Public pensions: The sky isn’t falling
Star Tribune Counterpoint – Published June 17, 2016
By Eliot Seide
Remember the fairy tale about Chicken Little? An acorn fell on her head and she proclaimed that “The sky is falling and I must go tell the king.” She took all of her animal friends on her journey, which ended at the hungry fox’s den.
Just like the storybook chicken who believed the world was coming to an end, Kim Crockett (The perfect defeats the good as Dayton vetoes pension bill, June 13) incites unreasonable fear about the health of Minnesota’s public pension funds.
Government workers have deferred their wages for a guaranteed pension that allows them to retire with dignity. Their retirement security is continually under attack by Crockett’s Center for the American Experiment, whose stated mission is “to design road maps to transition pension plans into defined contribution plans.” If the conservative think tank had its way, most Americans would grow old in poverty as Wall Street gambles away their hard-earned retirement savings on the stock market.
Wall Street is Crockett’s hungry fox and Gov. Dayton refused to lead retirees into the den.
Our problem isn’t a fable. High life expectancy is putting a strain on Minnesota’s pension systems. The challenge is to offset up to $1.4 billion in additional future liabilities after learning that the state’s employees, teachers and retirees are living an average of two years longer.
The good news is that Minnesotans live an average of 81 years, which is longer than anywhere else in the continental United States.
The bad news is that our longevity creates a projected shortfall for pension funds that more than a half-million people depend on to fund their retirement.
Unions that represent state employees and teachers recognize that longevity is a reality that must be faced. AFSCME Council 5 is the largest union of active and retired state employees and we support a combination of sustainability measures to keep our pension funds sound. In fact, we endorse the Minnesota State Retirement System’s proposal to raise employee contributions from 5.5 to 6 percent, raise employer contributions from 5.5 to 7 percent, and reduce the cost of living adjustment from 2 to 1.75 percent. Those measures could have kicked in July 1, 2017 to save $400 million.
Unfortunately, the omnibus pension bill passed by the Legislature didn’t include that comprehensive package of reforms. Instead, it put the entire burden on current retirees without shared sacrifice from employees and the employer. The cut would have reduced benefits by about $10 a month for a typical retiree. It might sound painless to Crockett, but for someone on a fixed income, losing $10 a month could mean going without medication or toilet paper. In his veto letter, Gov. Dayton wrote, “It’s unfair, and I cannot agree to it.”
Crockett asks what more the governor wants from the pension bill. He wants what every Minnesotan should want: Fair and holistic reforms to improve the financial health of our public pension funds.
AFSCME retirees have modest pension benefits of about $14,000 a year. Combined with Social Security, it’s the difference between dignity and poverty.
While sometimes painful, AFSCME members have supported every comprehensive pension reform over the last decade. Our responsible actions have ensured that there are sufficient funds to pay benefits for retirees.
Rest assured that Minnesota’s three public pensions are well managed and in much better shape than critics suggest. The retirement systems have $63 billion in assets, of which 84 percent comes from investment earnings and worker contributions.
The sky is not falling. There’s no reason for taxpayers or public workers to panic. Our union is helping government employers live up to their pension promises without breaking the bank. It can be done in a way that protects both retirees and taxpayers.
Eliot Seide is executive director of AFSCME Council 5, a union of 43,000 public workers in Minnesota. His counterpoint was published in the Star Tribune.