Newt Gingrich’s latest op-ed, ostensibly penned along with co-writer Jeb Bush, reads as if it is vintage Gingrich speak, demanding in bold declarative sentences that the federal government give the states the power to pee on their citizen’s heads and tell them it is raining. Gingrich proposes that states be allowed to go through a Bankruptcy Lite process that leaves state assets and income streams undisturbed while permitting them to legally discharge their pension obligations as they see fit. If this isn’t a weapon of mass destruction, I don’t know what is.
“a new bankruptcy law would allow states in default or in danger of default to reorganize their finances free from their union contractual obligations. In such a reorganization, a state could propose to terminate some, all or none of its government employee union contracts and establish new compensation rates, work rules, etc. The new law could also allow states an opportunity to reform their bloated, broken and underfunded pension systems for current and future workers.”
The opening description of the Gingrich state bankruptcy proposal may seem stark but there is really no other way to explain a scenario that seeks to strip the retirement accounts from the people who staff the departments in a typical state government, the large majority of whom earn nowhere close to the kind of six figure income it would take to generate the $100,000 a year pension payouts to the 10,000 California retirees Gingrich and Bush cite in their opinion piece.
In fact,the U.S. Bureau of Labor Statistics (BLS) estimates that the median annual salary for nearly 2.3 million workers who work for state agencies and state government is $49,240, hardly the king’s ransom Gingrich would have you believe, union or no union.
States and localities currently make annual contributions to their pension trust funds equaling an average of 3.8 percent of their general (operating) budgets. They began to make deposits to pre-fund their pension costs in the 1970s. Each year, they are supposed to deposit in a trust fund an amount that equals the present value of the future pensions their employees earned that year
You won’t hear any of the conservatives on talk radio like Sean Hannity or Rush Limbaugh call the Gingrich plan to erase state pension obligations a redistribution of wealth, but that’s exactly what it is – a naked and unapologetic asset grab to pay for the investment malfeasance perpetrated by state executive branches with the legitimately earned retirement money of the people who work in the departments just like the ones below that are typically found in most states.
Agriculture & Forestry
Secretary of State
Health & Hospitals
Transportation & Development
Children and Family Services
Culture, Recreation & Tourism
Public Safety and Corrections
Wildlife & Fisheries
Public Service Commission
The guy who invented the term “overfunded pension fund” gave corporations and governments the political cover necessary to explain why they could skip their scheduled contributions during boom times, as if the proverbial “rainy day” was impossible to imagine. Now that our country is in a financial typhoon, no one wants to talk about why this mess is not a political problem, but an actuarial one, similar to the situation the Social Security program finds itself in, where we as Americans have simply not exercised the kind of financial discipline necessary in boom times to help weather the occasional economic bust.
No one wants to admit that every single pension plan funding ratio in the country is dependent on the plan sponsor making ALL scheduled contributions, not just the ones they can make in boom times. Nobody in the news media or any position of responsibility wants to talk about Arkansas, which actually did default on its obligations back in the 1930’s, or how the default affected the state in future decades.
In 2000, more than half the states had fully funded state employee pension funds; that dropped to six states by 2006 and four states by 2008, according to a new report from the Pew Center on the States.
That’s partly because some states took holidays from contributing fully to the pension plans, according to Girard Miller, an expert on public pensions and a senior strategist for Public Financial Management Group.
Capitol Ideas State Pension Funding Gap Has Grown By Mary Branham
Deep down, on both sides of the political spectrum, there are many people who won’t admit it publically, but privately are pulling for Newt Gingrich and Jeb Bush to be right, even if they don’t agree with them ideologically. There are some Americans who want to minimize the point of financial pain we will have to endure so badly that they are willing to get behind any cockamamie idea that tells us “this will all be over soon”, even though it has been decades in the making.
Thank God that Newt Gingrich, the Master of the Art Of Pompous Nothingness, a man who thinks not in duplicate or triplicate or high fidelity but only in Grand Master Plans to save America, has become so wrapped up in the caricature he has created of himself that it is practically impossible these days for the country’s political center to take him seriously.