Pension plan liabilities are
loading states and cities all over the country with huge debt burdens but
because of the sacrosanct nature of public service employee contracts,
politicians can see no solution other than raising taxes on those who do not
enjoy such generous pensions. A first step in reforming the pension systems
would be to freeze benefits for all participants in the plans who are not
covered by these sacred union contracts, and offer them 401k type defined
contribution plans.
There is no contractual reason for
elected officials, political appointees, and high paid non-union employees to
continue in these plans. Removing them from participation will eliminate a real
conflict of interest. How can there be significant pension reform until the
legislators and political appointees who negotiated these generous union plans
no longer share in the benefits and concessions they gave to the unions.
My home state of Connecticut provides
a good example of egregious excess in the distribution of pension benefits.
Just last year Democratic Governor Dannell Malloy appointed two sixty-six year
old Democratic operatives as judges on the State’s highest court. The two will
be eligible to receive pensions of $100000 per year at age 70 after serving
just four years on the bench. It takes approximately $2,500,000 earning 4% to
provide an income of $100000 per year.
There was no union contract
requiring this incredibly generous pension benefit. It has just been a
traditional way to reward friends in high places. In this case, however, public
outcry caused the Governor and the Legislature to act almost overnight and
alter the pension benefit formula for future judicial appointees. Still, the
damage had been done. During his first term the Governor added about a dozen
Democratic lawyers to the State’s judiciary. All will enjoy extremely generous
pensions after relatively short periods of employment.
The high paid administrators of
Connecticut’s University system are also included in the State’s pension system
even though they are not covered by union contracts. There is no sacrosanct
contractual reason to provide football and basketball coaches whose total compensation exceeds
$2,000,000 per year with pensions. Actually, in 2011 a study showed
that the top ten pension recipients in the State were all associated with the
University of Connecticut, especially its health center and medical school.
They were all drawing pensions in excess of $200000 per year, with the highest
being about $272000.
Finally, all elected state
legislators and their staffs are included in the State’s pension system even
though they are not covered by any union contract. It is true that legislators
are considered part-time employees and only make about $35000 per year in
salary. But there is a pot of gold at the end of their rainbow. During his
first term Governor Malloy appointed a number of Democratic legislators to high
paid positions in his administration.
These appointments will eventually
double and perhaps even triple the pensions they would have received if they
had stayed in the legislative branch. A good example is Andrew McDonald, a
lawyer and political friend of the Governor’s from their hometown of Stamford.
McDonald left the legislature to take a high paying job in Malloy’s new
administration. He was subsequently elevated to the State’s Supreme Court where
he will be eligible for a six-figure pension upon retirement. If he had stayed
in the legislature his pension would have been a percentage of his $35000
salary.
How will it be possible to reform
the State’s pension system when the people who are supposed to be representing
the public share in all the benefits they confer on the unions? People regard
these union contracts as sacred obligations but the legislators and their
staffs knew they every concession they made in the past to the union
negotiators would benefit themselves or their own family members.
They cannot be part of the pension
liability solution as long as they are part of the problem.
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