Tuesday, January 12, 2010

Commentary: Hokum By Another Name

By Rich DeColibus
January 12, 2010

Recently, the newspapers in Ohio ran a concurrent attack on government retirees' pensions. Apparently, most major newspapers in the state were on board. While the papers certainly have wide differences in reporting philosophies, when it came to governmental retirees getting a pension, they were unanimous we were all greedy parasites sucking the public's vital tax juices right out of society. The Columbus Dispatch, for example, pointed out Ohio governmental workers had an average pension $25,736. Private sector workers only received pensions that averaged $13,326 and isn't that just awful? The article went on to mention our private sector worker also got an average of $12,699 dollars from social security, annuities and other like financial instruments, bringing his total to $26,025. Back in the old days, $26,025 was more than $25,736, but I guess the Dispatch uses its own version of math. And honesty.
The articles went on to note, all the public retirement systems in Ohio
(and most other states, if they have one to begin with) are in trouble, mostly attributable to the recent financial recession. This is the real hidden agenda behind the papers' motivation. What is sometimes implied, and sometimes outright stated, is that any increase in the required public employer contribution rates to the retirement systems in order to stabilize them will virtually bankrupt the state's finances (or, at the very least, your local public school system) and is totally underserved by governmental retirees.
Actually, for school systems, school boards haven't seen an increase in the rates they have to contribute for 24 years; they have not, it is fair to say, kept up with inflation. Workers' contributions rates to the pension system (STRS) have gone from 7% in 1969 to 10% in 2009, an increase of 42.9%. Who should have to pony up for the next increase as a matter of fairness? Not the school boards, if the papers have anything to say about it.
Now, I am a retired teacher and my pension is just fine. It is better than a private sector worker making the same salary as I did. It is better for a very simple reason: my contributions and my employer's contributions were invested year after year, not spent on current operating expenses. Let me bore you with numbers. Teachers pay 10% of their salary and school boards pay 14% of that same salary to STRS. "Wow," you say, "that's a huge amount." But, is it really different from the private sector? Private sector employees and employers contribute 15.67% of a given wage to federal governmental taxes (social security and Medicare). And here is where the most gratuitous lying goes on: a few we-hate-public-employees conservative political hacks immediately jumped on the 24% total STRS gets and compared it to the 15.67% private sector employees and employers pay. It is a deliberate and dishonest comparison because almost all employees have a 401(k) they contribute an average of 6% to (and if they don't, whose fault is that?). Most employers match that contribution from about 3% to 6%, depending on the company; let's use 3% as a fairly normal low-end example. Let's see, 15.67% + 6.00% + 3.00% = 24.65%. Oh my gosh, that's more than the 10% + 14% teachers and boards of education pay! How can that be? The papers obviously and clearly implied the exact opposite. Maybe the papers were running their own agenda and the facts ruined their advocacy? If there is some wild injustice here between public and private pensions, I'm not seeing it, But, does that mean private sector employees get the same pension I do? Don't they wish. No, they get considerably less. How much less? A lot less; not necessarily true for all governmental employees (see first paragraph above) but when it comes to teachers, a lot less. Why? STRS, which gets that 10% and 14%, invests it to make it compound over time. The federal government, which gets Social Security taxes, doesn't invest it, it spends it as fast as it come in. It attempts to adjust for inflation with things like the consumer price index (which doesn't include the cost of food or gasoline, not exactly minor items in most household budgets). It's the difference between putting hundreds of dollars a month into a 6% savings account month after month for 30 years and putting hundred of dollars a month in a savings account paying 2% for 30 years. Is it a big difference? Try about $200,000 over 30 years; if the unused portion is reinvested, that's about $10,000 a year for over 30 years, a lot longer than most retirees live. The difference isn't we're unreasonably greedy, the difference is the government doesn't intelligently invest its citizen-workers pension contributions.
What the papers are dead set to prevent is the Ohio General Assembly increasing school boards and other governmental entities' contribution rates to help stabilize Ohio's retirement systems. The newspapers need not have worried. Ohio's budget problems are so massive, whether it would be fair and just for school boards to step up to the plate they have avoided for 24 years, they're not going to because they're mostly broke and likely to continue in that condition. You'd think at least the papers would pay lip service and say something like, "Well, the teachers deserve it, but it can't happen anytime soon," instead of just pandering to the trite anti-government ideology that all government is bad and just absorbs tax dollars for no good purpose.
Rich is a Cleveland retiree and former president of the Cleveland Teachers Union.
Larry KehresMount Union Collge
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