Saturday, May 08, 2010

Should STRS employees be paying into STRS retirement instead of OPERS? Discussion: Duke Snider, Bob Jones and John Curry

From Duke (Kenneth) Snider, May 8, 2010
Subject: Re: Ponder (FYI)
Bob, You have a good grasp as to what has and is happening. First of all you were on the right track about STRS employees paying into STRS. Now I wonder why "they" wouldn't want to do that? It wouldn't have anything to do with spiking would it which I believe can be done in OPERS? Wouldn't it be an asset to OPERS if STRS employees paid into STRS? Quite frankly, I think the politicians should pass legislation that requires STRS employees to pay into STRS and not OPERS. It might make about 600 a little upset, but so what? And on the flip side the politicians would gain respect (votes) from retirees, spouses, family, friends and acquaintances. Vote and support politicians who support current STRS retirees. Don't vote or support any politician who is in favor of reducing or eliminating any part of current STRS retirees retirement. If politicians don't want to commit themselves, don't vote or support them. They are either for us or against us!!!
Duke
From Bob (RH) Jones, May 8, 2010
Subject: Re: Ponder (FYI)
To Duke and all:
A few years ago, a couple of us brought the idea of STRS employees paying into STRS, rather than OPERS. The answer we got from the STRS board member representing retired members was that the "STRS is only for educators. It, therefore, would take legislation to make the change. However, no OH Rep. (whose retirement system is OPERS) is apt to initiate the legislation because the STRS employees make so much steady money that OPERS is not about to lose this large amount of investment seed money. Without the statesmen of the past, our modern self-centered legislators of today are not about to sponsor, or to pass, such legislation for us. I believe that to be a realistic judgment.
Also, we do have to go to bed worrying about our retirement and the cuts that many of our STRS management employees and their "rubber stamp board members think up. They stay up at night dreaming of how they can cut retiree funds that effect us, as well as our families; for instance, when the STRS management recommended taking away our spousal and dependent HC/RX, the board majority voted to recommend it. Also, when the management recommended cutting our COLA the board approved recommending cutting it too! Can one then conclude that they are anti-family? They have not done their job in properly in making retired educators the pension compensations that professional career educators deserve. This bodes poorly for future educators. If they can cut us now, they will cut them in the future; therefore, a logical conclusion for them is: with all the hassle that politicians and a public are heaping on the profession today, along with a STRS that will cut you after retirement, why not go into another profession such as pharmacy where you can name your own hours and start out at $100 grand?
RHJones
Duke Snider to John Curry, May 8, 2010
Subject: Ponder (FYI)
Maybe the reason my thinking is the way it is stems to the fact I've been in law enforcement since 1989. Sometimes I have discovered a person who is guilty of doing something wrong is the person who is extremely loud and pointing the finger at some one else. The spotlight is taken off the guilty and shines brightly on the innocent. Psychology, and many haven't even attended college or taken a psych class.
Now this reminds me somewhat of what has and is happening to retirees. Who are the people that always have the spotlight shinning on them and are the target of reduction or elimination of their retirement? Who are the people who are not mentioned (in the Proposal from the Retirement Study Council) about improvement, reducing, or eliminating anything at the STRS employee and administrative level?
Shine that light brightly on the retirees!!!
Something to ponder. Please correct me if I make a mistake or I'm not accurate in this email.
STRS employees, app. 625, pay into PERS retirement and not into STRS retirement. WHY? If STRS employees paid into STRS retirement, that would eliminate their spiking in PERS which probably PERS wouldn't object and PERS would be money ahead.
STRS wouldn't allow them to spike.
If STRS employees paid into STRS retirement, the 600+ would definitely help the system, financially AND STRS employees should take or should have a greater interest in their jobs AND look at STRS retirement in a different light.
Now why wasn't something mentioned as this in the PROPOSAL?
One more point to ponder---obviously nothing is going to happen until AFTER the election in November. My stand is I will not vote, support, or work for ANY politician who supports or votes a reduction or elimination of ANY part of our STRS retirement.
I encourage you all to do the same, and make it be known to your politicians.
Shine that light where?
It's getting to the point that some retirees are trying to find solutions for STRS administration. Maybe many of us are guilty for this, but it should NOT be our job. We are the retirees and THEY are not. If it weren't for retirees and active teachers there would be no STRS. What part of this is not understood? Why should retirees have to go to bed worrying about retirement, healthcare etc?
Duke
From John Curry, May 8, 2010
Duke,
I agree wholeheartedly. If STRS's investment associates would retire in the same system that they invest in it certainly would give them a little more incentive to do a better job and not take excessive risks to obtain their six-digit bonuses. Right now, if they take that excessive risk and lose their (actually our) shirts, they still have that six-digit salary to fall back on. Either way.....they win! A change in the Ohio Revised Code to place all STRS employees in the STRS Retirement System is long overdue. This change would only affect 600 people but would benefit hundreds of thousands of stakeholders in STRS.
John

