Public Sector Doesn't Want to Contribute to Their Pension Plans

Cuckholded: Public Pension Funds (Part Two)

June 20, 2010

Daily Censored -Unless working people follow the example of those hit in Greece with IMF austerity measures, current and coming generations of people in the United States will work longer for less. Those who work for the public sector are seeing an all out ruling class attack on their jobs and their benefits — their pensions and lives. One can smell the hot breath of being reduced to living to survive not surviving to live social policies that are wafting in the air like an unpleasant odor.

As I wrote here at Daily Censored in my article entitled Cuckolded: Public Pension Plans the Next Big Bust (http://dailycensored.com/2010/06/07/cuckholded-public-pension-plans-the-next-big-bust/)

“On May 19^th, 2010 data was presented in Washington, DC, at a corporate conference called “New Retirement Realities: Pensions at a Crossroads“. The data suggests that several state pension funds will not even last the decade. The proffered research found that the pension liabilities will place enormous pressure on the federal government to bail out financially insolvent public pensions in an amount that either matches or exceeds the recent bailout or ‘rescue plan’ of the U.S. financial monopoly capitalist system.”

Either the researchers were lying or incompetent or both for the moment for the great unraveling, has now arrived. If we, as both private and public workers, don’t struggle against the Darwinian social policies planned for us by our rulers, we will wake up to find that life has not only gone down a notch, but the gruel has gotten thinner and the effort to get it harder.

The fact is the crisis of public funds is here now and not in some future, as predicted above. The consequence will be belligerent policies that force public workers, some present and most notably future hirees, to lose deferred compensation pension plans and work until they are as old as 67 years old. In other words, to work all their lives for the new nobility.

States to cut pension funds, rewrite rules using the corporate, neo-liberal government

According to a recent article in the New York Times, published today June 20^th:

“Illinois raised its retirement age to 67, the highest of any state, and capped public pensions at $106,800 a year. Arizona, New York, Missouri and Mississippi will make people work more years to earn pensions. Virginia is requiring employees to pay into the state pension fund for the first time. New Jersey will not give anyone pension credit unless they work at least 32 hours a week” (States make drastic moves to cut pension costs, Walsh, M. W. June 20, 2010. http://www.pressdemocrat.com/article/20100620/BUSINESS/6201118?Title=States-make-drastic-moves-to-cut-pension-costs).

All of this pension wreckage is a part of the disaster economics of the ruling class.
Reaganomics relied on budget deficits as it ran the cost of government up for wars and tax breaks.

Draining needed funds from pensions in an effort to both shrink government for people while hijacking it for the rich and leisure classes,’ state governments are now finding they are broke.  

Thirty years of Reaganomics and financial monopoly bubble economics have assured that the state coffers are empty while the silk purses are full. The answer of course is to blame it on unions and then cut back public services, erase public workers, and black bag contracted and future pensions. No one would dare breathe any criticism off the policies that drove up the deficits by transferring and redistributing wealth upwards. That would be tantamount to blasphemy.

The policies being proposed are so draconian that what they will mean for the ruling class that implements them can only be revolt by workers as there is less employment and therefore less demand for goods and services. This will curtail any fantasy recovery as retail sales fall. Credit will once again pounce on the backs of disenfranchised workers seeing diminished pensions and the predatory nature of the vampiric system will give us the full Monty.

However this will not fix the system for what is wrong with capitalism is its actual logic and no panacea will be found short of servitude or direct struggle that will fix it.

Enron Accounting and the disaster economics

As the states face off with mounting bankruptcy and debt created by those with capital they are finding that they must be crafty in how they ‘cook their books,’ for cooking the books is what they are doing in an attempt to maintain legitimacy and confidence.

Take the following example. Illinois is at least $300 million in the hole. So what will they do? They will raise their retirement ages for public workers, cap their actual retirement pensions, force workers to fund their own retirement all in the effort, officials say, to curb the loss of the funds. As the New York Times article noted:

“Lawmakers wanted to avoid legal battles or fights with unions, whose members can be influential voters. So they are allowing most public workers across the country to keep building up their pensions at the same rate as ever. The tens of thousands of workers now on Illinois’ payrolls, for instance, will still get to retire at 60 — and some will as young as 55” (ibid).

However as the Times presciently noted:

“That vaunted $300 million in immediate savings? The state produced it by giving itself credit now for the much smaller checks it will send retirees many years in the future — people who must first be hired and then, for full benefits, work until age 67. By recognizing those far-off savings right away, Illinois is letting itself put less money into its pension fund now, starting with $300 million this year. That saves the state money, but it also weakens the pension fund, actually a family of funds, raising the risk of a collapse long before the real savings start to materialize” (ibid).

