raised the retirement age for workers under age 45, and gave some workers a 401k option. To ease the pain of the cuts, he also cut workers' contributions to the plan by 1 percent.

In the private sector, any changes to defined benefit pension plans must include a provision that earned benefits cannot be reduced. Consequently, unions are suing over these reforms, on the basis that cuts to cost-of-living increases and changes in retirement ages are benefit cuts, which they are.

Chuck Todd completely missed the boat in this conversation with one of the dumbest questions ever asked in a conversation: "Will we even have pensions -- even for public workers -- in 20 years?" The right question is "Why are public workers' pensions being slashed to compensate Wall Street?"

If you're a Republican the answer to the first question is "God, I hope not." Republicans have long lusted after workers' pensions, going back to the days of Reagan and his quite successful effort to destroy private workers' pension plans. Now they're taking aim at public employees' pension plans because Wall Street demands it, and they have the bond rating agencies in their corner. It's for the shareholders, or in this case the bondholders and hedge fund managers.

For Chuck Todd to ask Governor Quinn that question with no context or background about how those public pension plans came to be so desperately underfunded is journalistic malpractice, and he's not the only one who does this. For the sake of an informed public I will offer him this primer, even though I'm sure he doesn't see it as his job to actually inform anyone.

  1. Pension plans are negotiated benefits are part of an employees' compensation package.
  2. Employers -- public and private - agreed to provide those benefits, and assumed an obligation to pay for them.
  3. Defined Benefit Pension plans are invested in much more conservative investments than 401k plans, because they are required to pay a fixed benefit at retirement. Often, that means contributions are higher than they would be if a 401k match were to be made.
  4. Corporate overlords don't want any ongoing obligation to employees, and certainly don't want one that has a mandatory funding requirement.
  5. One way to kill pensions is to underfund them, manufacture a crisis, and then make a fuss about how best to solve the impending end of whatever world they live in. Oh, they say, let's shift the retirement liability onto employees. That'll fix it.
  6. For the past 20 years, employers have raided pension plans and left employees holding the bag. In the past five years since the Great Recession, employers have opted out of even making matching contributions to 401k plans. As the economy recovered, they did not restore those matching contributions. Bottom lines had other priorities.

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This isn't my opinion. It's provable fact. Dealing with chronically underfunded pension plans is not for the faint of heart, or faint of will. As reforms go, Quinn's are more palatable than Scott Walker's would likely be, but they also miss the point: A promise is a promise. A promise to public employees should be just as solid as a promise to pay bond interest to bondholders. Yet the bondholders always seem to take precedence over the people who provide the services that keep the city running. Thank Wall Street for that.

Reagan and his cadre of pension raiders did a terrific job making it easy to underfund public employees' pension plans. The problems they created aren't going to go away easily or soon. But if we can't get anyone to actually talk about them in factual terms, how does the public become informed about what the real problems are?

[h/t Heather for the video]

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