RH Jones on STRS Board election

From RH Jones, May 8, 2010
Subject: Fw: [News] Retirement Board Election Results

To all:
In losing, the candidate that CORE backed got almost 15,000 votes. That should at least send a message that without the huge backing of advertisement money Jim Stoll did convince a large number of actives, that STRS board decisions should not be "rubber stamped".
RHJones, CORE member

Nancy Hamant: Comments on STRS Board election

From Nancy Hamant, May 8, 2010
Subject: Fwd: [News] Retirement Board Election Results

Jim Stoll made serious inroads into the OEA "establishment" candidates' quest for STRS Board. It is a shame that he was not elected as he would question the status quo at STRS and demand explanations for the administrative expenditures. As it stands now, only the OEA agenda will be represented on the STRS Board.

Nancy Hamant

Bob Buerkle: Other states still honoring commitments made to their current members and retirees

From Bob Buerkle, May 8, 2010
Subject: John, please forward to Nancy and others
Nancy,
I read your email this morning. I am assuming that the Lorain teachers union agreed to an extension of the April 30th layoff deadline established in Ohio Law. We had to do that once in Cincinnati, but it does have to be agreed upon in advance.
Nancy, you are right about the partisan bickering all the time. Friends of mine are talking about voting against all incumbents whenever possible, no matter what party they are in.
You are also right to say we don't know if we can invest our way out of this mess. Nobody does have that answer. But I'm also tired of hearing STRS say, "we can't invest our way out" of it either. At the same time action has to be taken to protect the system.
We need to let our legislators know that it is time to protect our current members and retirees at the benefit levels that they have earned and been promised under current law.
They should be looking at changes in the age and service requirements, lower pension formula multipliers, longer periods for FAS calculations and smaller COLAs. However, these things must be done by implementing a NEW RETIREMENT TIER for NEW HIRES ONLY. This offers the most logical way to get through this financial mess and still allows for improvements to be made with the new TIER members if we are able to overcome the crisis.
This is how Illinois, New York and fifteen other states are handling their pension shortfalls and still honoring the commitments that have been made to their current members and retirees. These states are not changing the pension rules after the game has begun (think actives) or worse, after the game is over (think retirees), and they are not going to withhold $9 billion from their retirees' pensions to make up for their losses like the STRS proposal does.
Bob Buerkle

Nancy Hamant: Teacher layoffs will have devastating impact

From Nancy Hamant, May 8, 2010
Subject: Fwd: ....and "they" think that the schools will go along with a 2.5% increase...
Literally, thousands of teachers are being laid off across Ohio. Among them, the youngest and most technologically astute group. The impact for Ohio students will be devastating and will affect their futures totally.
The impact for the STRS retirement and healthcare funds will be insurmountable when added to the economic crises losses incurred by the STRS funds. In light of Thursday's wild ride of the stock market, Ohio and the nation are still in the grips of one of the worst recessions/depressions to face our citizens.
Whether our nation and Ohio will recover from this mess is yet to be seen. It certainly appears that STRS will be facing unbelievable losses to the pension and healthcare funds for years to come. We all need to demand that our elected congress members, both Ohio and federal, work together to get us out of this mess and to stabilize the economy and to sustain a path of recovery. To continue the partisan fighting will only exacerbate the problems Ohio and the nation are facing.
Nancy (Hamant)

....and "they" think that the schools will go along with a 2.5% increase for health care for teachers after these kind of headlines?????

