While public pension critics undermine the middle class, Wall Street walks away with millions

February 16, 2011 | John Burbank

John Burbank | The Everett Herald:

john burbank

John Burbank, Executive Director

Which group of people do you think has your interests closer to heart: a Wall Street banker, an oil company CEO and a software executive, or the teacher’s aide in your kid’s classroom, the officer on DUI patrol and the social worker helping out foster kids?

Too easy? I’ll put it another way. On whom do we depend most for our quality of life: Chevron executives and the various vice presidents at Bank of America? Or the public health experts inspecting our restaurants and community college teachers who retrain unemployed workers?

If you chose the latter groups, then you’ve chosen public employees — the people who pick up the slack and fill the holes left in our social fabric by a market dominated by privilege and wealth.

Public sector employees, just like those in the private sector, need to earn a living. And just like the rest of us, they get old and disabled later in life. Since we employ them, it’s our collective responsibility to figure out how to make sure they have a decent retirement.

Instead, a concerted attack on public employee retirement benefits is picking up steam — even as income and wealth becomes more and more concentrated at the tippity-top of society. When you strip away the rhetoric, the excuse for the proposed cuts is that private sector pensions have eroded, so public sector workers should take a similar hit. In other words: spread misery and poverty, rather than figure out how to rebuild the middle class.

We can stop this nonsense by taking a look at some facts.

There are six main pension plans that together cover over 300,000 public employees. (If you’re interested, that’s 150,000 state, city and county staff; 70,000 teachers; 54,000 school employees; 4,000 corrections officers; 17,000 firefighters and police officers; and 1,000 State Patrol officers.)

All pay into their respective retirement systems, from a little over 4 percent of pay to almost 7.5 percent. In Snohomish County, almost 28,000 workers are paying into the public pension systems.

These contributions, and the corresponding state and local contributions, have put our public employee pensions in good shape. Back in the 1970s public employees had retirement plans that guaranteed them a healthier wage replacement ratio in retirement. But the Legislature projected the costs of this, and closed retirement plans, putting in place new plans with lesser benefits. These new plans are completely funded.

Of the nine public retirement plans and sub-plans, seven are better than 100 percent funded. The remaining two are funded at only 70 percent to 75 percent of projected costs. The legacy costs of the older plans are a problem now, principally because from 2000 on the Legislature failed to allocate the agreed-upon contributions required for the plans’ long-term fiscal health.

Then the stock market crash came along, thanks to those financial wizards of Wall Street, and pulled $2.5 billion out of the investment assets of PERS 1. PERS 1 returned to the positive side of the balance sheet in 2010, realizing an increase in net assets of $59 million. But it has a ways to go to make up for underfunding by the Legislature and undermining by Wall Street.

Just how much is the typical retirement benefit for public servants? About $1,660 a month. You can’t live high on the hog with that. But for the more than 10,000 public sector retirees in Snohomish County, it makes the difference between adequacy and poverty. For example, if you are in the PERS 2 plan (with more than 120,000 other current public servants), if you retire after 25 years of service you’ll receive about $1,700 a month for retirement — a little more than $20,000 a year. A far cry from the “gold-plated” rhetoric you sometimes hear, isn’t it?

This isn’t only about having a decent retirement for public servants. Each dollar that goes to retired public employees is spent in our own communities. Every month the public retirees in Snohomish County receive in total $19 million in pension benefits that circulate into the local economy, generating another $2 million in transactions each month. That translates to hundreds of jobs — and not on Wall Street. That money goes to main street businesses in Everett, Snohomish, Marysville and Edmonds.

Public pensions are an investment in a decent retirement and in our shared economic well-being. They comprise one of the building blocks for sustaining the middle class. The worst thing we could do for our economy is to slide that block out from the foundation for our future.

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Posted in Column, Retirement Security

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