Vol. 75/No. 3      January 24, 2011

In the last nine years at least 39 states have raised retirement ages, cut benefits, or increased pension deductions from workers’ paychecks. Under the banner of “pension reform,” state and local governments are accelerating these attacks on workers who retire.

City workers in Prichard, Alabama, on the outskirts of Mobile, learned firsthand in 2009 that the pension law is just a piece of paper. Saying the pension fund had run dry, the city government filed for bankruptcy and stopped sending monthly pension checks to 150 retired workers.

After skipping a $3.1 billion payment to the state employees’ pension fund, New Jersey governor Christopher Christie proposed almost tripling the amount workers must contribute. He also wants to raise the retirement age to 65 years for all state workers. According to the website Stateline, Christie “has indicated that an even more aggressive proposal is in the works.”

Capitalist politicians claim they have to “reform” pensions to narrow budget deficits and counter the impact of the capitalist economic crisis on state revenues. According to the U.S. Census Bureau, state tax collections fell by $66 billion in 2009, the steepest decline since records began being kept in 1951.

Many governors and state legislatures want to follow the example of private capitalist corporations and carry out what the Pew Center on the States calls “drastic overhauls” of pension plans. This involves replacing defined benefit plans, which supposedly guarantee a set monthly benefit on retirement, with defined contribution plans, such as 401(k)s, with payments based on the ups and downs of the stock and other financial markets.

A lot of the money in pension funds is in the form of stocks, bonds, derivatives, hedge funds, and the like. In the fallout of the 2008 financial crisis, pension funds lost huge sums, with the New York State employee fund dropping 26 percent. In spite of this the New York fund invested an additional $1 billion in hedge funds in 2009.

Many pension funds use creative accounting techniques to give the appearance of meeting funding requirements. For example, in New York local governments are allowed to defer fund payments by borrowing against estimated future gains in the funds’ financial investments. The alleged future gains are really just a gamble on the vagaries of the stock, bond, and other financial markets.

Less than half of the U.S. workforce is covered by employer pension plans. But workers with pension funds see them as an important addition to Social Security and guarantor of an adequate retirement.

The current patchwork of pension and health plans is a result of business unionism and the political retreat by U.S. unions following World War II. Union officials negotiated modest wage increases and fringe benefits, and in exchange they refused to fight for national health care, adequate social security, or national unemployment insurance that meets the needs of laid-off workers—social needs of the entire working class. They abandoned any working-class political action independent of the Democrats and Republicans.

Instead, the labor bureaucracy negotiated contracts company by company, and for government workers city by city and state by state, tying pensions and health care to the well being of a particular corporation or government entity. In 2009 only 12.3 percent of workers in the United States belonged to a union, down from 36 percent in 1945.  
 
Scapegoating government workers
Capitalist politicians and the big-business media are using the growing budget deficits to scapegoat government workers for the capitalist crisis and deepen divisions among workers, and divert solidarity in the union movement.

They claim that overpaid government workers with “excessive” benefits are responsible for high taxes and cutbacks in social services.

An opinion column by William McGurn in the January 4 Wall Street Journal quotes Steven Malanga from the Manhattan Institute saying, “Blue-collar union workers are beginning to appreciate that the generous pensions and health benefits going to their counterparts in state and local government are coming out of their pockets.”

The column notes that the president of the New Jersey Senate, Steven Sweeney, a proponent of pension reform for government employees, is an organizer for the International Association of Ironworkers.

A class war is coming, McGurn argues, “between workers in government unions and their union counterparts in the private sector.”

Not surprisingly McGurn does not give any figures on the supposedly high pensions government workers get. In New York, with one of the highest costs of living in the country, retired members of the largest union, District Council 37, receive an average of $18,000 a year.
 
 
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