U.S.: Public Workers Fight to Preserve Pensions

  • by Matthew Cardinale (atlanta, georgia)
  • Inter Press Service

Some of the affected workers include those who work in sanitation, water, public works, police and fire departments.

According to a new report by the Center on Budget and Policy Priorities, states are facing a total budget deficit of 103 billion dollars in fiscal year 2012.

Backed by labour unions, city workers, especially those who work lengthy terms of service up to 30 years, have been able to retire with somewhat generous pension benefits.

Workers invest some portion of their earnings into a pension fund, which is then matched by the city government. The pension fund is then invested on the stock market in order to - it is hoped - bring a positive return on the investment.

With the poor performance of the market in the current economy, the costs of funding pension liabilities to cities have skyrocketed. In Atlanta, Georgia, for example, pensions take up almost 20 percent of the city's annual budget.

The city of Baltimore, Maryland voted last year to change its pension system, but the unions are fighting the changes in court.

Chicago, Illinois; Los Angeles, California; New York, New York; Philadelphia, Pennsylvania; and Phoenix, Arizona are among the cities currently considering pension reform.

Elected officials have responded with a sense of urgency to the growth of pension costs in order to avoid raising taxes, firing workers, or further cutting services. On Thursday, Florida became the 16th state to increase retirement costs for public workers.

Meanwhile, critics say corporate interests have used the financial crisis as an excuse to radically change the character and structure of public pensions from what is called a defined benefit plan to a defined contributions plan.

'It's a continuation of what the private sector has been doing since the 1980s,' Jim Daws, president of the International Association of Fire Fighters, Atlanta Local 134, told IPS. 'They killed defined benefit plans and put everyone on 401(k)'s where investors can make billions of dollars. They were putting taxpayer dollars for workers' retirement money in their own pockets.'

In a defined benefits plan, workers are guaranteed a certain retirement benefit amount, regardless of how well the market performs; if the market performs poorly, the city makes up the difference.

In a defined contributions plan, the market risk is shifted to the worker; if the market performs poorly, the worker receives less.

'It's a coordinated effort, none of this is organic,' Daws added. 'It's been driven by the financial sector. The market crash in 2008 gave them the excuse, but the irony is, they caused the crisis.'

'They've been funding these right-wing think tanks... for going after the pensions,' he said.

Atlanta Mayor Kasim Reed pushed the City Council to take action by Thursday, Jun. 30.

Late Wednesday, the Atlanta Council unanimously passed a reform proposal that was the result of weeks of heated debate amongst Council Members and the public.

After Mayor Reed introduced two pension proposals, Councilwoman Yolanda Adrean introduced a proposal that drew the opposition of the unions.

Unions opposed the proposal because they did want to lose their guaranteed benefits and they did not trust the market.

'The Adrean plan... was a violation of the contract impairment clause of the State [Georgia] and U.S. Constitutions. We could not agree to that,' Daws said, noting the plan would have altered existing employees' benefits.

So, Councilwoman Felicia Moore introduced an alternative proposal, crafted with the help of the unions, called the Employee/Moore proposal. The unions offered to increase their own contribution into the pension by five percent - from eight to 13 percent - in order to keep their defined benefit.

'I work with the City of Atlanta Sewer Division. Out of the 26 years that I've worked there, it ain't been an easy road. I'd challenge any of you all to smell sewage, you know what it is. Hell to smell it. Hell to work in it... Now I'm at the end... I got to hear, ain't no pension for you,' Fletcher Glass said during a Jun. 15 meeting of the Council's Finance/Executive Committee.

'I think you all have never really seen how people feel, when you got to sit back here and listen to... Cuts, cuts, cuts, cuts. When you gonna say, add something to 'em?' Glass said.

Ultimately, council members reached a compromise to accept the current city workers' offer to pay five percent more to keep their current benefits. But future city employees will receive a hybrid plan with a reduced defined benefit component as well as a defined contribution component, with a generous city match.

'The key to this plan is it does not reduce benefits for the existing employees,' Daws said. 'It was a tough pill to swallow. The new workers... will wonder why this is happening to them.'

Meanwhile, Council President Mitchell said he was with happy the compromise.

'The new pension reform plan will save the city 22 to 30 million dollars annually, reduce our unfunded liability over the next 30 years, and provide current and future city employees a benefit plan that will allow them to retire with dignity in years to come,' Mitchell said.

The cuts being imposed across the country are deeper than in past years, says the Center on Budget and Policy Priorities, and will likely have the effect of delaying the nation's economic recovery and undermining efforts to create jobs.

© Inter Press Service (2011) — All Rights ReservedOriginal source: Inter Press Service