Public Pensions Support Vital Services, Stimulate the Economy

by AFSCME President Gerald W. McEntee  |  July 13, 2009

This column by AFSCME President Gerald McEntee originally appeared in the USA Today opinion section.

Public pensions offer good value for taxpayers. In addition to providing modest but secure retirements for public employees — emergency responders, firefighters, health care workers, teachers, police officers and more — defined-benefit pension plans help provide vital public services and stimulate the economy.

The average annual benefit for a public worker, who has spent a career working for our communities at modest salary, is about $20,000. On average, taxpayers fund only 25% of the pension benefit; employee contributions and investments make up the rest.

While a handful of public pension plans are experiencing funding shortfalls, most are working well. Employers should be required to make regular contributions. That would solve the problem of shortfalls and protect a system that works for employers, employees and taxpayers.

Some proposals would only make matters worse. States that have experimented with private accounts, for example, saw lower investment returns — nearly a 50% reduction. Florida, Nebraska, North Dakota and West Virginia all tried private accounts. They left taxpayers footing the bill. When private retirement investment plans fail, they leave retirees more reliant on governmental financial assistance. That costs taxpayers more in the long run and hurts our communities.

Public pensions create almost $360 billion in economic activity and 2.5 million jobs. Shifting to a private system would have a dramatic and detrimental impact on local economies because businesses depend upon the stimulus of investment income from public pension systems. In California, switching to a system of private accounts could cost citizens $7.6 billion. Experimenting with a system of private accounts could put vital public services at risk and cost taxpayers significantly more for at least 10 to 15 years.

All Americans should have retirement benefits that they can count on, not the gamble of privatized 401(k)s run by the same Wall Street bankers who drove our economy into the ditch. Pensions are proven and critical tools to provide public services, stimulate the economy, secure retirement for public employees, and provide the best value for taxpayer dollars. Pensions work, so let's preserve them and create retirement security for everyone who works hard for a living.

Gerald W. McEntee is president of the 1.6 million-member American Federation of State, County and Municipal Employees.