Michael Karsch, Legislative Representative


Looking at Pension Issues in
Unions, and Facing Women

By Michael Karsch, Legislative Representative

In this column, we focus most of our concerns on pensions to the public sector: local pensions for cities, counties, schools and the states. Once in a while I have chosen to cover the union pension funding issue, namely the word, multiemployer. Unions usually developed their pension plans in conjunction with the employer or by developing a pension that they negotiate with all of the employers involved, like with the mineworkers and the central states Teamsters. Eventually the issue grew into federally protected area where an insurance-type of support was created for those pension funds that were financially insufficient. The Compliance website reported in May that Congress has failed to resolve this crisis. Less than one percent of multiemployer plans are 100 percent funded. Ten years ago, the funding deficit was about $200 billion; now it is $680 billion. Benefit cuts (!) have occurred and for those already retired do not have an easy way to make up for the loss. These negative cash flows in the retirement plans are chipping away at the amount of assets. The federal government created the Pension Benefit Guaranty Corporation (PBGC) to help those plans that are poorly funded, but now the PBGC overall is facing a funding shortfall. The mineworkers and central states Teamsters’ plans are the worst off, according to Compliance. This matter is being considered by the Senate Finance Committee.

New Orleans is facing a lawsuit by its Orleans Parish School Board over tax dollars from the school tax being diverted by the city government to pay the city’s pension fund obligations since 2007, about $7.6 million, as reported by Nola website. In Los Angeles, the school district has its own tax base separate from the City. Also of note is that at press time the LAUSD is promoting its Measure EE, a parcel tax (16 cents per square foot), to pay for pension and health benefits. These costs will take up fully half of the LAUSD budget by 2031 if this is not passed. [The measure failed. – Ed.]

The Pasadena Star News published a report by Jen Sidorova about the impact of the pension funding issue on women. Fifty-four percent of all public sector employees are women, and about 77 percent of teachers are women, making them the largest group enrolled in the troubled pension systems. The California State Teachers’ Retirement System had an unfunded pension liability of $144.6 billion in 2017. Nationwide, teachers are in similar trouble, especially for some who do not participate in Social Security. Adding to the problem of pension debt is the increasing amount of each annual budget that must be spent on that debt and not on other benefits such as increasing wages. Employee options are being reduced, as is mobility of moving from one district to another due to a spousal move, or other reason. Moving around doesn’t always end up as a betterment. Some pensions are not transferable. The former job and the new one elsewhere usually do not result in higher overall pay. If one teacher stays in one job for 25 years, the value of the pension “normally soars after” that threshold. In highly competitive environments, some feel the pressure to move before the five years of vesting of pension benefits, hence losing the money paid into the pension fund. The author felt that this structure, the lack of portability and financial distress in the public pension and teacher retirement systems are a threat to all taxpayers “but should be of special concern for those seeking equal economic empowerment for women.”