Unfortunately, the long-standing idea that public employees are due a decent retirement is under growing attack from coast to coast as anti-tax, anti-government radicals set their sights on slashing or even eliminating traditional pension plans. PSRPs’ pensions are modest, at best, and not all school employees are even fortunate enough to participate in a traditional plan. So rhetoric about overpaid school employees and overly generous pensions that taxpayers can’t afford is especially misleading.

Pick almost any state and you will find legislators—and governors, in some cases—pushing bills to overhaul the public employee retirement systems that cover teachers, school employees and other public employees. Most state plans are still ­traditional “defined benefit” pensions that provide a set monthly payment to retirees based on years of service and salary at the end of their career. While attacks on public employee pensions are not new, the latest round began in full force in California early last year. Gov. Arnold Schwarzenegger proposed dismantling the state’s two main retirement systems, among the largest in the country, and replacing them with less generous and more risky “defined contribution” plans. (See the box below for some basic pension definitions.) Due in no small part to an aggressive campaign by AFT affiliates and other unions across the state, Schwarzenegger ended up withdrawing his ill-conceived ballot initiative.

Bad ideas spread
But similar “reform” proposals that share many of the California governor’s ideas have popped up in numerous states, with mixed success so far. In Alaska, the Republican governor and his allies in the Legislature pushed through a bill that moves new employees into a defined contribution plan and also changes employee health benefits. As we went to press, the AFT-affiliated Alaska Public Employees Association was preparing to file a lawsuit to stop implementation of the plan.

The changes in Alaska are especially frustrating, says Sharon Baker, president of the TOTEM Association of Educational Support Personnel in Anchorage, because her state is the richest in the country, and underfunding of the pension is not an issue, as it is in other states. One problem with reforms like Alaska’s, which essentially introduce a two-tiered system that treats new employees differently from veterans, is that it becomes harder to convince current employees that the changes for new workers will ultimately be bad for everyone, says Baker, who is also a member of the AFT’s PSRP program and policy council (PPC). And younger members who are many years from retirement tend not to be as concerned about the issue. “When you talk about retirement with some of the young members,” Baker says, “it’s like you’re speaking a foreign language to them because it seems so far away.”

Even AFT members in heavily Democratic states have seen their pensions come under attack in recent years. In Rhode Island, for example, the state plan was revised to raise the retirement age, limit cost-of-living increases and reduce benefits. “This really can happen in any state,” John Abraham, the AFT’s staff pension expert, told members of the PSRP PPC at a recent meeting.

While the growing number of attacks on pensions in state legislatures may seem alarming, AFT president Edward J. McElroy warns that “we haven’t seen anything yet” compared with what’s ahead. The most outrageous pension attacks to date have come in private industry, where a growing number of corporations—and not all of them facing financial problems—are simply abandoning traditional pension plans. “I don’t think we’ve been angry enough” about what has been happening to our unionized colleagues in the private sector, McElroy recently told members of the AFT’s program and policy councils.

Targeting traditional plans
I’s hard to generalize about PSRP pensions, since plans vary from state to state—some support staff are in the same plan as teachers, for example, while others are in broader state employee plans, and many PSRPs don’t work enough hours to qualify for some plans. But broad similarities among state pension plans make it clear why they have become such a prime target for attacks from anti-tax and anti-government crusaders. In almost every state, public employee plans are still the traditional defined benefit. That’s why the attack on California’s huge plans was so threatening, because states tend to imitate each other’s reforms, including their bad ideas.

In addition, state pension plans are typically managed by a board of trustees—not large Wall Street firms. Just as President Bush’s failed push for Social Security privatization appeared to be motivated in part by a desire to turn the massive assets in Social Security over to private brokers, the same privatization motives are driving some state-level reforms. (While Social Security privatization is dormant now, that might not be the case after the fall elections. See the box on page 5.) Not only are state pension plans not in corporate hands, but some of the more enlightened pension administrators—not surprisingly in places like California—have used their control of billions of dollars of stocks and bonds to promote better corporate governance and citizenship. In all, state pension plans have assets of about $2 trillion, which gives their managers a lot of say when shareholder proposals are considered by the companies in which they hold stocks.

