In The News › What do we want? Pension reform. When do we want it? Now.—James Varney

What do we want? Pension reform. When do we want it? Now.—James Varney

By James Varney
The Times-Picayune

When searching for examples of how dysfunctional government budgets have become, public employees’ pensions are a good place to start. Louisiana’s Cadillac plans for state workers offer case-closed evidence of the mentality that has driven government policy for ages.

That mentality is this: things like gluttonous public pensions can always be funded fully from one bottomless source – other people’s money.

Remember, the private sector is doing fine. Sure, folks in this economy may be worried about keeping their jobs, or putting kids through college, or watching their home values and income decline all while trying to salt away a few dollars for their own retirement. No matter. One of society’s chief goals, apparently, is ensuring public employees sail into a gold-plated golden age.

For the public worker, incidentally, that age comes much earlier than it does for their private sector counterparts. Not only are the marks in the private sector expected to pay for most of the public employees’ generous pensions, but they are also expected to foot that bill for a longer period of time. No one hits retirement age sooner and in better shape than a government worker.

A spate of reports looking at the issue statewide has drawn these conclusions, and they were buttressed again last week with a report by the Bureau of Governmental Research. The BGR looked at 18 public retirement plans in Orleans, Jefferson and St. Tammany parishes. What it found is infuriating, if unsurprising.

“Put simply,” the BGR wrote, “private citizens are helping to pay for public sector retirement benefits that are far more generous and more secure than their own.”

One thing in particular drives these costly engines of spending, which have already wrecked parts of failed blue states like California and loom as state-by-state fiscal cliffs nationwide. Indeed, that radical element comes on the very first sentence of the BGR report: defined benefits. Defined benefits are a model now largely extinct in the private sector for one complex reason: they’re unaffordable.

You would think these tough times would engender a more compromising attitude among public sector employees. But you would be wrong. Louisiana reflects its French roots in that respect: tinker even at the edges of the rich formulas to which government workers have become accustomed and fury will follow.

Gov. Bobby Jindal took a beating when he put forth a pension reform package last spring. The blowback legislators felt from those clawing to preserve every nickel of their precious deals meant only one small piece got passed – pushing new employees into more of a defined contribution plan starting next July. That wrinkle is already subject to a lawsuit, even though it’s a plan unlike anything familiar to the private sector as it has built-in cushions to protect public employees from market turbulence.

There’s no reason pension reform should be a partisan issue, and Jindal isn’t alone in trying to improve the situation. The Democratic machine that controls New Orleans is hip to this, too. To the local area’s credit, public employees have been increasing their plan contributions since 2000 in a majority of the plans surveyed by the BGR.

In addition, two caveats apply. One is that no one believes public employees aren’t entitled to a pension, and because Louisiana workers don’t participate in Social Security (which will probably prove another boon for them) that guarantee may require a bit more here than elsewhere. Second, the shocking deficit figures that get thrown around – Louisiana’s pension shortfall at the moment is $18.5 billion – are numbers run on five-year cycles and will shrink with better market performances.

Still, this is simply not a close call. Public pensions must be made to resemble more closely those available to private sector workers. There is no reason one group should shoulder the burden for two, and the fact that that’s the current arrangement is a galling, transparent injustice.

Local and state elected officials must aggressively and quickly articulate this slam-dunk case. Then they can implement changes that will make the system not only fairer, but sounder long-term for taxpayers and recipients.

Conventional wisdom held that Jindal may have lost his appetite for pension reform after the bruising fights over it in the last legislative session. He’d better get hungry.

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