Public pension opponents resort to Big Lie tactics

Supporters of a bill that would bar newly hired Texas state employees and teachers from enrolling in a secure defined benefits pension plan and, instead, force them into risky defined contribution plans used the Big Lie tactic to make their case Tuesday night at a legislative committee hearing on the bill, HB 2506.

Public employee defined benefit plans forced Illinois, California, and New York into bankruptcy, said Rep. Wayne Chisum, the sponsor of HB 2506, and therefore, need to be phased out.

Talmadge Heflin of the Texas Public Policy Foundation, a group that lobbies for fewer government services and more privatization, called defined benefit public pension plans a burden on taxpayers that could cause Texas to become insolvent.

“These lies are a smokescreen that opponents of defined benefit plan use to obscure their real agenda–to make the life of working people less secure,” said Mike Gross, vice-president of the Texas State Employees Union. “When workers are less secure, they’ll often work for lower wages.”

Defined benefit pensions provide a guaranteed pension based on years of service and average salary. On the other hand, the value of a defined contribution pension like 401(k) plans depends on how well the stock market performs. “I would have been in big trouble if all I had was my 401(k) plan when I retired,” said Leslie Cunningham a retired state employee and TSEU member who testified against HB 2506. “My 401(k) plan lost 40 percent of its value in stock market crash of 2001. It lost another 25 percent in the crash of 2008.”

Recently, reporters from the McClatchy news services examined the arguments that opponents of public defined benefit pension plans and found that they have little substance.

Public pension funds, despite what Rep. Chisum said, are not the cause of state budget deficits. In fact, they account for only a small share of state budgets. According to the National Association of State Retirement Administrators, contributions to public pension funds account for only 2.9 percent state budgets. The Center for Retirement Research at Boston College puts the figure slightly higher at 3.8 percent.

(In Texas, the state’s contribution to the state’s pension for state employees (ERS) and for teachers (TRS) is less than 2 percent of the state budget.)

Furthermore, state pension plans are nowhere near the point of requiring large infusions of state money that could cause an insolvency crisis. “On average with assets on hand today, (state pension) plans are able to pay annual benefits at their current level for 13 years,” Jean-Pierre Aubry, a researcher for Center for Retirement Research, told McClatchy reporters.

In other words, even if public pension funds didn’t receive any more money from states and the value of their assets did not improve, on average, they would still be able to pay benefits at their current level for 13 years. Texas is in slightly better shape. ERS would be able to pay benefits for 13.4 years and TRS for 14 years. California, which Rep. Chisum said was bankrupted by its public pension funds, would be able to meet current obligations for 15 years.

Most people who testified at Tuesday night’s hearing opposed HB 2605. The committee took no action on the bill leaving it pending. From the discussion that took place among committee members, it appears that a substitute bill that calls for an interim study of the issue after the Legislature will be considered.