STUMP » Articles » Public Pensions Watch: "It's Not Our Fault!!!!!!".... Oh Really? » 23 April 2014, 03:13

One of the usual complaints when pensions get up on the chopping block is that it’s not the public employee unions’ fault.

Now one may point to the political muscle they heave to get more benefits, but that’s more indirect, and there is indeed far more direct culpability for pension underfunding.

Because, you see, public employee unions have an outsize presence on the boards that are supposed to oversee the pension funds.

From RiShawn Biddle, Foxes are guarding the pension henhouse

All the puffery would be convincing except for one inconvenient fact. The unions themselves are as much to blame as the politicians for the mess the state pensions, and their rank-and-file members and pensioners, are in.

The AFSCME affiliate controls six of the state employee pension’s 13 board seats. This includes three current and former local presidents, along with the head of its unit for retired rank-and-file workers. Add in the presence of Danny Silverthorn, an appointee of Gov. Pat Quinn who formerly ran another union, the West Central Building and Construction Trades Council, and public-sector unions have ensured their sway over the pension’s affairs.

Meanwhile the NEA affiliate, the Illinois Education Association, along with an affiliate of the American Federation of Teachers, hold full sway over the Teacher Retirement System’s (TRS) operations. Cindy Klickna, the president of the NEA affiliates, holds a seat, as does Marcia Boone Campbell, the secretary-treasurer of the AFT chapter.

Thanks to the fiscal fecklessness that AFSCME, NEA, and other public-sector unions, Illinois has managed to make its own pensions even more virtually-insolvent than those of other states. The TRS alone is officially underfunded to the tune of at least $56 billion, and more-likely to be $76 billion in the hole, or 36 percent more than reported, according to an analysis by Dropout Nation using a formula developed by Moody’s Investors Service.

As for the state’s pension for other civil servants? It is officially $23 billion in the red – and more likely, $30 billion, or 30 percent higher than reported.
…..
The California State Employees’ Retirement System, the nation’s largest pension, is another government annuity system that is effectively controlled by unions. Five of the 13 seats on CalSTRS board – including that held by the board president – are controlled by an SEIU affiliate, the California State Employees Association, and the California School Employees Association, the nation’s largest union for school district workers who aren’t teachers.

When you factor in the presence of state officials such as Comptroller John Chiang and Treasurer Bill Lockyer – both of which owe their elections to support from CSEA ($40,700 in donations in 2010 alone), the two unions have virtual control over the fund.

Meanwhile in Massachusetts, the SEIU’s locals there control two of the five seats on the board that oversees the state’s civil servants’ pension, while another union, the Retired State, County And Municipal Employees Association, holds a third seat. The dominance of unions over the pension is one reason why the civil service pension is underfunded to the tune of $28 billion – more likely $38 billion.
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But for decades, unions haven’t had to resort to such tough tactics to keep pension trustees and state governments in line. Why? Because they have been the ones running the show in the first place.

Thanks to state laws, which often require a certain number of pension trustees to be elected by public employees. Because civil servants are often forced by law to become members of public sector unions, outfits such as AFSCME and NEA effectively control who gains seats on pension boards.

In Illinois, for example, AFSCME regularly informs rank-and-file members on who to choose for seats on the state employee pension. The AFT’s Chicago local’s control of pension seats goes even further: It even holds the elections for pension trustees, with its governing coalition all but assuring that its top players win their spots.

To recap: many public pension fund board of trustees have a required number of seats given to union representatives.

And then, given the power of the public union employees, they can control who else gets on the board, even if they’re not officially union reps.

I’m not on board with the fox & henhouse metaphor, because the “foxes” are covered by the pensions themselves. They are also “hens”. It is cute to try to make the argument that if union reps are to blame, then the rank-and-file aren’t…. no. They chose these people to be responsible. They are responsible.

(Oh, and it seems I’m the member of a union now, because of being an adjunct instructor at UConn. Woo.)

As per yesterday’s post, what these unions thought is that they would always get paid. So using the pension fund boards to, say, ignore fiduciary duty and pick assets based on political considerations, is just fine, because even if all these investments went belly-up, who cares?

Oh, who cares about the taxpayers. Those suckers will always make the pension whole.

Right?

Right?