[Davis Democrats] FW: State Senator Noreen Evans (California-Democrat- SD#2)-chair of Legislative Women's Caucus- criticizes Republicans' attack on pension plans of public employees

[John Chendo]

------ Forwarded Message
From: John  Chendo 
<jac07 at dcn.org>

   
Message from sender:

Republicans want to eliminate guaranteed public employment pension  benefits
    

 
Published on California Progress  Report
(http://www.californiaprogressreport.com/site)
 

 
Home </site/>  > Blogs </site/blog>  > megan's  blog </site/blog/7678>  >
Public Employee Pension ³Reform² or Dismantlement?
 

 
Public Employee Pension ³Reform² or  Dismantlement?
 
By megan
 
Created 01/28/2011 - 2:03am
 
     
                   
Posted on 28 January  2011
      
             
By State Senator Noreen Evans

While the Governor and Legislative Democrats grapple with the state¹s
fiscal crisis by proposing severe budget cuts matched with tax extensions,
our Republican colleagues remain on the sidelines. Recently, however, they
made their first demand ­ destruction of pension plans of public  employees.

You remember retirement plans? Just about everyone working for a large
company used to have one. Then some smart MBAs figured that corporations
could save a bundle of money by dropping pension plans and substituting
401(k) ­ style benefit plans. The corporation would pay out less, retirees
would reap ³benefits² from a perpetually growing stock market, and
investing firms would earn lavish fees. Of course, the market goes up and it
goes down, and if an employee about to retire is caught on the wrong end of
the graph, well life is tough.

So now our colleagues say that in order to consider letting voters decide
whether to extend taxes to help fill the budget gap, Democrats must first
agree to mandate that all new state employees forgo state pensions and
instead contribute to 401(k) ­style benefit plans.

Requiring state employees to enter into 401(k)-style benefit plans is not
³pension reform²; It is the complete dismantlement of our state¹s  public
employee retirement system and presents a host of potential  dilemmas.

Retirement plans can be broken into two basic categories ­ defined  benefits
(DB) plans and defined contribution (DC) plans. Defined benefit  plans pay
out specific benefits to retirees that cannot be changed or limited  during
that individual¹s lifetime. Defined contribution plans define the  specific
contributions the employers and/or employees make to an  individual¹s
retirement account, but do not specify the amount of the  benefit paid out
upon retirement. Then there are 401(k) plans which depend  entirely upon the
market and an individual¹s skill or luck.

Historically, public sector employees are paid lower wages than comparable
private sector employees. Secure long-term retirement benefits are often the
hook that keeps valuable employees in public sector employment rather than
leaving to find higher wages in the private sector. Substituting a DB system
with a DC system or 401(k) plan would discourage civil service employment
and  increase turnover rates, resulting in an inconsistent workforce and
loss of  institutional memory.

Studies  have shown
<http://www.calpers.ca.gov/eip-docs/member/retirement/info-sources/defined-b
ene-facts.pdf>  that DBs are less expensive to administer and do much better
than DC systems. Average administrative costs for a DC system are 2% of
assets, while a DB system costs only .18% of assets. And DB systems employ
top quality investment managers, consistently outperforming DC systems in
down market times.

Today many state employees contribute to both systems, often to defer
taxes, and that¹s well and good. And there are ways to reform pension plans
that are common sense and fair. The Governor, for one, is talking about such
reforms. But requiring state employees to enter into a 401(k)-style defined
contribution retirement plan would put public employees at the mercy of Wall
Street, and would represent a major step back to retirement insecurity, not
³reform.²

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

State Senator Noreen Evans represents California's 2nd State Senate
District, which spans from the North Bay to the North Coast.s. Evans serves
as Chair of the Legislative Women's Caucus. This article originally appeared
on her  new blog 
<http://noreenevans.blogspot.com/2011/01/public-employee-pension-reform-or.h
tml> . 
  
   
                   


 

 

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