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NH Retirement Security Coalition Comments on First Oral Arguments in “Pension Reform” Case in Supreme Court

NH Retirement Coalition

NH Retirement CoalitionCONCORD – The New Hampshire Supreme Court heard oral arguments the morning of Thursday, May 15th in regards to the New Hampshire Retirement Security Coalition (NHRSC) lawsuit challenging so-called “pension reforms” passed by the Legislature in 2011 (Professional Firefighters of NH, et al vs. State of N.H.).

In response to litigation following the disastrous legislation passed in 2011, a Superior Court judge ruled that the increase was unconstitutional for workers who had ‘vested’ in the pension fund. Attorney Andru Volinsky, lead counsel for the NHRSC, argued Thursday to the Supreme Court that public employees ‘vest’ in the New Hampshire Retirement System immediately after accepting the job, not after 10 years (which some have claimed is precedent).

Volinsky asked the justices to think of the pension benefit as an annuity, agreed upon as part of the terms of employment, and something that cannot be changed unilaterally.  The fact that pension annuities are considered not to ‘vest’ for ten years would seem to undermine the growing necessity to attract skilled young people to government work in this state, especially when the pension fund participation is mandatory. The current approach adopted by the 2011 Legislature will scare off, not attract young people to government service.

“When a police officer responds to a potentially life-threatening situation, as we see happen all too often, he or she goes in with 100% commitment to protecting the public interest. The deal is made on day one – that’s the job, that’s the commitment”, said Keith Phelps, President of the New Hampshire Police Association (NHPA).

“What’s to stop them [the Legislature] from raising the price to 25% or higher in the years ahead if the Court allows this broken promise to stand?” said Laura Hainey, President of the American Federation of Teachers – NH.

At stake for the approximately 48,000 public employees in the pension system is $75 million per year in higher costs.  Diana Lacey, President of the largest state employees’ union SEA/SEIU commented, “It’s been almost three years.  They’ve charged us almost $225 million more than they were supposed to for our annuities.  We don’t have the right to strike when they take from us.  If the Courts let this stand, to what end will legislators be able to steal from taxpayers?  That’s what we are and we’re being targeted unfairly.”

For more information on the New Hampshire Retirement Security Coalition, please visit nhretirementfacts.com and follow us @NH_RSC

Largest Federal Employee Union Leader Rejects Budget Deal Targeting Federal Pensions

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AFGE rejects notion that there should be trade-off between federal programs and federal employees

WASHINGTON – American Federation of Government Employees National President J. David Cox Sr. issued the following statement in response to the budget deal announced today by the Budget Conference Committee:

“Despite the extraordinarily hard work of several Congressional leaders, AFGE cannot support any budget deal that asks for more from federal employees. AFGE represents more than just the 670,000 federal and D.C government employees on the rolls today, but every other federal worker who will one day take the oath and be forced to live with this needless pension cut.

“AFGE rejects the notion that there should be a trade-off between funding the programs to which federal employees have devoted their lives, and their own livelihoods. Though the $6 billion in increased retirement contributions for new employees is less severe than the administration’s $20 billion proposal, it is still unacceptable.

“Newly hired federal employees already pay 3.1% of their salaries toward their defined benefit pension and 6.2% to Social Security. Forcing employees hired after 2013 to pay an additional 1.3% — for a total of 4.4% — toward their pension will make it all but impossible for them to fund their Thrift Savings Plan accounts.  The result will be a serious shortfall in their retirement income security, and a substantial lowering of their standard of living.

“We also are concerned with the impact of the new self plus one category in the Federal Employees Health Benefits Program, which will raise costs for families with more than two persons.

“None of this would be occurring were it not for the perverted logic of austerity politics. The Budget Control Act was a grave mistake, and the spending cuts it imposes year after year have been ruinous for our economy and for the government services on which all Americans depend. Spending cuts hurt the poor and the vulnerable, and they also hurt military readiness, medical research, enforcement of clean air and water rules, access to housing and education, transportation systems and infrastructure, and homeland security.  Congress should focus its efforts on repealing the Budget Control Act, not pitting federal workers against the very programs to which they have committed their lives.

“While we have not yet seen the language limiting the compensation taxpayers must pay for individual contractor employees to $487,000, AFGE will work to lower the overall amount, which is still too high, and also will work to ensure that there are no unnecessary loopholes or exceptions.  Although limiting contractor compensation technically doesn’t ‘score’ for budget purposes, GAO estimates that it will save almost $500 million annually, just in DoD.  Agencies will be better off by being able to rid themselves of ridiculously high compensation for contractor employees.