This is simply accounting fraud through and through and has nothing to do with helping to staunch bleeding funds; nor does it have anything to do with correcting the problem. What it does have to do with is lowering the standard of living for millions of public union workers, throwing them into unemployment lines and destroying their pensions, the arsenal many of the largest unions use to fight for political power.  

The ruling class knows this; they have been attacking public unions since their inception. Now, with the theft of public pension funds by Wall Street swindlers and banksters, the same vampires are back, now asking for the equivalent of World Bank or International Monetary Fund austerity policies to foist on workers they say caused the problem. Remember Pinochet’s Chile?

The US banana republic is now seeing the deliquescence of all of the savings of generations as the public sector becomes the whipping boy for body parts. De-severing the public sector is the real goal of the ruling class, and you know they will soon be back with a venom, disclosing new details on how we all must give up the ‘Social Security entitlements’ we have owed to us due to the fact we are robbing future workers, or so say the libertarians.

Getting government off our backs for conservatives means robbing public workers at gunpoint and throwing basic services to the faith-based groups who have cobbled together millions waiting for the moment that starvation politics would bring the broken public to their Gods.

Eden Martin, president of the Commercial Club of Chicago, a business group of elite plutocrats dating back more than one hundred years stated:

“We’re within a few years of having some of the pension funds run out of money,” Funding for the schools is going to be cut radically. Funding for Medicaid. As these things all mount up, there’s going to be a lot of outrage” (ibid).

The ruling class fears an outrage in the form of an uprising and this is just what is needed. One cannot even call these ‘concessions’ with a straight face anymore; this is stiletto politics and the knife wounds are being shouldered by working people. But it gets worse.

States want to break collective bargaining contracts in violation of federal and state law

For the states mentioned above, the cuts would be aimed at future public workers. Any changes, say these states, to the public pension programs fought for by public workers for more than a century would be felt by newly hired workers, not existing contracted workers.

Not so, says the state of Colorado. They are looking to cut current pension holders, not simply new hires. Colorado has imposed cuts on its current workers, not just future hires, and even on people who have already retired.

The state is now trying to claw back the retirement funds of pensioners who have worked all their life under the illusion, as stated in their contracts, that they would indeed enjoy their pensions in their ‘Golden Years’ which are more golden for the doctors than retirees. Yet given this, they are now being pick-pocketed by the neo-liberal Colorado state officials and their puppeteers.

Colorado pruned a 3.5 percent annual pension increase to 2 percent, concluding that was the fastest way to revive its pension fund, which was projected to run out of money by 2029. Colorado retirees have sued to block the reduction arguing that it is a breach of contract, that states are legally bound to shield current workers from pension cuts. However, if Colorado is victorious in its efforts to claw back gains made by worker concessions over the years and put the tourniquet on current pensioners, then other states will surely follow. 

UPDATE OCTOBER 2014: The Colorado Supreme Court ruled that Colorado’s largest pension fund could legally scale back cost-of-living adjustments. Cost-of-living formulas were first implemented in 1969 and have been adjusted several times over the years, with a 3.5 percent fixed rate set back in 2000 after stock markets had several years of big gains. In 2010, the Legislature reduced the cap on COLAs to 2 percent per year as part of a broad package of reforms, designed to reverse the long-term slide towards insolvency.  The lawsuit, known as Justus, was brought by current retirees and members of Colorado’s Public Employees Retirement Association (PERA), and sought to restore the 3.5 percent COLA cap.

The argument that will be wielded in court and perhaps used to bludgeon the public sector and their workers by the forces of ‘capital’ was iterated by the notoriously lavish and well heeled Commercial Club of Chicago (Arne Duncan’s old bosses), the autocratic arm of the government in Illinois. A legal memorandum prepared for the Commercial Club of Chicago states:

“It makes no sense to suggest that an employee who works for the state for a single day has acquired a right to have future pension benefits calculated for the next 20 to 40 years under whatever method was in effect on that single first day of service” (ibid).

This is the argument that will be relied on to accomplish the breach of contracts we can expect; that is if nothing is done.

With the courts in the hands of the ruling class nothing less than direct action will work to stop Governor’s like Christie in New Jersey or Schwarzenegger in California from sealing the fate of public workers and closing the coffin on the public commons. The Times story notes that:

“Aggrieved workers sued IBM over the issue of pension freezes for those about to retire, but after a long battle, a federal appellate court found that the cuts were legal. “An employer is free to move from one legal plan to another legal plan, provided that it does not diminish vested interests,” or the benefits workers have already earned, wrote Chief Judge Frank Easterbrook of the Seventh Circuit Court of Appeals in Chicago. He did not distinguish between corporate employers and states” (ibid).

