Welcome to this week’s edition of This Week in Pensions! We have gathered the best stories about pensions and retirement security from the previous week. This is the news you need to know in the fight for a secure retirement.
Before we dive into our top stories from this week, check out some stories of public employees helping their communities during the coronavirus pandemic:
- Volunteer Spotlight: Dartmouth students’ website gets life’s essentials to essential workers
- West Michigan grassroots effort to create PPE expands to meet region’s needs
- Putting art education in the digital frame pt. 2
- This Connecticut professor refurbishes old computers and gives them to students in need. Coronavirus has made his cause more urgent than ever
Here are the top stories from this week:
McConnell takes flak after suggesting bankruptcy for states rather than bailouts by John Wagner. On Wednesday, Senate Majority Leader Mitch McConnell cited public pensions to suggest state governments that have lost tax revenue from the market downturn should declare bankruptcy instead of applying for aid through the federal government. This argument does not hold up to the facts on multiple levels. Under the U.S. Bankruptcy Code, states can’t file for bankruptcy because of the constitutional issues that might arise. And even if states were allowed to declare bankruptcy, the results would likely be a dystopian version of government for sale to the highest bidder, leaving those who rely on government services unlikely to access them. Finally, retired public employees who dedicated their lives to serving the public could see their earned benefits effectively frozen, leaving them destitute in retirement. The vast majority of public pension plans are well-funded and able to withstand the current economic crisis.
Kiss Your State Pension Goodbye by Edward Siedle. In this article for Forbes, Siedle writes about Mitch McConnell’s comments about pensions and bankruptcy in reference to the senator’s home state of Kentucky. Siedle correctly notes that gutting pensions would have a dire impact because “a staggering percentage (94%) of the state’s 114,000 retirees still reside in Kentucky and pump over $1.9 billion a year into all 120 counties. Cutting pension benefits will undoubtedly depress the local economy.” It’s clear that protecting pensions is even more important during economic downturns because they provide a much-needed boost to local economies, supporting businesses and jobs across the country. According to the National Institute on Retirement Security, the spending from monthly pension payments supported 7.5 million jobs and $1.2 trillion in total economic output nationwide in 2016.
Public pensions survived the Great Recession. They will survive coronavirus, too by Ted Toppin. In this op-ed for the Sacramento Bee, Toppin correctly notes that pension systems “are built to withstand the extremes of economic cycles,” making them more likely to survive economic downturns. However, “under a retirement-security system that relies upon individual accounts – 401(k)s – many of those whose retirement coincides with a down cycle will not be around long enough for their savings to fully recover.” We couldn’t agree more with Toppin and his view that “weakening what measure of security that does exist should be the last thing anyone suggests.”
The Crisis Pulls The Rug Out From Under Many Older Workers’ Retirement Security by Christian Weller. In this article for Forbes, Weller writes that working longer may not be a guaranteed way to retire with security for low-income workers. According to Weller, “Median wealth among those recent retirees with less than $25,000 in total wealth in fact fell from $6,232 in the years from 2001 to 2007 to $1,547 in the years from 2010 to 2016 – a drop of more than 75%, even though people in this group not only worked longer than others, they also worked longer than in the past.” Furthermore, older workers face particular struggles with market downturns, because “in the last recession from 2007 to 2009, the unemployment rate for workers 55 years old and older rose faster than the unemployment rate for prime-age workers aged from 25 to 54 years.”
Share of State K-12 Education Budgets Going to Pension Costs Has Doubled in Two Decades by the Equable Institute. The Equable Institute, an opponent of public pensions, released a new report on Tuesday claiming that education budgets have “doubled” over the past 20 years, implying that pensions are crowding out education funding. The Equable Institute consists of a true who’s who of anti-pension ideologues, as several of its employees have formerly worked at organizations that oppose public pensions. Many of its board members also worked to gut earned benefits for public employees in the past. Reputable research shows that pensions do not crowd out education spending. According to the National Conference on Public Employee Retirement Systems (NCPERS), in 2016 state and local government pension contributions totaled 4.1 percent of state revenue, compared to 28.3 percent of revenue going to education spending. Pensions are the best way to guarantee a dignified retirement for educators.
We Need More Flexible And Resilient State Economies Post COVID-19 by Adam Millsap. Millsap is another author who is using the current market downturn to slash benefits for public employees. In this article for Forbes, Millsap claims that states should “transition public employees to defined contribution plans” in light of the current downturn. This would not give public employees a secure retirement and would also not help states financially. As we noted last week, “closing systems have come at a great cost to municipalities. Additionally, without an adequate retirement benefit, retirees are put at a higher risk of experiencing poverty, needing to rely on government assistance to make ends meet. All of these defined-contribution plans put all of the market risks on the individual worker. Pensions, on the other hand, are pooled collectively among its members, leaving them less vulnerable to market downturns and guaranteeing a secure retirement for its members after they have served the public.”
Be sure to check back next week for the latest news in the fight for a secure retirement!