15 November 2006

Off the mark

Senators Bert Stedman and Lyda Green miss the mark when talking about the unfunded liability in PERS and TRS:

Simply put, public employers (the state, city governments and school districts) are $8.6 billion behind in setting aside money that they’ll need to pay for the pension and medical benefits of their employees.
What this fails to recognize is that the reason public employers are behind is that the state has been telling them for the past several years to pay less than the actuaries have recommended. For instance, in Nome, the school district was supposed to pay 23 percent last year but the state system told them to pay about 20.

Then, there's another problem:
By raising employer contribution rates, the board is putting the funding problem squarely where it belongs — with employers.
This is true - the employers are responsible (at least in my value system) for ensuring the retirements of their employers. But just who are the employers? Public employees work for the public, you and me and we elect lawmakers to represent us and make big decisions. So Stedman's and Green's clever little attempt to evade responsibility for all this either ends up falling back on us or on them (or both). It does not free them of any responsibility for the problem.

But the most specious part comes at the end:

Without question, the most significant thing the Legislature has done to slow the growth of our unfunded liability and to reduce the volatility of future costs is to establish a 401(k)-style, defined-contribution plan for new public employees. We simply can’t continue the generous retirement benefits embedded in our current PERS and TRS tiers, nor can we put new employees into an already underfunded plan.

But to imply, as some have, that cutting off new employees from the existing tiers makes the problem worse is simply not true. Employee contributions have zero impact on the liability, regardless of the plan they participate in. Employers will always bear the full responsibility for paying off the $8.6 billion liability, and the state has some responsibility to help.

How can they possibly argue that "employee contributions have zero impact on liability"? That is cool, hard cash flowing into a system that needs it to pay retired folks. Cutting off that source of income reduces the amount of money PERS and TRS has to make their payouts and puts the system in worse shape. When you've got a mammoth deficit, it doesn't make sense to cut off a source of revenue.

Yes, "employers will always bear the full responsibility for paying off" the liability but those employers are the people ourself. When they say "the state has some responsibility to help," it's an evasion of their responsibility.

And Lyda Green thinks she should be president of the senate?

No comments: