For years, teachers have been double-dipping their pension accounts. Once again, the St. Paul Teachers’ Retirement Association is asking for another bailout of their pension plan while selling it as a reasonable fix to the situation. It isn’t reasonable to the taxpayers. It’s a rip-off.
A proposal is expected to be introduced in the Minnesota Legislature in the next two weeks.
The goal is to close a projected $16.7 million per year gap between what the fund needs each year and what it actually brings in.
“This is a problem that’s easier to remedy now than 10 years from now,” said Paul Doane, the association’s executive director. “I’m convinced this is a major step forward that will help both the long-term solvency and sustainability issue.”
It’s imperative that the remedy include 3 things. First, it’s imperative that the fix end the defined benefit plan. Next, it’s imperative that retire-and-rehire programs stop ASAP. Finally, it’s imperative that early retirement be eliminated. Here’s why it’s imperative the retire-then-rehire program is stopped:
The fund estimates it could get another $3.4 million by increasing employee and employer contributions by 1 percent for each and modifying early retirement and return-to-work policies.
Under the proposal, retirees would have to wait six months before they can return to a job with the district, up from 30 days now. And, if they make more than $46,000 after they return, they would lose some pension benefits, which are now set aside and paid out after returnees leave the district.
TRANSLATION: Retire-then-rehire programs are costing taxpayers millions of dollars in pensions.
What’s fair about telling private sector employees that they’re getting hit with a tax increase to pay for a teacher to retire when they’re 55, then start collecting a pension, then go on a month-long vacation before getting a cushy consultant’s job? That’s the system as it currently exists.
Why should taxpayers be funding a pension fund so public sector employees can retire when they’re fifty-something, especially when it’s a defined benefit pension plan?
There’s a fight brewing on this crisis. This provides a good glimpse into the bailout fight:
Rep. Phyllis Kahn, DFL-Minneapolis, who will sponsor the House version of the bill, said this proposal is “fair, appropriate and prudent.”
She noted that St. Paul Teachers received no state aid from 1987 to 1993. The state provided $22 million in annual aid to help the former Minneapolis teachers’ pension fund reduce its shortfall before it merged into the state’s larger Teachers Retirement Association pension fund.
But Thompson rejects the idea of using taxpayer dollars to shore up the fund while many private-sector workers are scaling back their own retirement plans because of the market downturn. He said the proposal is especially unpalatable because its proposed benefit increase negates the higher contributions from employees.
“In a nutshell, the St. Paul Teachers’ Retirement Fund is looking for a net increase in benefits, with the state acting as a guarantor of their investments,” he said. “In this economy, that’s really asking a lot.”
Rep. Kahn’s reply exposed the system’s flaw when she said that St. Paul teachers didn’t receive any state aid from 1987 through 1993. The first pertinent question is “why should Minnesota taxpayers bailout a St. Paul public employees pension plan”? The thinking should’ve been that a pension plan that’s underfunded at a time when the economy and stock market are going strong has a major structural flaw.
The response back then should’ve been to either insist on major structural reforms or let the teachers and trustees run the pension into bankruptcy. Overpromising isn’t a virtue. It’s a curse.
Sen. Thompson is right in saying that it’s wrong to ask taxpayers to fund a bailout that would improve benefits for people in the St. Paul Teachers’ Retirement Fund. With people living longer, increasing benefits isn’t sustainable. That means this pension fund will need another bailout a decade from now.
How’s that fair to private sector taxpayers?
Follow this link to read more on the subject.
Tags: Public Employee Unions, St. Paul Teachers’ Retirement Fund, Unfunded Liability, Pension Bailout, Phyllis Kahn, DFL, Dave Thompson, Pension Reform, Taxpayers, MNGOP