How politicians raid retirement funds to enrich their corporate masters
Let’s say that as a condition of your employment, your company agreed to pay you a set retirement benefit from its retirement fund, with the implied understanding that the company would make the necessary annual contributions to keep that fund solvent. How would you feel when you later discovered your employer wasn’t actually making those annual contributions? Instead there is a severe cash shortfall. More specifically, how would you feel if your employer cited that shortfall – the one it created – as justification to slash your retirement benefits — the ones you were originally promised?
If executives pled poverty to justify their failure to make the contributions, perhaps you might forgive them. But what if you found out they weren’t actually saving the money they were supposed to be setting aside for your retirement? What if you found out that those poverty-pleading executives were instead handing your retirement money over to their cronies? Would you be angry?
Of course you would be. So you will surely understand why a whole lot of workers will be enraged if they read a damning new study by the nonpartisan Good Jobs First. It buttresses earlier reporting by myself and Rolling Stone’s Matt Taibbi about pension funds being raided to finance lucrative subsidies to the richest of the rich.
In the cases documented by Good Jobs First, the employers are the politicians who run state governments, and the employees are teachers, firefighters, police officers, and other public workers. Over the years, the politicians have been violating the spirit of contracts with their employees by refusing to make the necessary contributions to their employees’ retirement funds.* They have justified this fiscal irresponsibility by suggesting that state and local governments are so strapped for cash that there are no resources available to make the required pension contributions.
But that’s where the Good Jobs First report comes in. Looking at 10 states that have considered pension benefit cuts, the analysis shows that politicians aren’t saving the money they should be putting into retirement systems, they are not investing it in core state services, and they most certainly are not behaving as if their states are strapped for cash. Instead, in many of the states that haven’t been consistently making their actuarially required contributions to pension plans, politicians are taking money that should be going to retirees and instead spending the cash on subsidies to the same corporate class that disproportionately funds politicians’ election campaigns. Indeed, as the report shows, “In all 10 states, the total annual cost of corporate subsidies, tax breaks and loopholes exceeds the total current annual pension costs for the main public pension plans administered by the states.”
The specific examples illustrate the bait and switch:
In Louisiana, for example, politicians claim the annual $348 million pension contribution the state should be making is unaffordable. They then cite this assumption to call for cuts to public workers’ guaranteed retirement income. Yet, at the same time, those same politicians support corporate welfare in the form of subsidies, tax breaks, and loopholes that cost the state five times that amount every single year.
Same thing in Florida, where lawmakers at once insist the $905 million annual pension contribution is unaffordable, all while they spend four times that much on subsidies, tax breaks, and loopholes to corporations.
Two of the country’s most corrupt states – Illinois and New Jersey – provide the most powerful examples.
In Illinois, Democratic Gov. Pat Quinn just signed legislation to slash state workers’ pension benefits even though the state spends $500 million more every year on corporate subsidies than it needed to contribute to its pension system. In recent years, those subsidies have included everything from a $275 million giveaway to Sears to a $117 million handout to Google. Meanwhile in Chicago, Democratic Mayor Rahm Emanuel is expected to propose similar cuts to municipal employees’ retirement benefits. Yet Emanuel, fresh off pleading poverty to shutter schools, is championing a $300 million spending spree on corporate subsidies, including a massive giveaway to a private university for the construction of a basketball arena. That’s just one part of his city’s notorious and burgeoning “shadow budget,” the mayor’s secret slush fund of taxpayer money designated for corporate subsidies.