Opinion: Pricy pension system has a cost


Sen. Cliff Bayer told IdahoReporter.com state lawmakers keep a close eye on state staffing levels.

School officials are rejoicing over the news that the state’s robust tax collections have allowed the disbursement of $60 million to the districts and charters across the state. In Coeur d’Alene, furlough days are being canceled, textbooks purchased and raises, euphemistically described as “additional salary compensation for experience and education” are being awarded to teachers. Twin Falls officials, according to one news account, negotiated away any windfall money as part of their collective bargaining agreement with the local teachers’ union. In Pocatello, school officials are planning to restore jobs previously eliminated.

The disbursement of money is tied to the Legislature’s action last winter, required as a condition of the state’s acceptance of federal money. For the moment, I’ll forgo discussing the fact that the federal government has no business telling states how to fund schools. (Hint: It’s not constitutional.)

What neither the school districts nor the teachers’ unions will tell you is that, while they’ve been cutting classroom textbooks, teachers, sports and music programs, schools continue to use and heartily defend their luxurious benefit program that awards payments for life to its beneficiaries. Most everyone agrees that, compared to other states, Idaho’s pension system is one of the better run. What few will say is that it is an expensive system. That cost comes with consequences.

To illustrate the effect of this expense, consider this: The state and its school districts spend about $1 billion on salaries. As a result, schools also spend about $100 million annually making payments to the state’s pension system, about 10 percent of payroll.  That figure is non-negotiable. Unlike a 401(k) plan, school districts can’t cut back its pension payments in times of need. It is a fixed cost tied directly to the cost of labor.

However, if school district employees were enrolled in a 401(k),  districts would be able to adjust their retirement contributions based on economic reality. In tough times like these, school districts could curtail retirement benefit payouts in order to preserve jobs, textbooks and other academic programs they deemed important. Imagine then, that I’ve waved my magic wand and every school district in the state had employees in a 401(k) instead of a pension system. And also imagine that even now, those school districts provided a 4 percent contribution toward retirement instead of the current 10 percent.  That would be a savings of $60 million, exactly the amount of the state windfall over which school districts are now salivating.

What I have described is not a strange concept. The Cowles Company, owners of the Spokesman-Review newspaper and KHQ-TV in Spokane, announced recently that it is freezing the company’s pension plan and opening 401(k) accounts for employees. Check out what President Stacy Cowles said about the change: “It is no longer feasible for companies to guarantee payments 10 or 20 years from now when we can hardly predict what’s going to happen 10 weeks from now.” I’d bet the Cowles Company employees are not too thrilled, but I’d bet they prefer a 401(k) to the alternative of unemployment. I’d bet some teachers would prefer a 401(k) to having to take a furlough day.

Government leaders and bureaucrats have to stop saying that our current pension system is just fine. It’s expensive and will always be so. Pretending the pension system is somehow removed from the equation is not fair to taxpayers, government employees or even schoolchildren.

Comments

comments

2 Comments

  1. fortboise

    I’m wondering when, if ever, you will find yourself your own life to live, Wayne. You love to couch things in altruistic terms, but there is so much bitterness in what you have to say. I’m sorry you can’t find worthy causes to put your energy toward.

    You make me think of the “miser” character in so many of the fairy tales that capture the cultural memory of our species. (Hint: it never ends well for the miser.)

    Oh how liberals love to be generous with other people’s money, you reply? Well, we consider the future. Squeezing everything can out of teachers is the quintessence of short-term thinking. I prefer the Finnish model: hold up teachers as an honored profession, valued in tangible terms as well as words of praise (not that I believe you’ve ever found any of those, yourself).

    The same is true of all of the employees who benefit from long-term promise and financial security that the Public Employees Retirement System of Idaho offers (as well as some who have been pushed out of the system). Their jobs may not be the most attractive, or the most lucrative, but they’re rewarding, and PERSI is an important and legitimate part of the compensation.

    And the work of public employees creates the context of a productive society in which “the market” can flourish, basic needs can be met with time and money left over for the finer things in life, and yes, some entrepreneurs can succeed beyond their wildest dreams. There’s even enough left over for non-profit foundations to create advocacy organizations such as yours, built on the donations of the well-to-do.

  2. Marie

    Basically you are proposing another pay cut to teachers in one of the worst paid states in the US. Money paid to a pension account for a teacher is no longer tax payers money but part of the teachers compensation. There are few reasons left to teach in Idaho. Let’s take another one away and see what happens.

    Believe me, Idaho has done a good job of cutting back on teachers pension contributions by cutting our pay. I love teaching, but I wouldn’t love living in poverty in my retirement.

    Planning for a good retirement for public workers gives back to the state economy more money in the long run than they spend on those pension payments.

    Right now, PERSI is the only reason I am still teaching in Idaho.