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If you’re going to be required to pay for something, common sense would say that you should have the right to know how much it costs, right? After all, no one likes surprises—especially if those surprises cost trillions and you, your children and your children’s children are likely going to have to pay for it for decades to come.
Yet, there are those who seem to think that the American taxpayers will forever just keep shoveling our money into the furnace of bailing out banks, car companies, and union pensions funds. Moreover, these same putrid people (be they bureaucrats, bankers, or union bosses) seem to think that, if they hide the truth from the the American taxpayer, we will just blindly and willingly keep bailing out failure. Have they learned nothing over these past two years?
The Ticking Time Bomb
On Saturday, three examples were given of the public pension Ponzi scheme that is beginning to unravel. In one case (Central Fall, RI), the costs have put a city into financial ruin. In Chicago, Mayor Daley is openly talking about reorganizing the city’s pension through bankruptcy. Then , of course, there’s California and newly retread governor Jerry Brown and the 30-year old legacy of union domination in the tarnished Golden State.
However, just so you know that Saturday’s three examples are not mere isolated incidents, you might want to know the following:
Yet, despite the evidence all around, there are special interest groups that would like you to believe there are no problems. [‘Move along citizen, there’s nothing to see here’.] To them, bankruptcy is a four letter word that shouldn’t be discussed around children and, why heck, the American taxpayers are children, after all. What they don’t know won’t hurt them! Let’s just keep ’em in the dark. That way, when everything goes bust, we’ll be long gone and they’ll be stuck with the bill!
‘Figures Don’t Lie, But Liars Figure’
Right now, there is a fight going on over whether or not America will continue kicking the can of underfunded public pension plans down the road a few more years, or whether we deal with it now. In order to begin to deal with it, though, making sure that pension funds are being true with their actual numbers (as they relate to underfunding) is crucial.
This fight stems from the all-too-often boring topic of accounting and the rules that public-sector pensions report their liabilities which, according to some, are much more lenient that private-sector accounting standards.
By their own accounting, state and local government pension plans are in bad shape. In total they face an estimated shortfall of $628 billion. But that reckoning is off by five-fold. If the rosy accounting rules used by pension funds are stripped away, the real funding gap is closer to $3 trillion–a debt in excess of all outstanding state and local government bonds.
But bad pension accounting has done more than hide a huge debt. It has driven bad policy decisions that have increased the cost of public-employee pensions–and it has encouraged pension-fund managers to take unreasonable amounts of risk in the stock market. Unless the accounting is right, many proposed pension reforms will fall short, and the fundamental problems of high cost and high risk will remain.
By hiding the actual debt that the pensions owe, America’s taxpayers may be on the hook for much, much more than is being reported by those responsible who handle the pension funds. This is why several prominent Republicans are trying to pass a law that introduces tighter accounting standards and transparency.
On December 2nd, U.S. House Representatives Devin Nunes (R-CA), Paul Ryan (R-WI), and Darrell Issa (R-CA) introduced the Public Employee Pension Transparency Act. The bill is aimed at providing more transparent accounting standards, as well as ensuring that, if a pension fund causes a municipality, city or state to go belly up, federal tax dollars won’t be used as a trough from which public-sector pension plans can steal more money from the American taxpayers if they fail.
From Congressman Nunes’ announcement of the bill:
The bill, which provides enhanced transparency for state and local pensions, also establishes a clear federal prohibition on any future public pension bailouts by the federal government.
“As we speak, lucrative pension promises are being made to public employees that taxpayers simply cannot afford. The plans themselves admit to more than a $1 trillion in unfunded liabilities,” said Rep. Devin Nunes. “Unfortunately, the true level of unfunded liabilities associated with these plans – perhaps more than $3 trillion – is being hidden thanks to unrealistic accounting standards.”
Congressman Paul Ryan, incoming Budget Committee Chairman, offered the following statement regarding the Public Employee Pension Transparency Act:
“We need to ensure that state and local governments are accurate and honest in detailing their financial liabilities, including the cost of pension plans for public employees. The Public Employee Pension Transparency Act will make government more accountable to taxpayers by shining a light on the financial soundness and unfunded obligations associated with these plans and I’m honored to join Representatives Nunes and Issa in sponsoring this common sense legislation.”
Congressman Darrell Issa, Incoming Chairman of the Oversight and Government Reform Committee said:
“The American people have a right to know the truth about the unfunded liabilities being run-up by state and local pensions. Quite frankly, if they have nothing to hide, there’s no reason why the states and local governments who control public employee pensions should not embrace this effort to ensure that the taxpayers have a more transparent accounting of the true nature of pension liabilities.”
You can read the text of the bill here.
While the bill would tighten up accounting standards and ensure that federal tax dollars not be used to bailout incompetently under-funded plans, there are (surprisingly–or not) some special interests who are opposed to that idea.
The Usual Suspects Oppose Transparency & Accountability
Clearly, there are some entrenched interests opposed to exposing the true costs of underfunded pension plans. Most notably would be unions like the SEIU (which, ironically, attack Wall Street for its lack of accountability).
Representatives of state and local governments and unions counter that the bill, the Public Employee Pension Transparency Act, amounts to an all-out assault by the federal government on state and local government autonomy.
“It’s a terrible proposal, and we’re obviously going to oppose it,” said Mark McCullough, a spokesman for the Service Employees International Union, Washington.
And, of course, AFSCME is also opposed to the Public Employee Pension Transparency Act.
Then on Friday, the Director of Federal Relations of National Association of State Retirement Administrators (an association that oversees public pension systems) sent an e-mail to recipients of the National Conference on Public Employee Retirement Systems (“The Voice for Public Pensions”). The e-mail, from Jeannine Markoe-Raymond, urged NCPERS members to oppose the Public Employee Pension Transparency Act.
FYI – NASRA and NCTR have urged our members to write members of their Congressional delegation relaying their opposition to HR 6484, the Public Employee Pension Transparency Act, to meet with their delegation while they are at home during adjournment, and also to educate key public officials in their state regarding the inaccuracies and harmful impacts of the bill. As many of you know, the introduction of H.R. 6484 on December 2 marked the beginning of a series of coordinated articles, reports and continuous media coverage falsely asserting state and local governments are a financial wreck and are not accurately accounting for the fiscal condition of their pension plans. Repeated over and over again is the reckless claim that public pension funds will soon be exhausted and bailouts and bankruptcies are on the horizon if the Federal government doesn’t act. Press statements and supporting literature for HR 6484 are premised almost entirely on research by Joshua Rauh, whose work has been criticized for using unrealistic assumptions to exaggerate the financial condition of public plans, and recommending changes that would only serve to exacerbate their financial condition. The sample letter we circulated is below – feel free to edit for your own use as you see fit.
Now, why would an association of administrators charged with administering pension funds paid for with taxpayers’ money not want greater accountability?
Perhaps knowing who some of the NCPERS’ board of directors are could help explain:
So, five out of six of NCPERS board are former union honchos—and, as The Voice for Public Pensions, they’re being asked to urge members of Congress to reject greater transparency for public pension.
Obviously, unions and the pension administrators know that their pensions are in trouble. However, attempting to mask the problem by refusing to use the same higher standards that are in the private sector is both hypocritical and unconscionable—especially as the unions expect the taxpayers to pick up the tab.
After all, if it’s our money, don’t we have the right to know?
“I bring reason to your ears, and, in language as plain as ABC, hold up truth to your eyes.” Thomas Paine, December 23, 1776