From John Curry, March 12, 2010
Alswager’s (a union lobbyist) remarks didn’t go over well with either Republicans or Democrats on the Education Committee. Rep. Marsha Swails, DFL-Woodbury, who is a career public schools teacher and Education Minnesota member, said Education Minnesota wasn’t addressing the financial mess facing the pension plans.
“I do feel a little disappointed about my union in the last couple weeks. … I feel there is a lot of finger pointing going on about things that have happened in the past,” Swails said.
Swails added to Alswager: “I don’t think what you’re proposing makes sense, to be honest.”
Pension puzzler: keeping funds alive 
by Charley Shaw
March 12, 2010
The words being used to describe this year’s omnibus pension bill are more dramatic than those from previous legislative sessions. Legislators and lobbyists are referring to it as “shared sacrifice,” and one GOP state representative even used the term “bailout.”
The rhetoric isn’t all that overblown, unfortunately. The three major pension plans face billions of dollars in funding shortfalls and are on an actuarial track to go broke in the early 2030s if no action is taken.
The boards of the three major statewide pension plans last fall agreed to recommend that state lawmakers increase employer and employee contributions and cut retiree benefit increases.
In response, a large and diverse group including the Minnesota School Boards Association and the League of Minnesota Cities has signed on in support of the bill.
The network of supporters, however, is missing one very influential member: Education Minnesota, the statewide teachers union.
At the Capitol, Education Minnesota is pushing an alternative proposal that would spare teachers from the contribution increases. Away from St. Paul, Education Minnesota recently waged a campaign in which hundreds of e-mails were sent to members of the Legislative Commission on Pensions and Retirement from teachers in their districts.
Sen. Don Betzold, DFL-Fridley, the chairman of the pension commission — and whose BlackBerry was inundated with e-mails before the commission’s vote on March 5 — expressed disappointment in Education Minnesota’s opposition. He said all major players need to be on board to pass the politically unpalatable measure.
“You’re not going to get a better deal,” Betzold said.
Betzold added: “The worst-case scenario is, you get the funds to the point where you can’t save them.”
The teachers’ pension plan is officially known as the Teachers Retirement Association (TRA). TRA pays benefits to 50,208 retirees or their survivors. The youngest person receiving benefits, according to TRA, is 52 years old.
There are 77,000 active members paying into the fund.
When the last actuarial assessment of TRA was done on June 30, 2009, TRA was 60 percent funded on a market-value basis. Under the current calculation, the teachers’ fund will go broke in 2032.
The legislative solution that passed the pension commission increases teacher and employer contribution rates by 0.5 a year for four consecutive years starting July 1, 2011. Teachers currently contribute 5.5 percent.
Retirees would share the pain under the TRA proposal.
In 2011 and 2012, the bill would suspend the 2.5 percent annual benefit increase that retirees receive. The benefit increase in 2013 would be reinstated at 2 percent. Retirees wouldn’t get the old 2.5 percent increase until the plan is 90 percent funded.
Retirees belonging to the two other major statewide plans, Minnesota State Retirement System and Public Employees Retirement Association, also have similar proposals in the bill to shore up their finances.
Meanwhile, Education Minnesota has shopped an alternative to legislators that would address TRA’s funding and also provide a benefit increase. The proposal was offered to the pension commission as an amendment by Rep. Paul Thissen, DFL-Minneapolis. Thissen, however, withdrew the amendment before a vote was taken by the pension commission.
Education Minnesota is making a case to legislators that teachers have had a disproportionate share of contribution increases compared with other states. The union also argues that union members were hurt when the ailing fund for post-retirement benefits was merged into the fund for active employees in 2008.
“We would like pension benefit equality,” said Jan Alswager, a lobbyist for Education Minnesota.
Alswager testified about the union’s proposal Thursday in front of the House K-12 Education Finance Division.
“Our active members should not bear the burden they did not create,” Alswager said.
Alswager’s remarks didn’t go over well with either Republicans or Democrats on the Education Committee. Rep. Marsha Swails, DFL-Woodbury, who is a career public schools teacher and Education Minnesota member, said Education Minnesota wasn’t addressing the financial mess facing the pension plans.
“I do feel a little disappointed about my union in the last couple weeks. … I feel there is a lot of finger pointing going on about things that have happened in the past,” Swails said.
Swails added to Alswager: “I don’t think what you’re proposing makes sense, to be honest.”
Rep. Pat Garofalo, R-Farmington, said that the deal for public employee pensions is better than anything private sector workers could hope for in the wake of the stock-market meltdown of 2008-2009.
“It’s a bailout. …There are taxpayers, my constituents, who would love to have a deal like this for their 401(k)s,” Garofalo said.
The question of how Education Minnesota will proceed this session could take a while to be answered because pension legislation usually hangs around until the end of session. The union could follow the path of another union, the American Federation of State, County and Municipal Employees (AFCSME) Council 5. AFSCME initially opposed the pension proposal. Since the session began, however, AFSCME reversed its position and now supports the omnibus bill.
One Capitol insider on pension issues said, however, that Education Minnesota “has painted itself into a corner” with its members. It will be hard for the union to tell its membership that they must make concessions and not get anything valuable in return from the 2010 session.
If the union continues to hold out for a deal that will sweeten pension benefits, it will likely incur more hostility from the bill’s supporters.
“We shouldn’t drive [the TRA fund] further into the hole by granting benefit increases we can’t pay for,” said Russ Stanton of the Inter Faculty Association.
