Yesterday was NOT a good day for public sector workers who think they can rely on long-promised pension benefits.
- Detroit: Yesterday, a federal bankruptcy judge ruled that even the state constitution did not protect workers’ retirement benefits.
- Illinois: Yesterday, the state Legislature passed a law reducing pension benefits and prohibiting collective bargaining on pensions.
Both of these violations of workers’ rights are being justified on the theory that the retirement systems are in such “dire” shape. The rhetorical focus is on the “funding ratio”: comparing what the system has now, in assets, with the total benefits it will have to pay out in the future.
In household budget terms, this is like comparing your current bank balance with the total amount of the mortgage or rent payments you are expected to make over the next 20 years. (Try doing that math, and you’ll understand how the “pension reform” disciples come up with their doomsday scenarios. They’re doing it with Social Security, too; so what is happening to public employees now will probably happen to the rest of America very, very soon.)
Ok, so… maybe the retirement systems’ current funding ratio is “dire”. Whose fault is that?
During the 2007-2008 Wall Street meltdown, public pension systems across America lost more than a trillion dollars in value. (Yes, that’s “trillion” – with a “T”.) Most public pension systems had already lost millions or billions in the 2001 recession.
But now that public pensions are a trillion dollars underfunded, they’re being attacked as “unaffordable” – and somehow, it’s all the fault of public workers.
- Detroit: both retirement systems were fully funded, back before the second Bush recession.
- Illinois: In FY2000, back before the first Bush recession, the State Employees’ Retirement System was more than 80% funded, and the Teachers’ Retirement System was almost 70% funded.
But… instead of going after all those Wall Street folks who lost all that public pension fund money… our politicians are going after rank-and-file public employees. (By the way: Wall Street bonuses are gong up by 5% to 15%, this year.)
Think this isn’t your fight? because it’s all the way out in Detroit? or because it’s “just” public employee unions?
The same folks who have been busy “reforming” public sector retirement benefits are also out to “reform” Social Security.