This is how the law is used to create more opportunities for the neo-liberal blood suckers while working people shrink into misery and squalor. Private profit and public squalor partner to deracinate whole sections of the population under cover of law. It is a racket and the racketeers know it.

While Colorado will base its legal defense on a 1961 state Supreme Court ruling that said pension cuts for current workers were allowed if “actuarially necessary,” and that this also applies to retirees as well, other states may not have such legal tools in their tool box.

In California Governor Schwarzenegger has opted to cut deals favorable to capital with public union workers. He knows the rank and file of the unions has fallen into a passive stupor and is not aware of the problem or if they are, not organized to confront their sold out leadership. The so-called union leaders know it too. Last week, four of them agreed to let the state of California cut its own contributions by requiring current workers to pay sharply more for the same pensions. The workers will contribute 10 percent of their pay, in some cases double the previous rate, to the state pension fund (ibid).

In New Jersey Governor Christie not only imposed the new rules on pensions on new public hires, he is quietly looking to see if he can reduce the benefits that current employees expect to accumulate in the coming years.

Also in New Jersey, a state assemblyman, Declan O’Scanlon, recently introduced a bill to ratchet back a 9 percent pension increase that the state gave most workers back in 2001.

These politicians work for the ruling financial interests and have no shame when it comes to rummaging around in workers retirement accounts or stealing loose change from their sofas. Why? No opposition to the policies. The American psyche has been so hoodwinked by the corporate media they do not even know the parts of the political body, let alone what to do about operating on it. They are socially and anatomically politically unaware of what has happened to the body politics and what is planned for their futures by their rulers. Confusion will be their epitaph if a socialist movement is not built.

What is needed?

What is needed of course is a federal bail-out of the states and we will see states clamoring more and more, looking to the feds to turn on the copy machine and print more dollars for use by the ‘territories’. But this too is problematic for the entire Empire is broke and the Chinese bankers do not want to see the dollar plunge in value as long as they own two trillion of them. Not only this, but muscular capitalists who have worked for decades in celebration of this day will not be content with public bailouts, preferring the destruction of the public workers’ unions instead. Private sector bailouts are fine, that is how the system is supposed to work but public sector bailouts are an anathema to ‘capital’. These forces are facing off for a class war they believe they can win.

The real solution, of course, is to claw back the stolen pension funds and public funds from the corporations who not only stole them and invested them in toxic assets and phony Wall Street instruments, but benefited lucratively from the government’s largess as they paid for politicians who allowed them to pay less and less taxes for public services, open tax free enterprise zones, ship work overseas and contract out essential public services to for-profit chop shops.

Decades of no regulations, contracting out, no taxation and unbridled greed by the corporate ruling class has now left the ‘territories’ ablaze with debt and broken promises to working people. The other solution is to raise taxes on the rich, re-regulate the public sector to protect it from contracting out services to privatization forces, and give workers participatory power in how decisions are made with their funds.

All of this is going to take mobilization and not just among public sector workers. If the workers at large corporations cannot see that their interests are the same as those in the public sector, then we will remain divided. Workers at IBM and other large companies like Kaiser Permanente are seeing their jobs contracted out at exhilarating rates; their pensions shrink into pools of dreams, and their work days getting longer. As productivity demands rise on the part of capital, wages and pensions falter.

The seedy politics of capitalist economics is not a spectator sport. It is the moral equivalent of serfdom for a new Digital Dark Ages of economic and social despair. For young workers coming into both the private and public sector, most of whom are Latino and Blacks, if they can find a job at all, they will be facing the diminishment of economic and social life. Social mobility is now backpedaling and the gains made by the social contract during the New Deal are now almost eliminated.

When will we stand up and fight? When will we begin to sharpen the guillotines? The Social Darwinist policies of the ruling class are not only immoral they are leading to homelessness, ratcheted up prison populations, increased poverty, brutal segregation and the continued failure of American capitalism as demand shrinks in face of no credit and little savings. The system is literally a Donner party.

Simply said, the working class is broke; many millions of workers are now in debt and the demand for goods and services is simply not there. When the whole charade breaks down and falls on its own petard is anyone’s guess, but I would look to Greece to see what is happening to the ‘Divided States’ and the ‘broken territories’.

Empire is dead for its occupants; containment and militarization along with a brutal prison industrial complex could be what the only thing lying in wait for passive workers who stare with bewilderment as the for-profit bull dozer takes down their lives. The time now is to organize and take to the streets. The policies are not only unacceptable but unconscionable. We need to build a socialist movement and soon.