May 15, 2010

So Future, Potential Tax Revenue (i.e., Private Income) Is and Has Been the Property of Public Labor?

Monique Chartier

Eight public labor unions filed suit Wednesday to stop the implementation of minor changes made last year to public pension eligibility guidelines. The basis cited for the claim is revealing.

Calling the changes a “taking of property without justification,” the unions are asking that the changes be declared unconstitutional, that lost benefits be restored and that the state pay for the unions’ legal costs.

The pension system consists of past and future contributions by employers and past and future contributions by employees, together to be amplified (hopefully) by investment instruments. However, as has been noted here and elsewhere, employer contributions have not been made as required; accordingly, the pension system is not sitting fully funded in a lock box. And even if it were, defining it as the property of current and future retirees still seems far from the mark.

The only way that the current Rhode Island pension system can play out as envisioned by the politicians who promised these pensions and then failed to properly fund them is via the appropriation, over many years, of a seriously non-feasible amount of taxpayer money. The only way that these eight labor unions can make the far-fetched case that public pensions are their "property", then, is if they are laying claim to the private sector funds that may or may not materialize over the next couple of decades in the pockets of taxpayers who may or may not even be here to surrender those funds.

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Actually, RI is in better shape than many other states, where public sector employee benefit guarantees were added to the state constitution in recent years.

A property based claim is, as these things go, a relatively weak one.

I'm just waiting for the progressive welfare crew to file a friend of the court brief arguing against the position taken by their public sector union allies -- they well understand the significance of this battle.

Posted by: John at May 15, 2010 8:37 PM

My understanding of this whole mess is once an employee is vested under the pension contract you can’t go taking things away that were promised under law. It has nothing to do when you can retire but when the individual is vested. The charge that the union is claiming ownership of the funds is a lame excuse. It’s the contract under law that was created between the employee who is investing retirement funds at 8.5% or 9.25% and the state of RI who is suppose to be matching the funds and managing the pension fund in a responsible manner.

State of Hawaii had the same problem because the pension fund was being underfunded same as in RI. The unions (HI 2nd most unionized state in nation verses RI at ranking 7th most unionized state) filed law suit to force state of HI to live up to the funding of the pension system. After court decisions and appeals to higher courts the unions won and the state under court rule is being forced to balance the underfunded pension liability.

The State of HI pension fund during the first quarter 2010 just raised an extra $308 million to bring the pension total to $10.52 billion or 3.3% increase Jan-Mar 2010. State of HI manages the retirement portfolio based on an 8% annual return.

Posted by: Ken at May 15, 2010 9:06 PM

Every nickel of pension monies that I lose will be made up by the private sector's forgiving their obligations. If my pension decreases, so then shall my mortgage. If more is lost, my other obligations will be reduced accordingly, and my tax burden reduced.

I honor my commitments, and fully expect everybody I do business with to do the same.

Posted by: michael at May 16, 2010 9:30 AM

Oh michael, it's only in your union world that people are supposed to live up to their obligations. How about the GM and Chrysler bankruptcies where the secured bondholders were forced by the fascist Obama administration to take second position to the unsecured union members. I'm sure you had no problems with people not living up to their committments in that case.

Posted by: Mike Cappelli at May 16, 2010 11:03 AM

I hereby extend my pink cloud vision of fairness to all workers, public and private.

Posted by: michael at May 16, 2010 11:17 AM

The best thing to happen is that the tit suckers WIN.
Because the removal of the barely real 05 and 09 "reforms" would quickly bankrupt the state and force, by necessity, the END of pensions for the "unvested".
By the way, though the benefit amount of those already pensioned may (may) be untouchable, the COLA's can be eliminated or reduced at will.
Anyone who doubts that real pension reform is coming very soon is delusionary or just plain insane-in short, a "progressive".

Posted by: tommy cranston at May 16, 2010 11:19 AM

"Every nickel of pension monies that I lose will be made up by the private sector's forgiving their obligations. If my pension decreases, so then shall my mortgage. If more is lost, my other obligations will be reduced accordingly, and my tax burden reduced."

The only thing more nonsensical and self-serving than trickle-down economic theory: trickle-up economic theory. Pat Crowley would be proud.

I'll see returns on the $10,000 I sent to displaced Nigerian prince Mariam Ajao Omotoriola via paypal last week before I ever see a cent of my tax money that goes to public union raises and firefighter disability fraud in the form of better services or economic growth. That money goes straight to Japanese plasma screen TV companies and Florida condominium associations.

F**k my "obligations" to the public unions. I never agreed to anything and the kind of waste, fraud, and breach of contract they engage in on a regular basis would release anyone from any legal agreement of which I am aware.

Posted by: Dan at May 16, 2010 11:33 AM

>>I honor my commitments, and fully expect everybody I do business with to do the same.

The argument is specious.

Yes, there is a legal right to vested benefits earned by an individual.

THAT IS NOT THE SAME, as the unions would have us believe, that one can't make changes to a pension program just because an individual is "vested." You CAN make changes prospectively -- it is ridiculous to think that the program in place on the day on one individual's hire can never be changed (once they've "vested") for the remainder of time that that individual CHOOSES to remain employed.

That is why a pension freeze (as has been done routinely in the private sector) is perfectly legal and is the best solution. If someone has 10 or 15 or 20 years in, they'll get whatever "benefit" they've earned (vested) to date. But they won't accrue any additional pension benefit (or pension credit to use their terminology). Instead, going forward, they participate in a 401k / 403b, just like those of us in the real world.

And if they don't like the new "benefit package" they are free to move on to a new employer.

Posted by: Ragin' Rhode Islander at May 17, 2010 8:20 AM
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