American humorist Garrison Keillor made us laugh with “A Prairie Home Companion,” his long-running radio show underwritten by a fictitious product called “Powdermilk Biscuits.” A tag line for these tasty treats was: “made from whole wheat raised by Norwegian bachelor farmers, so you know they’re not only good for you, they’re pure – mostly.”
It was the “mostly” that always got me.
Today, a “mostly” I write about is no laughing matter. The retirement security of teachers, firefighters, police and other public employees may hinge on the old saw that an exception does not prove the rule.
Let me explain. Here in Texas, defined-benefit public employee pension plans – the kind that pay retirees a set amount on a monthly basis in consideration of their service – are on track to meet their promises.
The Texas Legislature has taken prudent steps to strengthen the state’s two largest public pensions programs: the Teacher Retirement System and the Employee Retirement System. Similarly, many municipal, police and fire pension systems are adjusting their plans to ensure long-term viability.
For example, Houston Mayor Sylvester Turner recently reached a grand bargain with the three major pension systems in his city and is bringing forward legislation designed to strengthen the long-term solvency of those plans. The changes will require all parties, including active employees, retirees, and the city, to share in the costs associated with ensuring that those pension systems are able to meet their long-term obligations.
Unfortunately, opponents of defined-benefit public pension plans have launched a concerted, well-funded campaign to convince Texans that all public pension plans in our state are in crisis by exploiting a unique set of problems involving firefighter and police pensions in Dallas.
The challenges faced by that city are serious and must be addressed, but they are the exception, not the rule. The public should not be fooled by an effort to conflate the challenges facing Dallas pension funds with the continuing strength of other pension systems around the state.
The campaign against public pensions calls for a conversion from defined-benefit plans to defined-contribution plans, which would upset the shared stakes in the current system and heap all future risk on working people. This is bad for Texas for at least three reasons.
First, defined-benefit plans provide retirement security by guaranteeing a fixed benefit. Defined contribution plans – think 401(k) – on the other hand place retirees in uncertain positions, subject to short-term market fluctuations that could leave them with inadequate funds to make ends meet.
Second, eliminating defined-benefit public pension plans would create a true pension crisis in Texas, with no “mostly” necessary. Public pension systems would be thrown into chaos if new employees suddenly no longer contribute to the plans that existing employees and retirees are promised.
Third, the overhead of large public pension plans is tiny compared to fees and costs associated with defined-contribution plans. As with proposals to privatize Social Security, moving public pension plans to defined-contribution status would create a windfall for investment professionals who charge much higher fees for individual investors than governments obtain by hiring highly skilled professionals to invest pools of retirement funds.
Texans for Secure Retirement advocates for policies that support and enhance defined benefit pension plans. By working to ensure that employers and employees make adequate contributions and that pension systems are well managed and adequately funded, we ensure promises made to the first responders, teachers and public employees who serve our communities will be kept.
Our coalition of pension fund representatives, public employee unions, pension trustees and investment professionals will vigilantly watch pension bills this legislative session and will provide the public with information about how bills would affect all the pension plans in Texas.
Source: El Paso Times