Experts Correct Myths about Pensions for Public Employees

Here in Texas we’re already seeing the beginnings of a new attack on retirement security for school employees and other state and local public employees in the 2013 legislative session. (See the October 31, 2011, Hotline: The same sort of assault on pensions is being mounted all across the country. It calls for a national response as well as a state-level counter, and part of the response involves marshaling the relevant facts to correct myths being propagated to undermine public pension systems.

Hence we are pleased to convey the following report to you from the national office of the American Federation of Teachers regarding a fact-filled pension forum held today in the nation’s capital:

“In politics and policymaking, the facts aren’t always convenient. Such is the case with public employee defined-benefit retirement plans and the policymakers who want to dismantle them.

“A panel of state leaders and national experts gathered Jan. 19 at the National Press Club in Washington, D.C., to talk about the facts. Public employee defined-benefit plans keep an estimated 5 million senior Americans out of poverty and off government assistance, contribute more than $358 billion in economic output nationwide and create more than 2.5 million jobs. They also are cost-effective—risk is pooled and administrative costs are low, thanks to the economies of scale.

“The forum, sponsored by the National Public Pension Coalition, featured Thomas P. DiNapoli, New York state comptroller; Janet Cowell, North Carolina state treasurer; Dean Baker, co-director of the Center for Economic and Policy Research; Hank Kim, executive director and counsel for the National Conference on Public Employee Retirement Systems; and Dolores Bresette, a retired Rhode Island state employee.

“‘We have a crisis here that has been invented,’ said Baker, an economist, noting that $800 billion of the estimated $1 trillion cumulative shortfall in public defined-benefit plans is attributable to the market crash in 2008-09. The shortfall is manageable, he said, pointing out that the size of the economy is the relevant denominator; realistically, the plans have 30 years to make up the lost ground from the market losses.

“DiNapoli and Cowell, who oversee their respective state plans, dispelled the myth that public employees are retiring with $100,000-plus defined-benefit pensions.

“In New York, 83 cents of every $1 in benefits is derived from investment returns; the average pension, excluding police and fire, is $19,151; 76 percent of the pensioners receive less than $30,000 a year; and less than one-half of 1 percent of the state’s retirees have a pension that exceeds $100,000, said DiNapoli.

“The average pension in North Carolina is $22,000, said Cowell, noting that fewer than 300 retirees receive $100,000-plus pensions, ‘and some of those are basketball coaches.’

[Texas AFT editor’s note:  Some 68 percent of Texas Teacher Retirement System pensioners receive less than $2,000 a month.  On the upper end of the public-employee spectrum in Texas as elsewhere, of course, there also are a few retirees who receive more, such as Gov. Rick Perry. He has “retired” while continuing to serve as governor, pulling down a pension of $92,000 a year from the state Employees Retirement System in addition to his $133,000 gubernatorial salary.]

“While DiNapoli and Cowell talked big picture numbers and statistics, the real expert on defined-benefit plans in the room was Rhode Island retiree Bresette. ‘I worked for the state of Rhode Island for 37 years and contributed 9 percent of my salary to my pension fund. Now, after years of saving and preparing for my retirement, so much of what I and thousands of other public workers were promised is being taken away in the name of good ‘math,’ Bresette said. She was referring to the November enactment of the Rhode Island Retirement Security Act of 2011…, which, among other things, indefinitely suspends cost-of-living adjustments for current retirees.

“Loss of the COLA cuts about $70 a month from Bresette’s budget—the equivalent of a week of groceries for herself and her husband…. ‘There are real, human implications of the current efforts to dismantle public workers’ pension funds, and people here in Washington and across the country need to see that,’ Bresette said.

“In addition to the human implications, there are serious social and economic consequences that will develop over the long term if the shift away from defined-benefit pensions continues. In fact, panel members said that instead of dismantling public employee retirement systems, policymakers should be working to improve retirement security for the private sector workforce….”