The Gov's Pension Reform

Here's the Gov's priorities for pension reform (via press release):

BOSTON – Sunday, March 22, 2009 – In advance of expected legislative debate on pension reform legislation, Governor Deval Patrick today outlined his priorities for closing loopholes, ending abuses and restoring the public’s trust in state and municipal retirement systems. Pension reform is a critical component of the Governor’s Massachusetts Recovery Plan to help change the way government does business and secure the state’s economic future.

“The gaming of the public retirement system by a few undermines the system’s credibility and ultimate sustainability for all public workers and makes citizens question the integrity of their government. This is unacceptable,” said Governor Patrick. “I applaud Senate President Murray, Speaker DeLeo and all of my partners in the Legislature for their commitment to addressing loopholes and outdated practices, especially at this time of economic hardship.”

Citing the work of the Legislature’s Joint Committee on Public Service’s Blue Ribbon Panel on Pension Classification and the House Special Committee on Pensions, Governor Patrick recommended the following provisions to end the most extreme cases of pension abuse be included in reform legislation being considered in the House:

MBTA: Align MBTA Pension System with State System – Uncommon and excessive benefits in the MBTA pension system exacerbate the transit agency’s finances which is burdened by $8 billion of debt. Special perks such as the “23 years and out” rule that allow employees to start receiving a pension earlier than any reasonable retirement system should be abolished. Although the Governor proposed this remedy in his transportation reform bill, it is important to pursue this much needed modification in pension reform legislation as well.

Regular Compensation – Limit the definition of “regular compensation” to only wages and salary for the purpose of calculating annual benefits, ending the practice of including non-salary items such as housing and transportation allowances and retirement annuities to calculate the benefit.

One Day/One Year – Remove the “one day, one year” provision which currently grants some public employees an entire year of creditable service for as little as one day of work which can boost a pension by thousands of dollars a year. Pension credit should be accrued only for actual time employed.

Pension Credit Buyback – Prohibit the purchase or so-called buyback of pension credit for years served as an unpaid local official in positions such as a town moderator. Purchasing credit for this type of service requires a minimal monetary contribution yet provides as much credit and benefits to a pension as full-time salaried work. Additionally, when such service buybacks occur towards the end of an employee’s career, the pension system does not benefit from investing the funds for years which would generate returns to support the employee’s enhanced pension.

Section 10 Termination Benefits – Eliminate for new hires and elected officials and tighten eligibility and oversight on so-called Section 10 termination benefits which allow employees with 20 years of service who are terminated or whose positions are eliminated to begin collecting an enhanced pension before the standard minimum age of 55.

Dual Service – Eliminate “dual service” pension enhancements to prohibit public employees from collecting two pensions at the same time.

Double Pensions – Eliminate double pensions by changing provisions which allow some employees to qualify for two pensions. Currently, judges with other vested service can collect two pensions because state pension law provides judges with a separate pension benefit.

Disability Retirement – Change the salary formula for Accidental Disability Retirement calculations to end the practice of paying exaggerated future benefits on the basis of a short-term temporary assignment to a higher salaried supervisory position. Currently, the employee’s disability retirement is calculated based on the higher temporary position, regardless of the amount of time spent in that position.

The Special Commission on Pension Reform charged with examining a broad range of additional issues will hold its first meeting next Tuesday, March 31st. These issues include dollar limits on pension benefits, disability retirement reforms, other post-retirement benefit changes and system administration improvements. The Governor is prepared to work with legislative leaders on these matters once the Commission completes its work.

“The economic crisis presents us with significant opportunities to confront issues we have avoided in the past,” said Governor Patrick. “There is broad consensus that our pension system is in dire need of reform. If we can seize this opportunity and others like it, our Commonwealth will be stronger in the long run.”

Pension reform is a key part of Governor Patrick’s Massachusetts Recovery Plan. The plan, unveiled last week, will combine state, federal and, where possible, private efforts to provide immediate and long-term relief and position the Commonwealth for recovery in the following ways:

* Deliver immediate relief by investing in the road, bridge and rail projects that put people to work today and providing safety net services that sustain people who are especially vulnerable during an economic crisis;
* Build a better tomorrow through education and infrastructure investments that strengthen our economic competitiveness, prepare workers for the jobs of the future and support clean energy, broadband and technology projects that cut costs while growing the economy; and
* Reform state government by eliminating the pension and ethics loopholes that discredit the work of government and revitalize the transportation networks that have suffered from decades of neglect and inaction.

If half this stuff passes, even the most cynical people in this state should applaud. Lots of good ideas here.

Third Rail Politicking

If it's not pensions, it's nonprofit sector salary. The thing with third-rail politics isn't that there's never a point to the argument - in fact, there often is. Surely, some state pensions need to be fixed and there are nonprofit CEOs and executives being overpaid, especially in this economy. The problem, of course, is that there's all too much focus on these issues which, in the grand scheme of things, are rather petty when compared to the size and scope of our problems today.

