Tomorrow is Groundhog Day. This is also the time of the year when many state legislatures are beginning their sessions and legislators are introducing bills – some of which attack pensions. To commemorate these two occasions, we are re-posting this post from February 2017. The more things change, the more they stay the same.
Today is Groundhog Day. Everyone’s favorite groundhog- Punxsutawney Phil- will stick his head out of the ground and look for his shadow. Legend has it that if Phil sees his shadow, we’ll have six more weeks of winter. Many of you may also remember a film called Groundhog Day, which stars Bill Murray as a man who repeats February 2 over and over and over again. If you’ve been keeping up with pension news and policy, you may feel a lot like Bill Murray. Every year, we see the same attacks on pensions repeated over and over and over again.
Last year in Lincoln, Nebraska, Chuck Reed, the president of the anti-pension Retirement Security Initiative, testified before the Pension Review Committee and encouraged them to switch from a defined benefit pension to a 401(k)-style plan. Lincoln rejected this idea. So this year, John Arnold is funnelling money through the Retirement Security Initiative to hire a $10,000 per month lobbyist to persuade the Nebraska state legislature to force Omaha and Lincoln to abandon their pensions for firefighters and police officers. Lawmakers in Lincoln must feel like they’re reliving 2016 all over again.
In Michigan, lawmakers year after year introduce bills to force new public school employees out of traditional pensions and into risky 401(k)-style plans. In 2016, this legislation took the form of Senate Bill 102 – defeated in lame duck session. A similar bill failed to muster support in 2014’s lame duck session. Michigan should know better since the unfunded liability in its state employee’s pension systems ballooned after it closed the pension plan in 1997. The state recently reported that the median retirement account balance for workers in the 401(k)-style system is only $37,000– not even enough for one year’s worth of retirement.
In Pennsylvania, it’s no different. In 2014, former Governor Tom Corbett wanted to change the state pension system from a defined-benefit plan to a defined contribution plan 401(k) for new hires. His legislation was ultimately defeated. Lawmakers saw their shadow and ran away – it was a plan that would only make PA’s fiscal problems worse later. Every year since then, lawmakers have introduced similar legislation, even though it didn’t make sense in 2014. The new proposals introduced in 2015 and 2016 have been hybrid plans – proposals that force new hires into 401(k) combination plans. These proposals were only smoke and mirrors though. They jeopardize retirement security for public employees without offering the state cost savings.
It took Bill Murray 33 years in Groundhog Day to learn his lesson. How long will it take state lawmakers? We know that public pensions provide the best retirement security. We also know what works when it comes to public pensions: adequately funding the system each year. Nurses, librarians, and other public employees contribute to their pensions out of every paycheck and never miss a payment. State and local governments must do the same. If state governments want to repeat the same behavior over and over again, it should be consistently funding their public pensions.