By Dan Kennedy • The press, politics, technology, culture and other passions

Necessary but insufficient

Gov. Deval Patrick deserves credit for vetoing an unaffordable pension increase for retired teachers and state workers. The Outraged Liberal calls it “one of the more courageous political acts I’ve seen around here in a long time.”

But the larger issue is that people in the private sector, with rare exceptions, don’t receive pension benefits, and haven’t for some time. There are few things people resent more than paying taxes for employee benefits that go well beyond what are available to them.

It seems pretty obvious that Massachusetts needs to move gradually (but not too gradually) toward an employee-contribution system for current and future state and municipal workers — a 403(b), which is the government/nonprofit equivalent of a 401(k).

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14 Comments

  1. Peter Porcupine

    DK – FWIW, we began digging this hole in the early 1980’s.Social Security had reached a crisis, and Reagan looked around to keep it solvent. what he saw were state and Federal workers not paying Social Security. So, he mandated that the Federal employees began to pay immediately (I was a Federal employee at the time, and you would have thought the world was ending!), and he instituted penalties for the states which didn’t begin to make their employees pay in, in the form of lowering Social Security eligibility, usually an spousal survivor benefit on a widow/er, by the amount of any ‘non-contributory’ pension.Guess what Mass. chose to do?We are one of the few states which do NOT have state employees pay Social Security – ALL they get is their state pensions, unlike the Federal employees, who now collect both. It makes the comparision to private industry pensions false, as thee will be no additional Social Security to ‘stack’ at the end of the day, as a private industry pension can be stacked atop Social Security. And – it makes a 401-k model even less feasible.

  2. acf

    What matters to me is the fact the the Commonwealth’s employees are not contributing to the funding of Social Security. In my eyes it’s analogous to a company in the private sector deciding that because it have a pension plan, it shouldn’t pay SS, either. If the state wants to have a pension plan for its employees, I say fine, but it shouldn’t excuse those employees from paying into SS like the rest of us. Every worker in this country who receives pay for labor should play into SS, including independent consultants, and self employed owners who receive distributions instead of salaries. Rhetoric not withstanding, I see SS as a current program, not a pension plan.

  3. Sean Roche

    Welcome to the race to the bottom, with Wal-Mart setting the pace.I’d flip it on its head: why isn’t the private-sector keeping up with the public-sector? Defined benefits plans are better. Why should we all accept the turn to defined contributions?Of course, this would all be a lot different if the geniuses running big industrials after WWII didn’t fight union efforts to get universal healthcare and pensions.

  4. Rich

    Federal employees don’t collect “both”.If you were a federale hired before 1986, you are under the Civil Service Retirement System (CSRS) and get the goldplated federal pension that people think about when they think about federal pensions (80% of your high three years or something like that).However, if you were a federale hired in 1976 or later, you are under the Federal Employees Retirement System (FERS). FERS employees have to pay into Social Security and are expected to accumulate most of their retirement savings in the Thrift Savings Program (TSP) which is basically a 401(k). There is a miniscule contributory defined benefit pension that FERS employees do get, but it’s not even close to anything you can live on. All the govt literature drills into FERS employees that they have to depend on their TSP, their other savings, and Social Security for their retirement — there’s no big pension like the CSRS people got.

  5. Peter Porcupine

    Rich – I was hired in 1979, which is both before 1986, but after 1976. Can’t be both.My recollection is that you had to be hired and VESTED before the change-over (Feds vest in only 5 years) to be in CSRS.And Rich – the State MIRRORS the CSRS benefits – top 3 years, etc. We can’t afford it.becoming a contributory state would solve a LOT of problems, for the state AND the retirees.BUT – when pensions for state workers are discussed now, please remember that the state pension is all the lifers are eligible for.

  6. Neil

    Rich there’s maybe a typo in among that 1986 1976 stuff. I think it should read:However, if you were a federale hired in 1986 or later…

  7. Dan Kennedy

    PP: So let’s not throw up our hands. Move toward a system whereby Mass. state employees are paying into Social Security and investing in 403(b) plans like everyone else.Unfortunately, the lunatic income-tax elimination is going to pass this November. The only good thing that will come out of it is that everything will be on the table.

  8. Peter Porcupine

    DK – I absolutely concur. Just like only Nixon could go to China, only a Democrat can begin making state employees pay into Social Security. He’s already vetoed the pension bump.BUT as corrupt as the system is – for example, if you are a selectman serving 25 years with a $1,000 stipend later elected to the House, you will collect out of the system based on your 3 highest years, as if that 25 years had been full-time employment and you had paid in on that basis – it is important to remember that most state employees make in the $50,000 range, and will never have Social Security – only the system they paid into and they paid by those rules for their productive years. Move TOWARD is the operative attitude. But it MUST begin now.

  9. acf

    “…why isn’t the private-sector keeping up with the public-sector?”It’s because of the profit motive. Private businesses are driven by it, and public sector entities (governments) are not. The motive is what drives off shore outsourcing in the search for the lowest labor cost, and that drive is the reason why privatization of government services is bad. Companies’ drive for the strongest bottom line will always lead them to scrimp on quality, regardless of promises made to the contrary in the quest for those privatization deals. They can’t be trusted, ever.

  10. Amused

    Peter makes an excellent point about officeholders making a nominal sum being eligible for pensions. Worse, a many of them are appointed to state jobs after 20 or more years at a token salary in a part-time elected post for the sole purpose of rewarding them pensions that are more appropriate for people who have spent a working lifetime on the state payroll. Yes, your independent-minded city councilor may be trying to curry favor with a governor, state lawmaker or someone else with juice on Beacon HIll go grab a quick three years on a state board or commission so his years of service at a token fee suddenly becomes treated the same as if he worked digging ditches during that entire time.Problems with the state pension are something Frank Hatch, then Republican leader of the Massachusetts House and later a candidate for governor, was talking about 30 years ago. The Real Paper, I think, did a major piece on the state’s unfunded pension liability, but it didn’t and doesn’t “tell” well on television.Two things will happen. First, there will be a backlash over people still in their prime drawing enormous pensions from the state simply because they put their time in and then got huge pensions. Second, some organization such as The Globe will do a major spotlight type series on how much the “get your time in, get your pension and get a new job” philosophy is hammering the state and the cities and towns — complete with examples, names, and photos of relatively young pensioners working for new employers while receiving hundreds of pieces of eight from the taxpayers in their mailbox each month.On another matter, employee funded retirement programs are as regressive a policy that exists in the world, but I’m not going to get going on that one

  11. Peter Porcupine

    Amused – it isn’t even the pension that is causing the problem. It’s the lifelong eligibility – at fire sale rates – to health insurance for both pensioners and surviving spouses. THAT is the big ticket item!

  12. Sean Roche

    Again, isn’t lifelong eligibility for health insurance a good thing? Something we should be promoting wider access to, not narrower?If there is a discrepancy between public- and private-sector pension and health insurance benefits, the goal should be to raise the private-sector benefits, not lower the public-sector benefits.

  13. Dan Kennedy

    Sean: If my tax money is used to fund lifelong health insurance for public-sector employees, how does that move any of the rest of us closer to getting the same benefit for ourselves? It just means we have less money.For your logic to work, there must be some sort of connection between the two. There isn’t.

  14. Sean Roche

    Dan,Absolutely there is a connection. Instead of spending political capital bringing municipal, state, and federal workers down to the sorry 401(k) and HMO future the rest of us face, work for universal health care and universal pension.On the propaganda front, it is important to stop thinking that government workers have some sort of platinum-level deal that has to be brought down to the acceptable private-sector level. It’s time to recognize that private-sector benefits are inadequate.

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