STUMP » Articles » Welcome to the 80 Percent Funding Heroes List, Daniel Borenstein! » 17 March 2015, 06:42

Wow.

Daniel Borenstein: Labor perpetuates pension myth that 80 percent funding goal is OK

Public employee unions repeatedly insist that workers’ pension funds need not be fully funded, that a target of 80 percent is fine.

So it wasn’t surprising that a retired labor leader advocated that position at a recent talk I gave in Oakland. It was, however, disconcerting that the city’s assistant city administrator went even further, saying 75 percent funding was OK.

They’re wrong. A goal of anything less than full funding unfairly forces future generations to pay for current workers’ pensions and leaves local governments vulnerable to large future rate hikes.

There’s much more at the link. Go read it, now!

I do disagree with Borenstein on one point:

The myth-backers also argue that we don’t have to worry about a future shortfall because, unlike private sector pension plans for which there’s a risk employers might go broke, the public sector plans will always have tax revenues available.

It’s true that taxpayers will be there. But that argument essentially says that future generations should be prepared to pay more, or lose government services, because we didn’t responsibly address our debt now.

No, it’s not true. And I’m not referring to a future where the Sweet Meteor of Death (TM Ace of Spades) hits (in which case, public pensions won’t be a problem for anybody.)

I’m talking about the propensity of people to pick up and go somewhere else.

Ask Chicago if those taxpayers are still there.

Ask Detroit if those taxpayers are still there.

Of course, it’s not just a matter of people moving around. It’s also a matter of the next generation not being produced at all.

Ask Japan about that.

Oh, but you say, Japan is anti-immigration. The U.S. won’t have such a problem!

Immigration gets you only so far when the immigrants also don’t produce the next generation at levels one wanted.

I understand people don’t take the possibility of public pension failure seriously, but they really need to. The 80% funding “reasoning” adds to the possibility of failure.

But back to Borenstein’s piece: the more near term failure of having to pump more money into the pensions is loss of public union jobs….because that has definitely happened in some California towns already. Calpers has stepped up required contribution rates, which I’ve been seeing coming in dribs and drabs. Obviously, in the recent bankruptcies of Stockton and San Bernadino, there have been staff cuts. But not pension cuts. Yet.

But here is something to consider: California public retirees may soon outnumber public employees. Some of the plans in California, this is already the case.

That may explain why the public unions are behaving the way they have been.

Anyway, thanks to everybody who pointed this article out to me — because 80% funding is such a bugbear for me, I had multiple people point it out (don’t be chary in the future to point out something so obviously of interest to me… I almost missed this because I was busy with spring cleaning yesterday — the multiple emails/messages got my attention! And besides, you never know when you’re the only person who noticed something.)

In any case, I’ve added a Heroes List to my 80 Percent Funding Database, in case there are more people to add. Like with the 80 Percent Funding Hall of Shame, I’m mainly concentrating on regular media outlets, and not necessarily blogs like my own. Alas, I know I (and others) blogging on the topic is generally to an audience of like-minded people; if it’s a place with a more general audience, I would really like to highlight that they’re getting the message out there. I would really love to see actual politicians and pension fund managers to point out the lie of 80% funding being okay.

But I am happy to link to everybody bitching about the 80% Pension Funding Myth! If you’re a blogger and you write about this, feel free to email me: marypat.campbell@gmail.com. If you see any such message, please send it along to me! Don’t assume I’ve seen it already – as mentioned before, I almost missed this one due to spending hours cleaning out my closets.