|
Roots of Unity by Mike Allen, Guild President |
|
|
||
|
Mike Allen,
President, |
||||
|
Shoot First, Ask Questions Later |
||||
|
The recent attack by the governor and his cronies upon public employees is breathtaking in its recklessness, and the extra attacks aimed at teachers are clearly hypocritical. They can't be stupid enough to actually believe that the reason students in other states and countries perform better is that California teachers just don't work hard enough. While the broken promises emanating from Sacramento have given me enough material for several columns, Mona Field addresses many of them in her article in this issue, so I am going to focus on one that is particularly enraging. As many of you know, the governor has declared his support for proposals to amend our state constitution in ways that would prohibit all non-federal public employees in California hired on or after July 1, 2007 from enrolling in a "defined benefit" (DB) retirement plan, permit enrollment in an employer-sponsored "defined contribution" (DC) retirement plan, and establish maximum employer contribution rates for the DC plan provider they select. Since constitutional amendments need voter approval, and the governor fears he will lose if he waits until the next regularly scheduled election, it is anticipated he will force the state to spend about $60 million (during a budget crisis, no less!) in order to hold a special election on November 8. It is unlikely the state legislature will place measures like these on that ballot, so he and his ilk will also raise millions of dollars to hire the requisite mercenary signature gatherers (don't sign!!) and fund the media campaign in support of this boneheaded set of changes. Where to begin with the massive disruptions this would cause? Our employer's contribution rate, the disability and survivor benefit programs portion of our current DB plans, and other plan features would become something we would have to bargain locally, which sounds about as fun as annual root canals. Because public educators in California do not participate in the Social Security system for their public service, we do not have that safety net, so our financial security would become entirely dependent on the market. If a teacher is unlucky enough to have to retire during a weak economic period—well, too bad!! Gone would be the stable benefits, long investment horizon, and shareholder power of our existing STRS system.With people living longer, the need for good investment results becomes even more acute, due to the distinct possibility that you might outlive your money. Moreover, if employees are given the option to choose their contribution rate, does anything about the savings patterns of U.S. residents inspire confidence that they will set aside enough? Experience from the few other states that have DC options shows that, when offered a choice between DB and DC systems, few employees opt for DC. In addition, employees in DC plans rarely have good results, due to their propensity to make non-diversified, ultraconservative investment choices. This is understandable, since few have the time to manage better strategies as the financial wonks at STRS do for us now. No wonder President Bush is having a hard time selling a hybrid plan for Social Security that is only 25 percent DC! Bad enough as this plan is in the long-term, the transition to it is even uglier. The governor's Department of Finance has conceded that they don't know what the start-up and other short-term costs would be, but actuarial analysis says it could be as high as $15 billion for STRS alone. In fact, total contributions from districts and the state's general fund would actually increase through the year 2020. This is partly due to the much higher administrative costs of individualized DC plans, as well as the need to fund the DB benefits of those hired before 2007, especially since the truncated DB program will earn lower returns with its shortened investment horizon. Moreover, long before modest cost savings might be realized, districts will have to spend more in other areas to attract and retain employees offered such a crappy retirement plan. In fact, this need to prevent mid-career educators from leaving for other states or professions might cost more than the retirement savings even in the long-run. The Teachers' Retirement Board, well-stocked with the governor's appointees, recently voted to oppose the conversion plan for all these reasons and more. The governor rewarded his appointees for upholding their fiduciary responsibilities by sacking four of them who were scheduled for final confirmation by the state Senate. It appears he is committed to this ruinous course, and it will be up to us to educate the voters. Let us commit to doing so. Just a note about benefits for union members before I go. For you late filers, the AFL-CIO has a new Union Plus Tax Service that is about half the cost of similar services from H&R Block or Quicken (visit www.unionplus.org/taxes). Also, if you have legal questions that aren't the kind the Guild can help you with, visit www.unionplus.org/legal to find a local lawyer who specializes in the type of problem you are experiencing. Through this Union Plus Legal Service, you can get a free 30-minute consultation with the lawyer, and a 30 percent discount if you decide to hire them. Go Union! & |
|
|||