From John Curry, May 7, 2010
.............get real!!!!!!!!!
School layoff notices go out: 183 Lorain employees to lose jobs
By MEGAN ROZSA
MorningJournal.com, Friday, May 7, 2010
LORAIN — At the end of this school year, 183 employees of the Lorain City Schools will be without a job. The layoff notices were delivered yesterday to Lorain’s teacher and staff unions as well as grant positions within the district. A total of 220 positions have been eliminated.
The difference in people and positions is because some people have already retired or quit and their positions were not filled, Superintendent Cheryl Atkinson said.
Because an 8.97-mill, five-year levy failed at the polls on Tuesday and another levy failed in November 2009, Atkinson said the district has no choice but to lay off staff. If another levy isn’t passed soon, this whole process will be repeated, she said.
“We’ll be back in a deficit if we don’t pass a levy,” Atkinson said. “We’ll get through this coming school year, so more layoffs would come the following year. I don’t want to have to repeat this.”
The layoffs come as a result of the district not receiving any new money in more than 20 years. The district now faces a $9 million deficit at the end of next school year. Atkinson said with these layoffs and a cost reduction plan in place, the district’s budget will be balanced. There are a little more than 1,000 people working for the district. The school board will take formal action to approve the reduction of 220 positions in June.
“This cut and everything combined gives us a balanced budget,” Atkinson said. “These are tough times, and it’s difficult when you have to make these decisions.”
Atkinson has made arrangements with Lorain County’s Employment netWork to provide assistance to all displaced employees. These meetings will be with the teachers and staff on Tuesday and May 18. The Employment netWork provides access to a multitude of services that meet the needs of job seekers, workers and employers in the area.
Lorain Administrators Association President Christine Miller said the union agreed to take concessions on April 28 in order to avoid more members of their union being laid off. Miller said they also believe in the philosophy of putting children first.
The administrators agreed to a 5 percent pay cut. They were owed 6 percent raises — 3 percent in August 2009 and 3 percent in January 2010 — but never got them. Now, they will give back 5 percent and take a one-time, 1 percent raise. They also agreed to pay for benefits that were previously picked up by the board, such as annuities and retirement. Atkinson said in the old contract these benefits were paid to the union members rather than taken out of paychecks, and these new adjustments are now wrapped in with the base pay.
The district is still in negotiations with the teacher’s union and has yet to reach an agreement, Atkinson said yesterday.
Robyn Kniceley, president of the Lorain Education Association, could not be reached for comment.

STRS board election results announced

From STRS, May 8, 2010
On Saturday, May 8, 2010, the results of the State Teachers Retirement Board election were certified by tellers designated by each candidate and a representative of the Secretary of State. The result of the election for the two contributing member seats on the Retirement Board is as follows:
- Mark Hill, 24,200 votes
- Dale Price, 18,874 votes
- James A. Stoll, 14,968 votes
- Write-Ins, 237 votes
The term of office for Mark Hill and Dale Price begins on Sept. 1, 2010, and ends on Aug. 31, 2014.
Click to enlarge.

........................................................

Friday, May 07, 2010


Taps.....
Sincere condolences are extended to the family of a gracious and widely admired CORE member, Al Rhonemus, who passed away May 7, 2010 at age 83. He will be very much missed by many.
Visitation from 3 – 9 p.m. Sunday May 9 at the Cahall Funeral Home in Ripley, Ohio on State Route 52.
Visitation from 11 a.m. – 1 p.m. Monday, May 10 at the Ebenezer U. M. Church on Ebenezer Road with service at 1 p.m.