Moreover, often times the people making these third-rail arguments are hurting their own cause - such as AmberPaw today, over at BMG. Amber argues that MSPCA is overpaying its employees by a lot. The news will surely cost a lot of donations to MSPCA over the course of this year - perhaps millions. The result? Even more people will be laid off, more clinics could be shuttered and, most important of all, more dogs and cats will be homeless and without anyone to care for them or find them permanent families. This is what it means to shoot your own leg.

All for an organization that applies over 90% of its funds directly toward caring for the dogs and cats, not administrative costs. In nonprofits, 90% is the gold standard - heck, 80% is considered good. It doesn't get much better than 90%. So, for this cause that's so important and already underfunded, it's going to get hit even worse, all because supporters were supplying an irrational amount of anger at salaries which are in fact middling for the industry and could have been dealt with in a way that wouldn't have hurt the pets (such as a few big donors signing a letter asking the top-paid employees take a 10-20% pay cut in this economy, to spare a few jobs from being laid off).

A Front Page Globe Shocker

A pension article on the front page of the Boston Globe? You're kidding me?! That never happens.

The recipe for a Boston Globe page 1 headline seems to be any spurious thing linking DiMasi to something bad (Hey, Andrea Estes, did you know Sal's friends w/the bogeyman?), anything related to a pension, or when the Sox win a big game. It's a farce of a newspaper.

Note: I'm not saying pension articles shouldn't be printed in the Globe - and I'm not saying this wasn't a worthy one - but this is hardly A1, top of the fold material. Furthermore, they rarely get the whole story in any of these articles. For example, while these 'trapdoor' pensions have ended up with disabled retirees getting more than many disabled retirees, there's many disabled firemen and woman and police officers who end up struggling mightily because they were disabled before they reached their high income years, ensuring a better pension. Furthermore, disabilities are likely to result in increased household costs - that's just common sense. So, while the loophole the Globe brought up may be exceedingly generous and often abused, it may make sense to give some sort of extra thought into how disabled veterans should be compensated. If the Globe took that perspective in the article, it would have been a more interesting one - instead, they retreated to their comfort zone of pension attack, attack, attack. It's not until the end of page 2 in the online version that they start to tackle any of those questions. Perhaps the journalists writing these tire of watching their 401(k)s dissipate precipitously.

In any event, it reconfirms my longstanding notion: pensions are the new third rail of politics in Massachusetts, thanks to the Globe and Herald.

Again, Pensions are the New 3rd Rail

Oh no! State Retirees are getting a $120 boost to their pensions - in addition to the $360 yearly addition they were getting (because, clearly, that covered the cost of inflation /sarcasm off).

My first question: Do we really need another editorial on how bad and evil pensions are for state workers?

Are they generous? At face value, yes, but consider this fact:

state workers and teachers are not eligible for Social Security.

Once you calculate for that weird quirk in Massachusetts, a typical state worker's pension isn't nearly as generous as it sounds. In fact, it's not even better than someone who collects social security, if that person also invested in a 401(k) program for most of their working life. Furthermore, people who get pensions pay into them - quite a lot every year, at that (and they aren't eligible for social security, even when they had jobs in the private sector for years of their life, paying into the S.S. system). With all that considered, pardon me if I think this constant fixation on pensions in this state is poison. Heaven forbid someone be relatively comfortable in their retirement!

But this is the real kicker:

Public employee pensions have unfortunately become a popular bete noire for limited-government types, who have seized upon some recent high-profile abuses to paint deserving retirees with the same broad brush.

Does the Globe not realize or get that it's one of the prime sources in stoking this flame? Remember the old saying, "If it bleeds, it leads?" Well, in the Boston Globe, it's basically, "If it's about a pension, give it attention." The Globe shouldn't stoop so low as to blame this poisonous problem on just the limited-government types: the Paper of Record is far more to blame than any Mass member of the CLT or their brethren. It's the Globe that's spent cheap ink for their hundreds of cheap pension headlines, usually absurd in magnitude, with no real importance to the people of this Commonwealth. Are the editors really going to blame limited-government types in the very same editorial that they're guilty as charged? Really?

Us vs. Them Attitudes

Every single city and town in this state is working on a shoe-string budget. For some reason I'll never quite understand, most people tend to view things through an us-vs.-them lens: 'Marblehead receives more Chapter 70 funding per capita than Swampscott, so let's raise some hell!' tends to be the general view in my town. Of course, the fact that Marblehead receives more funding than Swampscott isn't Swampscott's problem - it's the slap in the face that makes the problem worse. Unfortunately, as countless books discuss (such as What's the Matter with Kansas), it's easy to distract people from the real problems by alerting them to the fact that not everyone shares those problems. Many people may not be riled up if everyone's just as screwed over as they are, but that kind of attitude certainly doesn't make for smart governmental policy.

Of course, the problem extends way beyond school funding: I'm damn-near ready to trademark the sentence - "Pension reform is the new third rail of Massachusetts politics." Anyone else sick and tired about reading how teachers have it so well? Let me be the first to say, as the son of a teacher, their wonderful salaries (/sarcasm off) and benefits aren't all that they're cracked up to be.