“AFGE’s members are extremely grateful for the heroic work of House Budget Committee Ranking Member Chris Van Hollen of Maryland for his efforts as a chief negotiator of the budget deal, and in particular for his extraordinary efforts to protect current federal employees. AFGE also is grateful to House Minority Leader Nancy Pelosi of California, Steny Hoyer of Maryland, Jim Clyburn of South Carolina, Stephen Lynch of Massachusetts, Frank Wolf of Virginia, Keith Ellison of Minnesota and Nita Lowey of New York for their leadership in pushing for a deal that would not unfairly punish federal workers.  Finally, Senators Patty Murray of Washington, Ben Cardin of Maryland, Barbara Mikulski of Maryland and Harry Reid of Nevada all worked hard to ensure that the budget deal was fair for federal workers.”

Starting in Detroit… next stop: Social Security

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Frederick Bancroft, prince of magicians: the wizard's enchantments, performing arts poster, ca. 1895Buried on the PBS website, there is a blog post that ought to strike fear into the heart of every working-age American.

Detroit Today, Washington Tomorrow” takes dead aim at the Social Security system, using the same “inflate the numbers” messaging strategy that Kevyn Orr and Gov. Rick Snyder have been using lately in Detroit.

What’s the strategy?

  1. Just pick the biggest number that you can find, and use it to scare the bejeezus out of people.
  2. Once you’ve got folks focused on that huge number, it’s easy to convince them that “oh, we’re so sorry! But Detroit can’t afford to pay the retirement benefits we’ve been promising all these decades.”
  3. Nevermind that all those Detroit workers have been paying into the system, all these decades, and planning their futures based on the promises that were made.
  4. Just keep everyone’s eyes focused on that really huge number – and they won’t even think about questioning your claim that “oh, so sorry! We can’t afford it!”

It’s the rhetorical equivalent of old-fashioned magic tricks.  And just like those old-fashioned magic tricks, it will work so long as people don’t pay attention to what’s really going on.

In Detroit, they’re hiding a $326 million accumulated deficit under the rhetorical handkerchief of $18 billion in total outstanding debt.  They’re basically saying: “don’t look at that smaller deficit number (caused by cutbacks in state revenue-sharing) – look at this huge number over here!  Look at how much Detroit is supposed to pay bondholders back, over the next 30 years!  Look here, Detroit can’t afford to pay back $18 billion right now!  (Nevermind that it’s not supposed to be paid back, for decades yet.)  Look here, if we can’t afford to pay back $18 billion, then we should declare bankruptcy and get rid of the debt (that we owe to our public employees).  We just can’t afford to keep our promises!”

Can’t you just hear the calliope music?   (If not, here’s a YouTube to help get you into a properly gullible mood.)

Now, read that PBS post by Boston University professor (and presidential candidate) Larry Kotlikoff.

  1. All of a sudden, our federal debt isn’t just $12 trillion (the number that outrages Republicans, as long as nobody suggests increasing taxes to pay it back).  According to Professor Kotlikoff, “the true measure of our debt – the one suggested by economic theory – is the fiscal gap, which totals $222 trillion.”
  2. Now, keep looking at this number over here – it’s really, really huge.  According to Professor Kotlikoff, “Given the $222 trillion fiscal gap … current policy is clearly not sustainable. Making it sustainable requires either an immediate and permanent 64 percent increase in all federal taxes or an immediate and permanent 38 percent cut in all spending or some combination of tax increases and spending cuts.”
  3. Nevermind all those decades that workers have been paying into the Social Security system.  Again, here’s Professor Kotlikoff: “If anything, the Social Security benefits, and not the Treasury bond payments, should be recorded as official debt.”
  4. Keep folks paying attention to that really big number.  Professor Kotlikoff borrows the authoritative voice of former Secretary of State George Shultz to finish his performance: “Our country doesn’t have a lot of elder statesmen to guide us. But this tough ex-marine knows our country is broke, knows our children are threatened, and knows we’ve been hiding the truth.”

Yep, that’s where things are headed.  Detroit today, Washington tomorrow.

They’ve been trying to “reform” Social Security since Barry Goldwater ran for President.

And they’re still trying.