Thursday, May 06, 2010

ORSC to meet May 12

Ohio Retirement Study Council
MEETING NOTICE AND AGENDA
Wednesday, May 12, 2010
9:00 a.m.
Room 122
Statehouse
Columbus, OH
  • Call to Order
  • Roll Call
  • Minutes of Previous Meeting
  • ORSC FY 2011 Budget
  • Presentation of Systems’ Operating Budgets Pursuant to R.C. §§ 3307.041, 3309.041 (STRS, SERS)
  • Rules
  • Announcement of Next Meeting
  • Adjournment
  • (Click image twice to enlarge.)
  • Note: Frequently the room number is changed at the last minute; watch this post for any changes.
  • ...Posted 5/6/10......................................

Update on GPO/WEP

May 6, 2010
Below is a report summarizing the findings of a GPO/WEP summit hosted by the Texas Retired Teachers Association (TRTA) in March 2010 in Washington, D.C. Both links will display the report, or click (twice) on the image below. Thanks to Marilyn Mancuso for making this available.
http://www.trta.org/CFDocument.cfm?updateID=74363F81-B4E1-346F-04675664E17C168D

......................................................................

Wednesday, May 05, 2010

Columbus Dispatch on OEA lawsuit: The wrong direction, 'one more in a series of steps down the road toward a secret and unaccountable government'

From John Curry, May 5, 2010
Editorial: The wrong direction
Step by step, the public's right to know is being curtailed
Columbus Dispatch, May 5, 2010

If neither courts nor the keepers of public records will stand up for the public's right to see those records, then lawmakers must step in.

When the Ohio Education Association, the state's largest teachers union, sued to block an attempt by the Ohio Republican Party to get a list of teachers' names, addresses and other contact information from the State Board of Education, the state initially fought the lawsuit, arguing correctly that nothing in state law shields this information from public view.

Now that Franklin County Common Pleas Judge Daniel T. Hogan has ruled in favor of the teachers union, granting an injunction forbidding the education department from releasing the records, the department has decided to let the ruling stand unchallenged.

That's one more in a series of steps down the road toward a secret and unaccountable government.

Hogan's decision rests on an unfortunate 2005 ruling in which the Ohio Supreme Court held that the home addresses of state employees are not a public record. The ruling came after The Dispatch sued the Department of Administrative Services for withholding employees' information.

Separately, lawmakers passed a measure in 2007 forbidding cities to release home addresses of police officers, prosecutors, prison guards and others in law enforcement.

In the most recent case, involving teachers' addresses, Hogan wrote, "There is no good reason for treating the personal contact information of these two different, but overlapping, groups of people differently."

If that's true, it's all the more reason for lawmakers to revisit and reaffirm the principle of open government: People have a right to know who is working for their tax dollars, how much they're paid and where they live.

Police officers and other law-enforcement employees typically justify their desire for secrecy by claiming that criminals or disgruntled individuals could use a public directory of public-safety workers' addresses to do physical harm to someone. But no one arguing that point ever provides much in the way of examples of that happening.

The harm that could be done by secret government, on the other hand, is clear.

Many public employees are required to live in the political subdivisions they serve; how can the public be sure that they do if their addresses are secret?

In the late 1980s, a Dispatch investigation found that two rental properties owned by Columbus police officers had been the target of narcotics raids. The questions prompted by those stories would have gone unraised and unanswered if the owners' names on those property records had been closed to public scrutiny.

Employees' addresses aren't the only area of public-records retrenchment. The state Supreme Court issued an especially troubling ruling a year ago, when, citing attorney-client privilege, it held that a government agency needn't make public a fact-finding report if the report was prepared by a private lawyer. In the underlying case, the Toledo-Lucas County Port Authority sought an investigation of allegations that the authority's president was having an affair with a lobbyist who worked at the authority, funneling public money to her and using his influence to help her.

The authority board eventually fired the president but kept the fact-finding report secret. With that precedent, public bodies could hide all manner of wrongdoing by using private attorneys to investigate it.

Open records make public employees uncomfortable, but that's part of the price of public employment in an open society.

Good government requires that citizens be able to serve as watchdogs, and that requires open records.

Ohio lawmakers should make sure that state law enshrines those principles more clearly, so that those who would draw the curtain over democracy will have less luck with the courts when they try to do so.

