“Lifting the Pension Fog,” a report by the Arnold Foundation-funded National Council on Teacher Quality and Education Counsel, paints a bleak picture for teacher pensions by ignoring numerous facts and bending others to fit a pre-determined narrative. The Arnold Foundation has consistently advocated for shifting risks away from employers onto the shoulders of workers by converting public pensions into 401(k)-style retirement plans.
“The doomsday scenario painted by the National Council on Teacher Quality is driven by ideology rather than facts,” said Hank H. Kim, Esq., executive director and counsel of NCPERS. “The authors throw around scary figures representing unfunded liabilities, but they clearly flunked math. They either don’t know or don’t bother to mention that these liabilities are spread over 30 years. In fact, the unfunded liabilities of $516 billion equal a mere 0.6% of the $81 trillion in state and local revenues projected for the next 30 years—and those are conservative projections that assume no revenue growth whatsoever.”
Kim noted that the report also relies on artificial, undefined and vague concepts such as flexibility and neutrality to present its case that public pensions should be converted to defined-contribution plans, as do-it-yourself plans like 401(k)s are formally known. “This report lacks the intellectual rigor to be taken seriously, and is the latest example of the shameless propaganda being spread by the Arnold Foundation,” Kim said.
“In this era of fake news, the facts bear repeating over and over,” Kim said. “Many state and local governments have inflicted pension funding shortfalls on themselves by failing to make legally mandated employer contributions. Employees never had the option to skip a payment, and always made their required contributions. The report simply ignores this reality.”
In addition, Kim noted, state and local governments have steadily made their revenue systems more regressive and volatile, shifting the burden of funding to those who are least able to pay through casinos, lotteries, excise taxes on gasoline, and other forms of taxation. “A regressive and volatile system of revenue cannot provide enough revenues to public services such as police, fire, education, and roads and bridges, let alone pensions,” Kim said. “State and local governments have also given away the store in subsidies and loopholes to big corporations.”
The report holds out 401(k)-style plans as the answer to public pension system funding shortfalls, but fails to acknowledge the shortcomings of these plans. Defined contribution plans are costlier to administer, and have other consequences for an already polarized society. “Our analysis of the last 30 years of data show that massive shift to defined contribution plans has increased income inequality, slowed down economic growth, making it harder to get out of recessions, and increased economic volatility,” Kim said.
The National Conference on Public Employee Retirement Systems (NCPERS) is the largest trade association for public sector pension funds, representing more than 500 funds throughout the United States and Canada. It is a unique non-profit network of public trustees, administrators, public officials and investment professionals who collectively manage more than $3.5 trillion in pension assets. Founded in 1941, NCPERS is the principal trade association working to promote and protect pensions by focusing on advocacy, research and education for the benefit of public sector pension stakeholders.