And they’re about to have the biggest Congress-created crisis yet.

  • Read about January’s Fiscal Cliff crisis here and here.
  • Read about the March Sequestration crisis here and here.

There is another “perfect storm” of crises coming up in the next two months: the current federal budget will expire at about the same time that the Treasury runs out of debt limit “headroom” (again, thank our federal and postal service employees, whose retirement contributions provide this reprieve!).

What sorts of magic tricks do you think they’re going to try, then?

Detroit today, Washington tomorrow.

My recommendation?  Remember Professor Kotlikoff’s patter, and keep your eyes on the magicians’ hands.

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Read the LTE in response to this post.

Using Retirement Funds to Balance the Budget

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Up here in New Hampshire, we have some experience with politicians trying to use public workers’ retirement funds to balance the budget.

Back when Craig Benson was Governor, he wanted to use money from the public employee retirement system to balance the state budget.

But up here in New Hampshire, the public didn’t let him get away with that.  In 1984, Granite State voters amended our state Constitution to protect our employees’ retirement benefits.  New Hampshire Constitution Article 36-a [Use of Retirement Funds] provides:

“The employer contributions certified as payable to the New Hampshire retirement system … shall be appropriated each fiscal year … All of the assets and proceeds, and income there from, of the New Hampshire retirement system … shall be held, invested or disbursed as in trust for the exclusive purpose of providing for such benefits and shall not be encumbered for, or diverted to, any other purposes.”

Down in Washington DC, the federal government hasn’t been quite so careful.  Down in DC, public employee retirement funds are regularly used to balance the budget.

In fact, when the federal government hit the debt ceiling in May 2011, public employee retirement contributions were used to keep the federal government going for more than two months (until Congressional Republicans finally agreed to increase the debt limit).

At last report,

  • more than $800 billion of the federal debt was owed to the federal employees’ retirement system;
  • more than $600 billion of the federal debt was owed to military employees’ retirement programs;
  • more than $45 billion of the federal debt was owed to the Postal Service Retiree Health Benefits Fund.

State and local employees also own a significant chunk of the federal debt.  At last report, pension systems for state and local government employees held almost $190 billion in Treasury securities.

Adding it all up, the nation owes about $1.6 trillion to the various public employees’ retirement systems.  (That’s direct debt – not including unfunded liabilities.)

That’s only slightly more than what tax cuts for the wealthiest 5% have cost the Treasury since 2001.

Should we really be surprised that right-wing Republicans are trying so hard to “reform” public pensions?

The business lobbying group ALEC (“American Legislative Exchange Council”) has led the crusade.  “Taxpayers are no longer willing to bear the increasing cost of these plans… They are demanding reforms that will bring these plans into line with pension and OPEB benefits offered in the private sector.”  (What an interesting comparison!  Federal law generally prohibits private sector pension plans from loaning money to the company that sponsors the plan.)

As Chairman of the House Budget Committee, Rep. Paul Ryan followed ALEC’s lead – almost word-for-word.

Up here in the Granite State, we believe that government should fulfill the promises it has made to its employees.  We even amended our state constitution to ensure that public employees’ retirement funds would be used only to pay retirement benefits.

It’s time for the country to stop using public employee retirement funds to pay the cost of extending tax cuts for the wealthy.

It’s time for Congressional Republicans to stop trying to weasel out of their obligations to federal employees.

It’s time to keep the country’s promises.  (Now that’s a conservative value.)

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Wait!  That $45 billion borrowed from the Postal Service Retiree Health Benefits Fund deserves a closer look.

The Post Office is losing money.  Most of that deficit is being caused by Congressionally-mandated payments to the Postal Service Retiree Health Benefits Fund.   That mandate dates back to the Postal Accountability and Enhancement Act of 2006.

Guess what else happened in 2006?  Just months before Congress decided to have the Postal Service pre-fund retiree benefits (and loan that money to the US Treasury), the country had hit the debt ceiling, and had borrowed from the federal employees’ retirement system to pay the bills.

(No, by the time 2006 rolled around, the Bush tax cuts hadn’t “jump started” the economy or started to erase the federal debt.  So Congress used federal employees’ retirement contributions as a Rainy Day Fund.)

Kind of convenient, isn’t it?  The country needs to borrow money, and suddenly there’s a new Fund to borrow from.

Only now, that Fund is drowning the Postal Service in debt.

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