Welcome to the newest communications tool of the FPPTA – our professional Blog “Pension Talk”. This part of our website will serve as a bulletin board and op-ed site for position papers, opinion papers, and research about public pension plans. We will be circulating announcements about our new posts directly to our media mailing list and to lawmakers in an effort to encourage them to visit our website and make themselves better educated about the complexities of public pension (politically) and about the strengths of defined benefit plans (financially).

We always are willing to share your comments about these posts and we strongly encourage you to share the link with your board members, employees, retirees and local elected officials, as well as the local press. Comments will be accepted only via e-mail, but will be reviewed and posted within a day of receipt. So, if you have additional information on any given post, please feel free to share it with us. Our membership will benefit from wider viewpoints and the experience of others.

Click on the blog titles below to view details.

Blame Game, by Susan Marden
Written By:
Monday, 6/26/2017

While unfunded liabilities of pension plans across the country spiked alarmingly in response to the drop in assets that accompanied the 2008 stock market crash, most plans have rebounded and have continued to meet their long-term anticipated rate of returns – proof that public sector pension plans are sustainable.

  According to a recent report from the [Florida] law firm Cypen & Cypen, “Public pension funds have recently exceeded their pre-recession asset totals, currently holding $3.72 trillion in assets for over 15 million working and 8 million retired employees of state and local governments. The pre-recession high was $3.2 trillion. For the 25-year period ending June 2013, which included three economic recessions and four years of negative median public fund investment returns, actual public pension investment returns averaged 8.6%; the 10-year return was 7.1%.”

  So, what of the plans that are still steeply underfunded?  It seems research is now finally surfacing that correctly identifies the real reason for shortfalls in these public pension funds, and it is not the exorbitance of pension benefits, nor the unsustainability of public funds, but rather the failure of elected officials to make promised contributions to those funds.

  In perhaps the most ludicrous white paper yet on this subject, and without a trace of irony, Brookings Institution author Josh Barrow argued that defined benefit pensions are “basically a structure with which state lawmakers cannot be trusted. They involve making promises over periods of decades. They involve state lawmakers now making decisions for political benefit, and being able to send the bill to people who will be in office far in the future. 

  It turns out, the public pension plans struggling most are in trouble because elected officials abdicated their responsibilities. They agreed to contracts they were unwilling or unable to fund. The buck stops there.

  After all the demonizing of public workers, greedy unions, and hyperbole about pension plans bankrupting states (which is constitutionally prohibited), the real culprit of pension fund problems has been the people we voted into office. And yet, private sector anti-pension critics continue to suggest the solution to underfunded plans is to get rid of them.

  We believe the solution is pension reform, which already has included the following:

  •  Since 2008, 48 states have enacted pension reforms aimed at closing the gaps in unfunded liabilities, bringing total assets more closely in line with what will be required to pay retirees.
  • According to the National Institute on Retirement Security, 40 states reduced future pension benefits;
  • 30 states required employees to increase their contributions (including Florida);
  • 21 states reduced cost-of-living adjustments for retirees;
  • and 11 states statutorily increased the employers' pension contributions.

  In fact, the Boston College Center for Retirement Research projects current reforms might eventually reduce many state pension costs to levels below what plans paid before 2008.  Municipal plans also have been aggressively working to recalibrate their benefits-to-contribution ratios to ensure their pension plans’ sustainability.  They are succeeding.

  Yet still there are voices – well financed and with a clear political agenda – advocating for the end of defined benefit (guaranteed) public pension plans.  These voices are still selling fear about how the cost of public worker benefits will crowd out other public services. They are also selling 401(k) products.

  It should come as no surprise the Brookings Institution paper was financed by the John and Laura Arnold Foundation.  The same foundation that quietly tried to finance a PBS series titled Pension Peril, and that financed a Pew report used to support the closure of the Kentucky public pension plan, a report later vigorously condemned as subterfuge by a group of Kentucky State Senators. John Arnold is a billionaire former Enron trader who is aggressively campaigning in select states to replace DB pension plans with cash balance accounts – including in Florida.

  The private sector, and particularly the financial services industry, has done a good job convincing people that “Big Government” is the enemy of economic growth, but it was “Big Banking” that precipitated the financial meltdown we are now struggling to overcome. We don’t need more financial insecurity. We need more responsible public officials.