Better get at the front of the rebate line, STRS.....1,499 other state and local entities will be there also!

From John Curry, May 5, 2010
"Under the new law, Ms. Sebelius said, employers must use the federal money to reduce “health benefit costs” for themselves or their retirees — for example, by reducing premiums, deductibles or co-payments."
"Kathleen Sebelius, the secretary of health and human services, predicted that 4,500 employers — 3,000 private entities and 1,500 state and local governments — would seek federal aid under the program."
Some Retirees Will Receive Aid to Pay Health Bills
NY Times, May 4, 2010
By ROBERT PEAR

WASHINGTON — The White House announced Tuesday that it would help pay medical bills for early retirees who have health insurance provided by their former employers.

The purpose of the temporary $5 billion program, authorized by the new health care law, is to reverse the erosion of employer-sponsored insurance.

In announcing the initiative, the White House tried to win broader support for President Obama’s overhaul of the health care system. Opinion polls suggest that the public remains deeply divided over the merits of the final legislation, passed by Congress without Republican votes.

Republicans hope to win control of Congress by running against the new law, while Democrats hope voters will reward them for passing it.

The administration said its goal was to provide “as much relief as possible as soon as possible” to employer-sponsored health plans.

Under the program, the federal government can reimburse employers for 80 percent of the cost of claims from $15,000 to $90,000 a year for a retired worker who is 55 or older and not eligible for Medicare.

The program will run from June 1 of this year to Jan. 1, 2014, when many early retirees, like millions of other Americans, will be able to enroll in health plans offered through new state-based markets known as insurance exchanges.

Valerie Jarrett, a senior adviser to Mr. Obama, said many retirees now “pay exorbitant premiums or simply go without health insurance.”

“In 1988,” Ms. Jarrett said, “66 percent of large firms provided health care coverage to their retirees. Twenty years later, in 2008, the percent of firms offering coverage to retirees plummeted to 31 percent.”

John J. Castellani, president of the Business Roundtable, which represents large employers, welcomed the new program, saying it would make health benefits “more affordable for employers and early retirees and their families.”

Kathleen Sebelius, the secretary of health and human services, predicted that 4,500 employers — 3,000 private entities and 1,500 state and local governments — would seek federal aid under the program.

Ms. Sebelius issued rules to carry out the program on Tuesday. Employers can apply through her department. Applications will be available by the end of June.

Early retirees “often face difficulties obtaining insurance in the individual market because of advanced age or chronic conditions that make coverage unaffordable,” Ms. Sebelius said.

The federal aid will be available to private employers, state and local governments, nonprofit and religious organizations and labor unions that sponsor health benefit plans. It will be available to employers who pay premiums to insure early retirees, as well as to employers who assume the risk themselves and pay claims with their own assets.

The government said it would help defray the cost of medical claims paid by employer-sponsored plans for early retirees and their spouses, surviving spouses and dependents.

Under the new law, Ms. Sebelius said, employers must use the federal money to reduce “health benefit costs” for themselves or their retirees — for example, by reducing premiums, deductibles or co-payments.

As a condition receiving federal aid, employers must maintain their current contributions to the cost of retiree health benefits.

In addition, to qualify for federal aid, Ms. Sebelius said, health plans must have “programs and procedures” to save money for people with chronic and high-cost conditions like diabetes and cancer.

In a preamble to the new rules, Ms. Sebelius said the government could deny or stop accepting applications if it appeared that the $5 billion would run out before 2014.

Many companies expected to apply for the new program already receive federal subsidies, under a 2003 law, to help offset the cost of providing prescription drug benefits to retirees, Ms. Sebelius said.

