The Pension IOU



By 04/08/2014

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As I write in a piece for RealClearEducation, “When advocates for traditional defined-benefit pensions say things like, “pension plans would be in better financial shape if states made their required contributions,” that’s true, but only half the story. The other half is that the current structure carries no cost for politicians who make pension promises but fail to live up to them.”

Two very different politicians—Chris Christie in New Jersey and Martin O’Malley in Maryland—are following nearly the same playbook on pensions. In response to under-funded pension plans, both cut benefits for new teachers, both made promises to raise state contributions in order to prevent future under-funding, and now both are trying to back away from those promises.

It’s an old story that politicians make promises they don’t intend to keep. But it’s worth noting that these two politicians, who are both vocal good government types, are struggling to keep promises that are only a couple years old. Pension funding isn’t exciting and it doesn’t provide any immediate return. Pensions are an investment in the future, but politicians can’t resist the urge to use today’s money to pay for today’s services.

As I conclude in the piece, “Teachers across the country must stop enabling this system, which is bad for their personal retirement and also for their profession. Instead, they should insist that all forms of compensation—including retirement benefits—are paid for upfront and that benefit promises are matched by real contributions.” Read the full thing here.

-Chad Aldeman

This first appeared on teacherpensions.org




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