Welcome to 2021’s first edition of This Week in Pensions! This is the news you need to know in the fight for a secure retirement.
Before you dive into our top stories from this week, check out some stories of public employees helping their communities during the coronavirus pandemic.
Here are the top stories from this week:
Beshear’s budget would boost education funding, give raises to teachers, public workers by John Cheves. Yesterday, Kentucky Gov. Andy Beshear shared his budget proposal for the commonwealth’s upcoming fiscal year, including multiple items on public pensions. Gov. Beshear’s proposed budget includes making the full annual required contributions to the Kentucky Retirement Systems and the Teachers’ Retirement System. It also proposes “to subsidize pension contribution rates for regional universities and ‘quasi-government’ employers, such as local health departments and community mental health centers.” Now, the Kentucky state House and state Senate must consider and pass a budget for the commonwealth. We will continue to follow Kentucky’s legislative developments to ensure public employees’ hard-earned retirement security is protected.
Public Pensions Aren’t Causing State And Local Budget Gaps—The Pandemic Is by Richard McGahey. In this article for Forbes, McGaheny lays out how the coronavirus-induced economic crisis is responsible for creating state and local budget shortfalls, not public employees and their pensions. “The estimated total pension fund shortfall is less than 0.2 percent of projected gross state product over the next 30 years for most states, and less than 0.5 percent in states with the largest shortfalls,” McGaheny writes, and “states and cities are suffering from the pandemic recession’s impact on their economies and budgets, not because of poor management.” We also couldn’t agree more with the author’s final point that “instead of attacking public employee pensions, we should be finding ways to get decent retirement coverage for all Americans.”
Are There Cracks in Your Pension Plan? By Alina Tugend. The National Public Pension Coalition’s (NPPC) executive director, Bridget Early, was quoted in Kiplinger’s piece about what protections were available to pension recipients. Early commented that “states and policymakers have been unable to move the goalposts for retirees and current employees, whether they are vested or not, because those plans are part of a contract.” For example, in Illinois, the state passed a law to reduce benefits and was subsequently sued, and the U.S. Supreme Court ruled in 2015 that the law was unconstitutional. However, Early noted that “state legislatures can make other changes, such as to cost-of-living adjustments, because they are not included in the initial pension formula.” At NPPC, we believe that every American should be able to retire with dignity. We will do our best to protect the retirement security of the dedicated public employees who serve us.
Pension Spending Supports $1.3 Trillion In Output, 6.9 Million Jobs, $192 Billion in Tax Revenue Across the U.S. Economy by the National Institute on Retirement Security (NIRS). On Wednesday, NIRS released a new report on the economic impact of pension spending throughout the country. NIRS found that, in 2018, pension spending created $1.3 trillion in total economic output and supported nearly 7 million jobs, in addition to generating nearly $192 billion in federal, state, and local tax revenue. NIRS also noted that for every dollar paid out in pension benefits, it supported $2.19 in total economic output. It’s clear that pension spending makes a real difference not just for the public employees who depend on them for financial security but also for the economic health of communities across the nation.
Pandemic has been ‘extremely disruptive’ for retirement plans for some Americans by Dhara Singh. In this article for Yahoo!Money, Singh writes on how the coronavirus-induced economic downturn has impacted Americans’ retirement security. Singh is correct when she notes that the current recession has “led to nearly a third of Americans thinking that retirement is no longer a possibility.” However, her claim that “state pension funds remain in trouble” due to the crisis is not true. Research from the Center for State and Local Government Excellence and the Boston College Center for Retirement Research shows the average funded ratio for local plans in the fiscal year 2020 was 70.8 percent, and for state plans, it was 72.4 percent. These numbers are roughly the same as they were in the last fiscal year before the current downturn.
Be sure to check back next week for the latest news in the fight for a secure retirement!