Nor is eliminating public employee benefits and salaries the solution to our society's problems. First off, public employee pensions are fair. Massachusetts employees pay 11% of their salaries into pension funds and usually don't earn anywhere near as much as the private sector. Many public employees - the same ones who aren't anywhere near over payed - are also required to have more advanced degrees than private sector counterparts. Even the so-called worst offenders, the people who's pensions end up on the front page of the Boston Globe, have had to put in more than 20 years of service in the state to get them. If a few people are getting a sweet deal, that doesn't mean the pension system needs to be totally overhauled.

That's not to say the pension system is perfect and there isn't some room for reform, but the vitriol directed towards public employees is unsettling, and certainly the aims of many directing such vitriol goes way beyond what's fair and decent. I've yet to read a reasonable pension-reform post on BMG or article in the Boston Globe that proposes specific ideas on how to reform pensions so that there aren't the outliers that get more than they deserve, while also protecting the core middle and working class employees who have put 20+ years and 11%+ of their salaries into the system in return for those benefits. It's all about how some guy got such a sweet deal and it's so unfair and needs to stop, or it's about how public employees are hacks and don't deserve to be decently compensated. People clearly forget that public sector employees perform services that we all benefit from and thus deserve compensation on par with everyone else in society (lest we truly get what we pay for).

The bottom line is that lashing out against public sector employees may feel good, but it certainly isn't a solution to the problem: the erosion of the middle and working classes, or even our budget difficulties (pension reform would represent a fraction of a fraction of our budget deficit). Social Security alone isn't enough to cover the costs of living in today's society and most people aren't expert enough in planning for their future, or they simply don't have the funds necessary to make those plans. So, the problem is the lack of post-retirement security in the private sector, not Billy Bulger's cousins. The solution to the problem isn't tearing the middle and working class apart, it's actually addressing social security and the problems average citizens face when planning for their future. The solution, in essence, is in tackling the bigger issues.

Hold the Presses!!

Another unsavory, former Mass employee has a state pension. Rewrite the page-one headline!

Is it just me, or has state pensions joined anti-immigration hate speech as the third rail of Massachusetts politics? Former state employees of 20 years or more who have a pension shouldn't be a front-page story in the Boston Globe. There are soldiers dying in Iraq for a war the President lied about. Let's get a grip.

Pensions Aren't the Problem

Mr. Glaeser, it's poor planning. If companies, in their prime, set aside enough money for pensions - it wouldn't have been a problem. They didn't foresee the rise of foreign competitors and therefore expected everything to remain the same. Unions aren't to blame, GM/Ford/Chrysler and hundreds of other companies are at fault. Many towns and cities lacked sufficient planning as well, not setting aside the necessary funding at the time and instead allowing surprise situations later on.

The fact remains that 401(k)s are dangerous and there's no guarantee companies will increase wages enough to compensate for the lack of pensions. In fact, everything that's happened over the past 20-30 years has proven they won't: wages in the private sector are near stagnant, not even really keeping up with inflation. Pensions are secure and have helped hundreds of millions live comfortably in their retirement. 401(k)s are a mixed bag in terms of savings; not that many people have enough money to adequately fund their retirement. If private companies aren't paying their employees enough to adequately fund their retirement, why will localities do so?

Most importantly, funding one's own retirement through decades of personal saving and investing assumes people have the expertise and frugality to both save and know how to save, when most people don't. Not everyone can be experts at stocks, the market or the safest sorts of investments. Pensions were something that any blue collar person could understand, all the while anyone with a good pension could live decently after retiring. It's funny that, after decades of proving how good they are for people, there are attacks from all over aimed at pensions. It's one of the last frontiers for conservatives and their efforts at destroying middle class America.

Update: I just have to explain my frustration. I'm sick and tired of intelligent people spending so much time examining an issue that they can't even see what's under their nose. Obviously, they think, since there have been so many perceived troubles with pensions lately there's actually a problem with pensions. If they just took a step outside of their box, maybe they'd be able to tell that pensions are only a symptom of the larger problem.

And don't misconstrue those words: there is a larger problem. Corporations haven't proven themselves nearly as efficient as people like to pretend they are, otherwise there would be no pension problems. The whole stock mentality has created a thirst for instant profits, which means companies like General Motors isn't exactly going to be very willing to save more money when they make these deals with unions - thinking the money will be there in the future when that wasn't certain. Companies can't plan for the long term when they're worried about stock holders today - and all those people care about are their instant or near-term profits. Why pay workers higher wages now, when corporations could create pensions and defer payment until retirement - thus increasing their supposed profitability now? Companies could have planned their employee pensions then, instead of getting themselves into trouble now, but they didn't. Workers shouldn't be held accountability for shoddy planning by their employers and lose their rights to have a solid pension. Mr. Glaeser could have written about these topics and actually contributed to the dialogue, but instead he chose to attack one of the few remaining assets many in the middle and working class enjoy.