Should workers have their retirement savings or their pensions stolen from them, only to be tossed a mere 16 cents on the dollar?
Is it right and fair and just that a retiree, who has worked for decades to earn a $30,000 annual pension, be left to live on only $4,800 a year?
On Tuesday, Cincinnati voters will decide.
Issue 4 is a charter amendment petitioned onto the city’s ballot by a citizens’ group called Cincinnati for Pension Reform (CPR), with some ties to local Tea Party groups. If passed, the ballot initiative will give new city employees a 401(k)-style retirement program, while protecting the pensions of current city retirees and workers through annual audits, publicly reported results, and requiring the city to take steps to close any pension fund deficit.
The Queen City’s public employee pension system is currently in deep trouble. Even by the city’s rosy accounting, it’s only 61 percent funded, with a whopping unfunded liability of $862 million. In fact, Moody’s recently downgraded the city’s credit rating specifically because of its pension liabilities.
As if that’s not horrendous enough, a new study of Cincinnati’s pension problem by Ohio’s Buckeye Institute for Public Policy Solutions is entitled, “Worse Than You Think.” The study’s author, Dr. Andrew Biggs of the American Enterprise Institute, writes, “a more accurate measure, the ‘fair market valuation’ preferred by most economists, reveals unfunded liabilities of over $2.5 billion and a funding ratio of only 35%.”
Ouch.
Nonetheless, Issue 4 faces fierce opposition from a group “primarily funded by several different branches of the American Federation of State, County, and Municipal Employees. In just two weeks,” reports the Cincinnati Enquirer, “the committee raised $207,970.… It received contributions from only two individuals, totaling $750, including a $500 contribution from former acting Cincinnati city manager and current Dayton city manager Tim Riordan.”
Jeff Harmon, president of the Cincinnati Organized and Dedicated Employees (CRAG), a union representing 850 city workers, said, “This measure is going to lead to higher taxes and possible lawsuits for the city and would potentially bankrupt Cincinnati.”
Why would actually funding the promises the city has already made to workers “lead to higher taxes” or “bankrupt Cincinnati”?
Strange. The Buckeye Institute analysis concluded, “Passage of the Cincinnati Pension Reform Charter Amendment Initiative [Issue 4] would lower overall pension costs for the City and reduce budget pressures in future years.”
And who on earth would file CRAG’s “possible lawsuits”? It doesn’t take a genius to realize that this is a polite way of saying: If you don’t vote the way we want, we’ll sue.
Wait … you’re starting to wonder about the stolen retirement/pension savings of workers and that 16-cents-on-the-dollar deal. How are Cincinnatians going to decide that?
Well, Issue 4 on Tuesday’s Queen City ballot will determine whether the city’s employee pension system is saved, placed on solid fiscal ground, or continues to fall deeper into debt, with spiraling costs that undercut city services and ultimately leading to bankruptcy … like Detroit, only four hours driving time north.
Last week in a Motor City courtroom, bankruptcy lawyers for the City of Detroit made an offer in court negotiations: The city would like to “leave pensioners with 16 cents on the dollar.”
Pensioner Olivia Gillon, 68, told FoxNews.com, “It’s wrong on every possible level. I earned my pension.”
Now a judge will decide what she gets.
In Cincinnati, voters still have time to act on the problem. Liberty Initiative Fund, where I work, is proud to be supporting the pension reform campaign there, whose TV spot opens with this comparison: “Detroit. Political leaders and voters put their head in the sand. Pensions ballooned and credit ratings dropped. Is Cincinnati next? We have $862 billion in unfunded pensions and a weakened credit rating.”
The alternative to passing Issue 4 isn’t pretty. As that FoxNews.com article on Detroit’s bankruptcy negotiations noted: “The Michigan-based Mackinac Center for Public Policy … sounded a warning about Detroit’s fiscal problems more than a decade ago” and against “old-style defined benefits pensions” that would “leave pensioners at the mercy of politicians.”
No one should be left at the mercy of politicians.
November 3, 2013
This column first appeared at Townhall.com.