Private-Sector Anger Builds as Public Pension Costs Rise
Lawmakers feel the heat from taxpayers who see their own
benefits wither, and traditional payouts give way to
By Molly Hennessy-Fiske, Staff Writer
Los Angeles Times
Monday, October 2, 2006
HADDONFIELD, N.J.For insurance agent Steve Adams, 51, the
resentment began two years ago.
As he worried whether his stagnant 401(k) account would be
adequate for retirement, his wife's employer ended her pension
plan, forcing her to rely on a 401(k) as well. Then New Jersey
lawmakers raised his property taxes to maintain state workers'
Last spring Adams joined a taxpayer group called Americans for
Prosperity that is seeking limits on government employee
In June he attended a rally in Seaside Heights, N.J., where
about 200 people urged state legislators to make cuts in such
things as pensions rather than raise taxes again this time, a
proposal to raise the state sales tax.
"We don't get anything nearly as generous in the private sector"
as public pensions, Adams said.
Public employee pensions, one of the last bastions of guaranteed
retirement plans in America, are under assault as cash-strapped
state and local governments struggle to cover rising costs and
as resentful taxpayers refuse to pay more to cover them.
The development has led to "pension envy" among people like
Adams, as baby boomers struggling to make it to retirement see
state workers retire early to reap rewards they may never
enjoy. The tension has crept into relationships between
friends, neighbors, parents and teachers.
The struggle to fund public employee pension plans is a familiar
topic in California, where last year Gov. Arnold Schwarzenegger
unsuccessfully sought to replace state workers' pensions with
The California Public Employee Retirement System and California
State Teachers Retirement System cover more than 2 million
workers. CalPERS is 88% funded and CalSTRS 82% funded, according
to their financial records levels that researchers at the
conservative Pacific Research Institute say are high compared
with states such as Illinois and New Jersey.
Alaska and Colorado have made changes to state pensions, and
Illinois, Oklahoma, Montana, New Jersey, Pennsylvania and
Providence, R.I., are contemplating similar steps.
About 90% of state and local workers in the U.S. have pensions,
compared with about 20% of private-sector workers, said Keith
Brainard, research director at the National Assn. of State
Instead of company-paid pensions with guaranteed payments, most
private-sector workers now are offered 401(k) plans, investment
accounts that employees pay into and manage while they're
working, then tap when they retire. Some employers contribute
to 401(k) plans.
With state pensions, investment management is up to the state,
but taxpayers are often called on to cover costs. As of last
year, 84% of state pension plans were underfunded, meaning their
assets don't cover projected payments, according to Santa
Monica-based Wilshire Associates. Some lawmakers plan to make
up the difference by raising taxes.
The tension between public employees and taxpayers is playing
out across the country, but nowhere more sharply than in New
Several of New Jersey's major private employers recently
eliminated pensions. Telecom giants Sprint Nextel Corp. and
Verizon Communications partially froze pensions last year,
affecting some 18,000 workers in New Jersey. DuPont Co., which
employs about 1,300 in New Jersey, announced plans this summer
to freeze pensions, meaning the company intends to drastically
reduce its pension fund for current employees and deny any
coverage to new hires.
"More and more New Jerseyans find themselves without pensions
and become resentful of the double whammy that they face: fewer
benefits for themselves and higher taxes so that the
public-sector workers can receive generous benefits," said David
Rebovich, managing director of the Institute for New Jersey
Politics at Rider University in Lawrenceville.
Nancy Burwell, 52, of Morristown, N.J., is one of them. She's
been attending and organizing meetings of Americans for
Prosperity seven were scheduled in September
across the state, seven this month where organizers
explain the public pension system and how it contributes to
local tax increases.
Burwell, who works in sales, said she and her husband, a
computer programmer, were saving for retirement without a
pension or 401(k) because their jobs didn't offer them.
"We don't expect anybody else to help us out; we take care of
it ourselves," Burwell said. "I really resent these public
workers. Why should I pay for their retirement?"
State Assemblyman Paul D. Moriarty is pushing pension changes.
"In New Jersey, life is still about keeping up with Mr. and Mrs.
Jones. And the Joneses have state pensions and health care
coverage," the Democrat said.