America’s recession is exposing societal fault lines, as various groups fight over increasingly smaller pieces of the pie. Tensions are particularly flaring between government workers and employees of private businesses.
David Walker, the U.S. comptroller appointed by President Bill Clinton who continued in the role under George Bush, on Friday gave a bracing indictment of the pension and salary benefits being rewarded to government workers at the federal, state and local level. Walker said that public sector workers are growing prosperous on the back of private sector workers.
“There is a huge gap. State and local plans on average … are much more lucrative than typical plans for employees. State and local government employees, on average, have greater job security than people in the private sector. And state and local government employees, in the middle of government, in many cases make more money than their private sector counterparts,” Walker said during a speech at the U.S. Chamber of Commerce. According to Pew numbers provided by the Chamber, the budget gap to cover state employees’ benefits totals $1 trillion.
“Therefore, if governments expect taxpayers to pay more taxes to fund lucrative benefit programs that are much better than the average employee gets, in jobs that more job security and in some cases make more money than their private sector counterparts, that ain’t gonna happen,” he said. “But the only way it’s not going to happen is if there’s transparency and if the cover is blown, so that pressure is brought to bear to make changes.”
Walker, who is now president and chief executive of the Peter G. Peterson Foundation, said there are “many vested interests in the status quo, whether it be elected officials, appointed officials, union officials or otherwise.”
“The only way you’re going to break the cycle is to make this information public in an understandable, clear, compelling and concise form, such that the first three words of the Constitution can come alive: we the people. That’s the only way,” he said.
Walker spoke at the beginning of a half-day Chamber conference on the “impending dangers of the retirement financing crisis.”
He emphasized that he thought state pension fund obligations are only part of a larger “national fiscal challenge” at all levels of government spending, with health-care costs being the most explosive cost driver.
“We must wake up. We need to make dramatic and fundamental changes at all levels of government,” Walker said, going through a series of slides showing future government spending obligations completely overwhelming tax revenues.
Walker’s speech, and the comments of some of the panelists who spoke after him, were met with strong disagreement and at times derision by labor officials and union-aligned representatives who sat at the back of the room. A small group laughed out loud several times during remarks by Diana Furchtgott-Roth, an analyst at the Hudson Institute.
“The biggest fallacy here is the discussion about comparing what a private sector employee gets to a public sector. And if where we want to go from a policy perspective is to go down and bring everybody’s boat down, so that they’re retiring on nothing, I mean that’s an interesting conversation to have. What do you do with those people?” said Cathie G. Eitelberg, senior vice president at the Segal Company, which advises public employee pension fund directors.
“That person who’s working at XYZ company who’s not getting anything, is that the policy direction we want to go? Or should these corporate folks start thinking about providing adequate retirement security so we don’t have a whole generation of people who don’t have any money to retire on?” Eitelberg told The Daily Caller. “It should be raising everyone’s boat, not lowering everyone’s boat.”
Jeannine Markoe Raymond, the director of federal relations for the National Association of State Retirement Administrations, argued that if more isn’t done now for private sector employees, even those who are self-employed, then their retirement costs will also fall on the taxpayer.
“If we don’t raise the bar in the private sector and the public sector, the public sector’s going to get stuck with the bag. We’re all going to be paying, taxpayers are going to be paying if people can’t afford it,” Raymond said.
But that logic forgets that at some point, revenues dry up, since the federal government cannot print money or raise taxes endlessly, even in theory.
And while a recent study by USA Today showed that state and local government workers make five percent less than their private sector counterparts in salary, their total compensation is higher than private sector workers when their pension and health-care benefits are added in.
The USA Today study showed that federal government workers are making almost $110,000 for jobs that pay about $70,000, combining salary and benefits.
The National Institute on Retirement Security found, however, that “employees of state and local government earn an average of 11 percent and 12 percent less, respectively, than comparable private sector employees.”
“An analysis spanning two decades shows the pay gap between public and private sector employees has widened in recent years,” the NIRS study found.
NIRS focuses its research “on the role and value of defined benefit pension plans,” the kind of pension plan preferred by unions, as opposed to defined contribution plans.
Illinois State Sen. Chris Lauzen spoke at the Chamber event on Friday. One of his PowerPoint slides (similar to this chart) alleged that the 100 most well-paid Illinois public school administrators had pension plans that would pay them a combined amount of almost $1 billion — $889,514,827 to be exact – assuming they lived 29 years after retirement at age 56, following 34 years of government employment.
But the Illinois Teachers’ Retirement System said Lauzen’s numbers were bogus.
“These numbers are not accurate,” said TRS spokesman Dave Urbanek.
For example, Urbanek said, the salary and benefits for the first name on Lauzen’s chart — Neil C. Codell — were completely wrong.
Codell was listed as having retired with a salary of $885,327, with an estimated total pension payout guarantee over 29 years of $26.7 million.
However, Urbanek said, Codell’s salary when he retired in 2009 was $221,000, and his annual pension is $163,000, not $602,000 as was listed on Lauzen’s chart.
“He’s not going to be getting $26 million over the course of his retirement,” Urbanek said.