The Pew Charitable Trusts are a widely respected source of information on a great number of subjects. Pew provides objective, non-partisan analysis on issues ranging from religion & public life to the health of the oceans. Unfortunately, one division of Pew – the Public Sector Retirement Systems project – has been hijacked by anti-pension ideologues. Rather than dispensing unbiased analysis and information, this division of Pew actively campaigns in states across the nation to undermine traditional public pensions.
The Public Sector Retirement Systems project at Pew is run by Greg Mennis and David Draine. This project has received almost $10 million in funding from John Arnold, the noted anti-pension billionaire. Pew claims they are simply providing an analysis of public pension plans, but their actions tell a different story.
As we have noted before, Pew is known for its advocacy of cash balance plans. Cash balance plans are an inefficient hybrid of defined benefit and defined contribution plans that manage to combine the worst of both plans. Cash balance plans are known for being opaque; it’s often difficult for participants to know exactly how much they’ll have in retirement. A study of four different retirement plan designs commissioned by the Colorado legislature found that a cash balance plan was the worst of the four plans by any measure. Even a 401(k)-style defined contribution plan replaced more income in retirement than a cash balance plan.
Pew really made its mark promoting cash balance plans in Kentucky. In 2013, employees of Pew, working with the Arnold Foundation, convinced the Kentucky legislature to adopt a cash balance plan for future public employees in the state. They promised that a cash balance plan would solve the problem of Kentucky’s notoriously underfunded public pension plans. Kentucky’s public pensions were underfunded because the state had for years deliberately avoided making its full payment to the pension systems. Had the state simply met its obligations to public employees and taxpayers, Kentucky’s public pensions would be in much better financial shape.
Pew trumpeted the adoption of the cash balance plan as a “successful public pension reform.” In reality, though, moving to a cash balance plan has failed to fix the problems facing Kentucky’s public pension systems. Rather than improving the “fiscal health of the pension system by billions of dollars,” Kentucky’s pension funding level has continued to fall. That’s because the problem was never with the design of the pension plan, therefore, changing the plan design didn’t solve the true problem: mismanagement by the state. Now the state’s current governor, Matt Bevin, is pushing to hold a special legislative session to consider further pension changes. Gov. Bevin is openly pushing for a complete conversion to a 401(k)-style plan, which also will not address the root cause of the underfunding problem. Rather than fixing the problems facing Kentucky’s public pensions, switching to a cash balance plan only opened the door for further changes down the road.
It’s not just in Kentucky that Pew has been active. In Alabama, Pennsylvania, and Virginia, Pew has actively sought changes to traditional pensions for public employees. Despite their rhetoric, Pew is not there to provide unbiased analysis and insight; they are in these states to fundamentally change and undermine pensions for public employees. Traditional defined benefit pensions provide the most secure retirement for working families. Pew seeks to weaken that retirement security by promoting changes to public pensions.
We will have more to say about Pew in the weeks ahead. In the meantime, if Pew is active in your state, beware. After their activity in Kentucky, ten Kentucky state legislators wrote a letter to other state legislators across the nation warning them not to fall for Pew’s ruse. They may hide behind their sterling reputation, but they are truly wolves in sheep’s clothing when it comes to public pensions.