Jim N. Reed's letter to the Editor: STRS members should take time to research, vote for board

Lancaster Eagle-Gazette, May 5, 2010
During the month of April, Ohio's "active" educators were at another fork in their STRS journey as balloting took place to select representatives to the board. The board makes critical decisions that affect all active and retired educators. Since the terms of board members Dennis Leone and John Lazares ended, watch-dogging and challenging rubber-stamp board policy have dangerously retreated and their warnings and admonitions have been diluted by an OEA-controlled board. Unfortunately, for actives and retirees, Leone's and Lazares's prognostications regarding STRS financial mismanagement and their dire consequences have been corroborated including the $30 billion asset loss from 2007 to 2009.
The current board has determined active and retired educators will have to bear the burden of having their benefits reduced to compensate for years of mismanagement.
Current OEA-trained and endorsed board members recently voted to recommend an increase in service retirement from 30 to 35 years; increase minimum retirement age to 60 (or until 35 years of service); increase member contribution by 2.5 percent; increase employer contribution by 2.5 percent; and increase the number of years to calculate your FAS from three to five years.
Yes, there is a decrease in their recommendations. A decrease in the COLA for retirees!
Cincinnati Sycamore High School Athletic Director Jim Stoll offers 24 years as a teacher, coach, administrator and successful businessman as experiences that can monitor and challenge policy in making STRS accountable and more responsive to its members. Stoll's platform -- available on Facebook and at www.kathiebracy.blogspot.com -- emphasizes cutting STRS spending practices and not member benefits.
If you are an active educator and have not voted yet, it is not too late as you can return your ballot through early May. Too frequently, STRS members do not engage in board elections, and their apathy and passiveness might have cost 450,000 members and beneficiaries significantly.
Actives, do some homework and vote. Too many have blindly followed Yogi's advice, "When you come to a fork in the road, take it!" STOP! Become STRS-literate.

Tuesday, May 04, 2010

FLASHBACK - 1 YEAR AGO - ORSC head (Aristotle Hutras) said, "Our job is to look aout for the next generation, not the next election!"

From John Curry, May 2, 2010
Well, Aristotle, looks like some on your study council are still looking out for the next election, doesn't it?


Teachers vow fight over benefit cuts

By Laura A. Bischoff
Staff Writer
Sunday, May 17, 2009
Dayton Daily News

Teachers in Ohio can start their careers right out of college and retire 30 years later, when they’re just entering their 50s, and begin collecting two-thirds of their salary in the form of a pension check.

But that formula could change.

Ohio’s five public pension systems have collectively lost $63.6 billion in value, and they pay out more than $2 billion a year for health care coverage — a benefit that isn’t mandated but has been offered traditionally.

The pension funds for teachers, police, firefighters, state troopers and other government workers are crunching the numbers on how various changes would help keep the five funds solvent.

Options under consideration include increasing minimum retirement ages, decreasing cost of living allowances, requiring retirees or their spouses to pay more for health care, and changing how the pensions are calculated.

“I have a problem with all of that,” said Pat Lynch, a Dayton teacher with 35 years of service. “Don’t change midstream on us. I’m very close to retirement.”

She predicted that teachers would fight those changes “big time.”

Scott Maney, a junior high school social studies teacher in Springboro, agreed.

“One of the most important parts of the whole benefits package is retirement,” said Maney, who has been a teacher for seven years. “It’s important for all the teachers across the state to be really aware of what’s going on. It’s easy to give benefits away. It’s real hard to get them back.”

Another scenario would be asking taxpayers to chip in more toward what is set aside for workers’ retirement. School districts, cities and other governments already contribute between 14 percent and 26.5 percent of every paycheck toward pensions.

Bill Estabrook, former Dayton city manager and now director of the Ohio Police & Fire Pension Fund, said he doesn’t think local governments are able to pay more.

Over the last 40 years, Ohio’s public pension systems sweetened the pot with more and more generous offerings: 3 percent per year cost of living adjustments, subsidized health care, higher multipliers used to calculate the monthly pension check, and a chance for police and firefighters to retire as young as 48.

In 1996, however, a legislative study recommended ratcheting back on some of the benefits as a way to shore up the systems. For example, the study said, troopers, police and firefighters should be able to retire at 52, not 48.

Extraordinary investment returns over the past decade allowed pension officials and lawmakers to put off such politically unpopular decisions, said Aris Hutras, director of the Ohio Retirement Study Council, a bipartisan oversight board.

