By Robert D. Rinker
A recent Op-Ed piece in the Hartford Courant penned by David M. Walker and Andrew G. Biggs, stated that government pensions and retiree health insurance are: 1) more generous than in the private sector, 2) these benefits explain why Connecticut has the second highest liabilities and unfunded retirement obligations per taxpayer of any state, and 3) additional debt and unfunded retirement obligations means even higher taxes and less competitive state over time. They added for good measure that the State’s health care plan will be subject to the “Cadillac tax” under the Affordable Care Act.
Well, who are David Walker and Andrew Biggs? Walker was the former U.S. Comptroller under the Clinton and Bush Administrations. We tangled with Walker in 2013 when he called for a cap on the cost of retiree health care. Walker also lost a primary to be the Republican nominee for Lieutenant Governor in 2014.
Biggs is a “scholar” at the American Enterprise Institute and not only does he write about public pensions and retiree health insurance, but he wants to “reform” Social Security as well. He writes, and I am paraphrasing, the old geezers will leave nothing for the next generation and the current workforce is now paying for these old geezers’ generous Social Security benefits. Social Security will be a topic for a future column, but for now we know who Biggs is and who he works for.
So let’s debunk the assertions of Walker and Biggs.
Pensions and Retiree Health Insurance are more generous than the private sector. I will concede that point to Walker and Biggs. Just having a pension and retiree health insurance puts public employees ahead of most private sector workers. As we all know, this has not always been the case. So instead of arguing to raise the standard for private sector workers back to the level they once enjoyed, Walker and Biggs wants to eliminate those benefits for public workers. The fact is that nearly a majority of private sector workers will only have Social Security to rely on for income in retirement. This is a travesty for the richest country in the world. And by the way, Biggs wants to cut your Social Security benefits.
These benefits explain why Connecticut has the second highest liabilities and unfunded retirement obligation per taxpayer of any state. It is not the benefit level that driven the unfunded liability, but the failure of the General Assembly to fund the normal cost of retirement benefits before collective bargaining in 1977. 70% of the unfunded liability is attributable to Tier 1 plan participants. No one has entered Tier 1 since July 2, 1984. So, almost all Tier 1 plan participants are retired state employees. In fact, the normal cost contribution by the State for the most recent state pension plan is 2.5% for non-hazardous duty members. This is modest by anyone’s standard. Finally, through recent bargaining with SEBAC, the unfunded liability will be paid off by 2032.
Additional debt and unfunded retirement obligations means even higher taxes and a less competitive state, over time. The exact opposite is true. CSEA and then SEBAC have advocated for more than 30 years to pre-fund State retiree health benefits. Two agreements, one with the Rell administration and one with the Malloy administration, will set aside contribution from employees and the State into a Retiree Health Insurance Trust Fund. The Retiree Health Insurance Trust Fund will pay for retiree health insurance for those employees that contributed to the fund. These two agreements have reduced our liability for retiree health insurance by $15 billion. So over time, State employees and State retirees will have both a funded pension plan and a fully funded retiree health insurance fund.
The “Cadillac Tax” of the Affordable Care Act will cost taxpayers more money for the State’s healthcare plan. Based upon the current spending trajectory the State’s healthcare plan will not be subject to the excise tax. We have maintained our excellent benefits and put into a place a plan that keeps our members healthy and consequently our costs down. The plan for over 200,000 lives is administered cost effectively by the two largest insurance companies in the country. Additionally, CSEA has advocated for years to open the State’s healthcare plan to municipalities and boards of education. This year the General Assembly passed legislation and the Governor signed into law such an opportunity for other public employers and public employees to join the plan. By doing so, we will have healthier public employees and savings for most of our municipalities. These savings can be passed onto the taxpayers.
So how do you implement the plan suggested by Walker and Biggs, and this is the scary part, you take away benefits from active and retired public employees. If you eliminate retiree health insurance, your liability goes to zero. If you reduce or eliminate pensions for active and retired state employees, your liability goes to zero.
Are these ideas of eliminating pensions and retiree health care far-fetched? They certainly are not far-fetched for private sector workers and retirees, many of whom saw their retiree health insurance disappear, in order to “improve” the bottom line of the companies they work or had worked for. Nor or the far-fetched for private sector workers and retirees, who saw their pensions reduced or eliminated by using bankruptcy courts to strip them of their pensions.
In a world envisioned by Walker and Biggs, all workers would live with retirement insecurity. I would suggest a different world where all workers, private and public, can live with dignity and security in retirement. The debate should be how can we achieve this vision for all workers, not how can we take away from the public employees and retirees.