ABQJOURNAL OPINION/GUEST_COLUMNS: Pension Envy Won't Fix State Budget, Policy Woes

Sunday, July 12, 2009

Pension Envy Won't Fix State Budget, Policy Woes

By Nick Mandel
New Mexico Public Policy Group
          Tough economic times cannot only bring out a survival mentality; it may raise a further defensive nature from those in the work force who are seemingly in a better position than most workers today. That is one take on the recent lawsuit filed on behalf of public-sector employees by AFSCME, the American Federation State, County, & Municipal Employees, the collective bargaining unit representing them.
        The suit, which had been scheduled for its first hearing June 30 but has been postponed for a later date, challenges recent state legislation that increases contributions from state employees and teachers by 1.5 percent and took place on July 1, the start of the new state fiscal year.
        But what is perhaps more surprising is given dire economic circumstances being faced by business and government alike — at both a state and national level — how will New Mexicans react?
        When you consider the type of pension most government agencies in New Mexico offer — defined-benefit plans providing lifetime benefits to retired employees — and the majority of private-sector employees now belonging to 401(k)s, it's not hard to imagine a form of "pension envy" that surfaces. Consider that as of 2005, at the national level, state and local governments offered defined-benefit packages to some 92 percent of employees eligible, compared to the private sector offering only 33 percent of their employees a similar package and one that has plummeted from a high of 88 percent in 1975, according to one study by the Center for State and Local Governments.
        Public-sector employment has enjoyed a remarkable protection from the "real" world global economy. Not only does it continue to offer defined benefits for life, early age retirement eligibility and supplemental health insurance, it provides reasonable job security — at least still in New Mexico. That trend continues to create disparity between public-sector employees and the rest of work force.
        So, why the challenge from organized labor? Union representatives spoken with acknowledged the state's generous pension plan and other employee benefits but pointed to flawed and questionable management practices of the state and Gov. Bill Richardson's administration in particular.
        As an example, they cite numbers of exempt appointees serving at the pleasure of the governor and mushrooming into hundreds more than the previous administration of Republican Gov. Gary Johnson — no friend of organized labor by the way. The positions come with above-average salaries, and the political affiliations with questionable or unclear qualifications and needed competencies. Union officials said as an alternative to the increase in employee contributions, they approached the administration to "downsize" the number of exempts and realize some costs savings, while also demonstrating a share-the-pain approach to the state economic woes.
        Or the double-dipping practice, allowing former retired state and local government employees to return to work for a public-sector organization and continue receiving full benefits. There are an estimated 2,000 retired employees engaged in this practice, costing the state retirement funds more in benefits and hobbling the promotion and mobility of younger state employees, they claim. Union officials expressed further dismay with Richardson's veto of the legislation preventing this practice of new retirees returning to government employment in the future.
        But there are other problematic policies in place that are not the exclusive domain of the Governor's Office. Out-of-state corporate tax reporting, the practice of companies setting up their main corporate offices in Delaware or Nevada because of lower tax rates, is a practice generating legislative and special-interest attention each legislative session. And the now infamous $200 million surplus stimulus distributed last fall was certainly an instance of giving money away the state didn't have. But perhaps a larger lesson emerging from these criticisms from organized labor is a disconnect between a political administration that came in being exceptionally supportive of collective bargaining interests and labor questioning their very management practices. What does the future of that relationship hold?
        Still, it's doubtful most of the working public will be sympathetic in the very least to public-sector employees, even the many whose earnings are low-scale compared to their private-sector counterparts. Contributing another $25 of their bi-weekly salary to a pension plan that provides defined benefits for the length of their lifetime is a golden parachute to anyone whose outlook is working for a lifetime.
        But does the union have valid points in the management practices cited? An excessive number of exempt employees, questionable employment practices and the more complex issues of tax fairness for corporations, among other policies, suggest there is merit to their concerns. Perhaps by putting aside the pension-envy issue and further examining some of the policy issues the union raises, the consequential dialogue just might produce a better state and better state government, for all us — union members and the public alike.
        Nick Mandel is a retired state employee and principal of the New Mexico Public Policy Group.

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