Hutras said he expects lawmakers to consider a pension reform bill sometime this year or next.

“Our job is to look out for the next generation, not the next election,” he said. “Change could be unpopular, but it’s change for the good.”

Contact this reporter at (614)224-1624 or lbischoff@DaytonDailyNews.com.

CORE meeting scheduled for May 20, 2010

From CORE, May 4, 2010
CORE (Concerned Ohio Retired Educators) will hold its May meeting on Thursday, May 20th at the STRS Building at 275 East Broad Street in Columbus. Parking is free in the STRS parking garage behind the building. We encourage you to also attend the STRS meeting which usually begins around 9:00 a.m. on Thursday in the meeting room on the 6th floor but this beginning time varies from month to month. Lately the STRS meetings have been held most of the day on Friday as well as Thursday. For this reason, we encourage you to check the STRS website (www.strsoh.org) to confirm the time.
Please remember that CORE meeting attendees usually leave the STRS meeting around 11:30 in order to go to the cafeteria on the 2nd floor to get our lunches. We then take our lunches to the small cafeteria room behind the Sublett Room on the 2nd floor where the CORE meeting will begin promptly at 11:45.
If you have suggestions for the May CORE meeting agenda, please send a reply to John Curry at curryjo@watchtv.net so that he can relay this information to CORE President, Dave Parshall.

Monday, May 03, 2010

USA Today: Debate on the other debt crisis Our view: Ugly truth about state pensions begins to emerge

From Ralph Roshong, May 3, 2010
USA Today, May 2, 2010
Even the most casual observers know the federal government has a serious debt problem that's propelling the USA toward the same cliff as Greece. Less well known is that certain states and localities are even worse off. Or at least their problems are coming to a head sooner, as they have fewer options for kicking the proverbial can down the road.

OPPOSING VIEW: Manageable challenges

States can't print money, and they have limits on borrowing. Much of their shortfall, moreover, is the result of pension obligations that are binding contracts, not just political promises. The looming shortfalls were hidden in recent years through a combination of outright deceit and overly rosy projections for annual investment returns. But the truth is now emerging.

Last month, a panel from Stanford University concluded that California's public employee pensions were underfunded by $500 billion. That's about $35,700 per California household. Nationally, the American Enterprise Institute estimates that state pension funds are more than $3 trillion short.

The problem is twofold. Many states have lavish programs that allow workers to retire in their 50s with ample pensions — and health insurance to cover them until Medicare kicks in. Second, regardless of how generous their benefits, some states have simply failed to put away adequate funds to cover them.

These lavish programs are a good deal for public employees and politicians seeking their votes. But the deal is a bitter pill for taxpayers, most of whom are private sector workers without the types of benefits that state and local workers see as their right.

The first thing that must be done is to acknowledge the colossal irresponsibility of lawmakers who have engineered a massive transfer of wealth from non-unionized workers to unionized ones.

The next thing to do is to take steps to limit the damage. One good idea is to move new state and local government employees to 401(k)-type programs. This won't solve the problem of current workers and retirees, but it will keep the problem from getting worse. Alaska and Michigan have already moved broadly in this direction, while several other states have 401(k)s for certain types of employees.

The ability to rein in spending for current workers and retirees varies from state to state. In about a third of the states, pensions are not the result of collective bargaining agreements and can be adjusted within the confines of what is politically possible. Health benefits are often easier to trim, at least from a legal standpoint.

Without dramatic action, it is not difficult to see states such as Illinois and New Jersey falling into downward spirals of tax hikes and service cuts to finance their unaffordable promises.

In New Jersey, recently elected Gov. Chris Christie is finding out how tough the issue is. His state faces massive deficits even though it has some of the highest taxes in the country. With little ability to trim pensions, he is demanding that the teachers' unions agree to pay freezes or layoffs. For his efforts, Christie is being portrayed as a Scrooge-like character who is anti-education. Many other states will soon be forced into the same type of contentious fights.

The story of state pension shortfalls isn't as well known as the national debt. But given the severity of their problems, that probably won't be true for long.

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