Enriching corporations by stealing from public pensions
Those of us in the public pension world know that the vast majority of plans are on solid financial ground – and that the few that aren't are in jurisdictions whose legislatures have consistently failed to make some or all of the actuarially required contributions to those plans, even in boom economic times.
In the wake of the Great Recession, state and local politicians seeking to convert public DB plans to DC plans and/or cut plan benefits claim their jurisdictions simply do not have the resources to make the necessary pension payments. They claim that without the changes they want, core government services will suffer. They claim that pension costs are bankrupting their communities.
The rhetoric has been as impressive as it is deceitful. There's money there to fund public pensions. It just isn't going to public pensions – it's going to wealthy corporations.
Individual examples of pension funds being raided to finance corporate subsidies have been reported in the media recently, but a far more detailed – and damning – picture is painted in a recent report by the nonpartisan research group Good Jobs First. The report looks at 10 states where the controversy over pension costs has been intense. In each state, it compares public pension costs to the amount of revenue lost to corporate welfare – including economic development subsidies, tax preferences and accounting loopholes (even offshore tax havens).
In all 10 states, the total annual cost of corporate welfare programs exceeds the total current annual pension costs. The money they are withholding from pension plans is not going to other core services or government functions. It's going to Sears, Boeing, Google, Apple, Facebook, Verizon and other large corporations that auction off their new operations to the state that will come up with the heftiest package of incentives for locating there.
The biggest offender is Louisiana, which hands out $1.8 billion a year for such things as attracting motion picture production and natural gas plants – while Gov. Bobby JIndal is trying to force new state employees into a cash-balance retirement plan to reduce the state's annual pension obligation of $348 million. That's just 19 percent of what the state spends in corporate welfare.
Next comes Florida. With annual pension costs of $905 million, it spends more than four times that amount – $3.8 billion – on corporate subsidies. Colorado's annual pension costs are just 30 percent of its nearly $600 million in corporate subsidies. Michigan's pension costs are 32 percent of the $1.86 billion it spends on corporate welfare. In the aggregate, the annual pension costs for all 10 states are almost exactly half of what those states give away to corporations.
Backers of corporate subsidies say they want to create jobs and make their local economies stronger. But it seems no one knows if and when those subsidies actually achieve those goals. The New York Times reported recently that governments rarely track how many jobs are created by corporate welfare – and even those who do admit it's impossible to know whether the jobs would have been created even if the subsidies hadn't been granted.
What has been established with absolute certainty is that public pensions strengthen local economies and the national economy. We know that 90 percent of retirees remain in the communities where they worked. We know that every dollar paid out in pension benefits generates $2.36 in economic activity. So the more than $175 billion in annual public pension benefit distributions represents a powerful source of economic stimulus and provides economic stability, both locally and nationally.
We also know that cutting pension benefits will produce the opposite effects.
So it seems to us at NCPERS that elected officials should be viewing public pension benefits as a critical, long-term resource for ensuring economic strength and security for their communities. If supporting their communities is truly their goal, they should be reducing the amount of money they are devoting to risky corporate subsidies and investing more in a sure thing.