Last week, Louisiana was one of
10 states mentioned in a report
by the leftist group Good Jobs First,
which criticizes government subsidies and tax breaks only to corporations as
part of its government-centric, labor-friendly, static view of economic
development. The report reviewed, quite selectively as pointed out by
Louisiana’s Secretary of Economic Development Stephen Moret, such programs in
these states and compared their costs to pension costs. It concluded that in
all states reviewed these subsidies/breaks exceeded pension costs, and the gap
was greatest in Louisiana. This assertion was used in support of a narrative
that states ought not be trying to find ways to reduce pension costs to
taxpayers when they apparently give away so much corporate largesse.
Specifically for Louisiana, the
group selected $1.8 billion in corporate subsidization (which admittedly
contains some speculative numbers, such as the estimate made by a Ralph
Nader-connected interest group that claimed “corporate tax avoidance” cost the
state nearly a half billion bucks) and determined pension costs were about $350
million a year. These costs were derived from data from the two, of four, “state”
retirement systems (the nine other “statewide” systems are much smaller)
presumably because the two, the Louisiana State Employees’ Retirement System
and the Teachers’ Retirement System of Louisiana, between them have 85 percent
of all state system retirement assets.
However, in computing the latter
figure, they made an egregious error that decisively underestimated the actual
pension costs. Through inattentiveness, or perhaps to skew the results to try
to make their case, the analysts derived the cost looking at covered payroll
times the “normal cost” for government, or the minimal contribution governments
were obligated to make. But that ignores the constitutional imperative the
state has that by 2029 all of the unfunded accrued liability in pension funds
be reduced to zero (see here
for an explanation), which pushes the actual costs far higher, in recent years
typically to about four times the normal cost. For LASERS alone, instead of the
$132 million the group computed as costs, the actual cost was $649 million,
and for TRSL that the group reported as $216 million, it was $984
million -- putting the total almost at what it computed in its questionable
subsidies numbers.
But untrustworthy numbers alone
don’t make the report essentially useless. Its entire premise links the forms
of subsidization and pension payouts to create disingenuously the notion that
policy merits of the two are relative and dependent on the other. That is,
subsidization makes it more likely that politicians will “single out” pensions
as areas of reform that need changes that either or both increase employee
contributions or reduce benefits.
Yet this is a specious argument.
Proper analysis places both activities in an absolute context. That Louisiana
may provide too much corporate largesse has no bearing on whether it has
pension systems that provide too much benefits, in the overall larger scheme of
things of total compensation for work performed, for too little employee
contribution and too much demand on taxpayers. Regardless of other policy
areas, the question of whether the current retirement regime for most state
employees and most school district employees is appropriate stands
independently. By trying to connect it to other government spending choices,
this serves only to introduce a red herring to distract from this genuine issue
of inefficient and wasteful government spending that unduly enriches state
employees at taxpayer expense.
But, in spite of – or perhaps
because of – these analytical errors, gubernatorial candidate state Rep. John Bel Edwards ran with this
argument, saying “When there’s not enough money to do the things that everybody
thinks we should do, we immediately blame our public sector employees and talk
about their pension benefits. That’s clearly wrong.” In his view, regardless of
the appropriateness of an overgenerous
pension regime in the state, conversations about changes to it are
forbidden.
And, with mouth wide open in
parroting the line based upon flawed analysis, Edwards then can’t resist but to
stick his own foot into it upon stating that state retirees average $19,000 a
year, perhaps in order to make a claim that the system isn’t generous enough.
At least the invalid representation on total state payment annually towards the
two major pension funds by the group could be traced as to its error; but where
Edwards concocted this number is anybody’s guess.
According to the data, the
average LASERS retired member benefit received was $22,120 last year, and for TRSL
it was $25,343, and the 11 other systems combined almost certainly have a
significantly higher average, given their memberships. Further, these figures
include large numbers of retirees who did not spend the vast majority of their
working careers in state or local government, which serves to reduce the
average significantly; for those employees who put at least 30 years into state
employment, LASERS’ average benefit for those retiring in 2013 was $53,448.
Keep in mind that for most in LASERS one could retire as early as 58 with full
pay (averaged over the last three years of service) or at 48 with 75 percent of
full pay, that over half retiring in 2013 served less than 25 years, and that retirees
often have had other jobs that qualify them for other retirement benefits
including Social Security.
Of course, Edwards with these
comments is grubbing for votes from his natural constituency – the
beneficiaries of government largesse, both the takers of wealth transferred
from its makers and the intermediaries of this process. In the process his
uncritically swallowing biased data to spit out an ideological point impoverishes
serious debate.
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