LaborTalk (99) September 17, 2010
All Public Employee Unions Face Attacks
On Wages and Pensions from Needy States
By Harry Kelber
Fueled by intense public anger and faced with crushing budget deficits, state administrations are demanding that public employees take cuts in their“over- generous” wages, pensions and other benefits.
Public employee unions have become the whipping boys for a generation of governors, both Republican and some Democrats, who are ready totake on political targets that were once a protected liberal class of teachers, police, firefighters and other public employees.
The immediate cause of the new spotlight on public sector unions is the collapse of state and city tax revenues that came with the 2008 Wall Street crash, something that union leaders note is not their fault. “It’s outrageous to blame a librarian or blame a fireman for the financial mess we find our country in,” said Gerald McEntee, president of the American Federation of State, County and Municipal Employees (AFSCME), the largest national public workers union, with 1.4 million members.
“We have a new privileged class n America,” says Indiana Gov. Mitch Daniels, who rescinded state workers’ collective bargaining power on his first day in office in 2006. “We used to think of government workers as underpaid government servants. Now they are better paid than the people who pay their salaries.”
Governors have made sporadic attempts over the last decade to rein in the spiraling pension costs that have consumed increasing shares of the state budgets, and which legislatures in states like New York and California often sweetened pensions as a gift to political allies..
The recent revenue crunch has given governors and big-city mayors new leverage to squeeze public employees. Andrew Cuomo, the Democratic nominee for governor, has echoed the attacks on unions.
States Will Seek to Restructure Union Pension Funds
Probably the biggest problem facing state administrations is how to restructure their pension systems to avoid a financial crisis. Public pensions at the state and local level are underfunded by more than 1 trillion dollars. In many cities, pension obligations will soon consume a quarter or more of their annual budgets — money that will be unavailable for parks, libraries, street maintenance and public safety. Part of the problem is that pension funds need significant new financing to cover the growing number of retirees. But the real issue is the lack of incentives to improve pension performance.
Responding to public anger, state administrations have been promoting legislation that reduces benefits to retirees. In Illinois, Gov. Pat Quinn, a Democrat, last month signed into law a bill that changed the benefits for all five of the state’s pension systems and raised the retirement age. He also limited pension raises, capped maximum benefits and ended public pensions for people who work another public job.
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Public employees are in danger of seeing their retirement benefits significantly reduced to solve the grossly underfunded pension plans of many states and cities. Union members should be vigilant about protecting their “deferred benefit plan” from new formulas that may end up as reductions in their retirement income. And they can’t let Republicans tear down Social Security.
Let’s remind the public and the government that our contributions to the pension fund are actually deferred wages, which we put aside as part of a collective bargaining agreement. That money is ours! And it should be included in our retirement package.—Harry Kelber