Posted 11/17/10 (Wed)
By Neal A. Shipman
Pension funds for public employees and teachers across the United States are in deep trouble. According to a recent study, because of the huge financial losses that followed the recent market meltdown, over a trillion dollars in state and municipal pension fund assets have been erased with the average public pension plan now being about 35 percent under-funded.
And things are getting worse, which is causing a whole lot of concern by the elected state and city leaders who are now looking at how they are going to bring these funds back into solvency.
Even in North Dakota, which has for the most part escaped the economic downturn experienced across the rest of the country, the state legislature is going to struggle long and hard with righting the sinking ships that are the North Dakota Public Employees Retirement System (PERS) and the North Dakota Teacher’s Retirement Fund, which could run out of funds in the next 30 years.
So what should be done to fix these retirement funds for our teachers and public workers?
The most obvious solution to fix the problem facing these retirement systems would be to either start cutting benefits or increasing the age by which public employees can retire. After all, that is what private businesses were forced to do when the stock market wreaked havoc on their retirement programs.
But that doesn’t seem to be the way that most governments, including North Dakota’s, seem to want to handle the problem. Rather than tell the public employees that they are going to see changes in their retirement system, the push is on to put more taxpayers’ money into the pot.
The trouble with the taxpayer solution is that we are tapped out. Non-government workers didn’t see the federal or state government, or anyone else for that matter, come forward and say, “Hey, we’re sorry that you lost the vast majority of your retirement funds when the markets went south, so we’re going to replace the money that you lost.”
When the non-public employee’s retirement funds disappeared, they kept on working because they couldn’t afford to retire. And for those non-public employees who were retired and saw their retirement funds slashed, they either cut back on their living expenses or found another job. So excuse the average non-government worker for not being all that keen on the prospect of now being asked to pay higher taxes to pad the retirement benefits of government workers whose pensions already vastly exceeds theirs.
North Dakota public employees and teachers have long benefitted from a retirement system that far outshines what private businesses in the state can offer to their employees. While some private businesses offer a retirement system, the vast majority of small businesses cannot afford the cost. And of those businesses that do offer a retirement program, the business provides some retirement funds, while the employee is often required to make matching contributions. Public employees, on the other hand, for the most part, get 100 percent contributions into the their retirement fund from the taxpayer.
Just as the federal Social Security program is poised to raise the retirement age, as well as to make other changes in the program, in order to maintain the fund’s solvency into the future, state legislators are going to have to accept the fact that fundamental changes must be made to maintain the solvency of the public employee retirement systems.
Fundamental changes to public retirement programs need to come before the taxpayers are asked to pony up more bail-out money.