While much of the focus for the AFT, and especially its state federations, has been on fending off bad ideas, there have been some positive developments since Gov. Schwarzenegger had to pull his initiative off the California ballot. With strong support from AFT-Maryland and its affiliates, the Maryland Legislature this year passed a “pension enhancement” bill that improves benefits for all members of the teachers and public employees pension systems. The improvements in Maryland result from an increase in the “multiplier.” (See the pension glossary box.) The larger the multiplier, the better the retirement benefit; the Maryland law increased the multiplier from 1.2 percent or 1.4 percent, depending on when the employee started, to 1.8 percent.

AFT PSRP leader Lorretta Johnson, who is also president of AFT-Maryland and an AFT vice president, says the change is not only good for current employees but also should help with recruitment. It also has been a good vehicle for attracting new members and state employees in particular.

West Virginia provides a rare example in which the public employee pension plan was converted from a defined contribution back to a defined benefit after a vote by the workers covered by the plan. As in Maryland, AFT activists in West Virginia report that the pension changes have been good for member recruitment.

And in Colorado, a coalition of unions and their allies helped get legislation passed that deals with funding shortfalls in their state plan; the legislation prompted an anti-tax group in the state to withdraw a proposed ballot initiative aimed at gutting the pension plan. “This was a good example of how our legislative work in the past paid off with electing good legislators” who supported the union’s position, says Wayne Scott, executive director of the Colorado Classified School Employees Association and member of the PSRP PPC.

The defined benefit advantage
Unions aren’t the only ones arguing for the preservation of traditional pensions. An in­dependent study of defined benefit pensions concludes that such plans not only provide a more secure retirement than defined contribution plans, such as 401(k)s, but also have other important pluses. Among the other benefits, according to the study by Notre Dame economics professor Teresa Ghilarducci: Every worker is automatically covered; plan assets are professionally invested, which reduces the risk to workers; plans have a long time horizon, which also can reduce risks; and employers can use traditional pension plans to attract and retain skilled workers.

Much of the work to fend off attacks on school employee pensions takes place in state capitols, with union lobbyists leading the way. And while direct lobbying is an important tactic, it’s crucial for individual AFT members to keep up with what’s going on with their state pension plans. As Scott pointed out, electing worker-friendly lawmakers is also key.

In Michigan, another state where Republican legislators are trying to overhaul the state retirement system, the AFT’s affiliates are reaching out to Republicans who they think will work with them to defeat misguided changes. “We’re trying to explain to our members why it’s good to be active legislatively and how what we do legislatively affects their retirement,” says AFT vice president Ruby Newbold, who is president of the Detroit Association of Educational Office Employees.

Sharon Baker in Alaska says that her union will make sure to remind its members of who voted with them on the pension bill in the Legislature so they’ll keep that in mind in the voting booth next time.

Unfortunately, the pension reform bill working its way through Congress might create even more headaches in the future for public employees. While the bill only applies to private sector pensions, such changes usually find their way into the regulations for public plans. And some of the new rules, if adopted, could drastically drop the funding levels of state plans. One of the first things that politicians mention when they want to change—and that usually means cut—a pension plan is that the state can’t afford it because it is so underfunded. Although the legislation is complicated, watch out for harmful pension proposals when you start hearing that your state plan is underfunded.

The AFT’s John Abraham has a couple of other suggestions for rank and file members when it comes to their pensions. Besides paying attention to issues such as funding levels, it’s good to familiarize yourself with who manages the state plan and how they are selected. Many public employee plans include employee or union representatives on their investment boards, so members should take the time to find out who that person is and, if that’s how it works in your state, to vote in elections to choose those representatives.

Finally, as Abraham and other retirement experts point out, traditional pension plans are only one leg of what they call the “three-legged stool” of retirement security. Social Security and private savings make up the other two legs. So it’s worth paying attention to projected Social Security payments, for those who participate in the system, and to figure out what if any private savings can be put aside to bring you closer to the comfortable retirement that all school employees deserve.