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Don’t blame pension obligations for budget crisis

No doubt about it, public employees have targets on their backs.

But one can make a powerful argument that the problems facing state governments are due to the failure of Wall Street and a horrible economy-not retirement funds for public employees. Research published a few weeks ago by the Economic Policy Institute and recent reports from several reputable news agencies also support this notion.

Many politicians and anti-labor forces focus on the myth that retirement security for public service employees is one of the causes of overburdened state budgets. This is false. This is just political campaign rhetoric and has been disproven by the facts.

Noted Washington Post contributor Ezra Klein recently reported that pension obligations currently account for only 3.8 percent of the average state’s spending. This is not where the current crisis is coming from-so why are political types blaming public-sector pensions for our fiscal woes?

It is reported that American Federation of State, County and Municipal Employees members receive an average of $18,000 a year after retirement and most of the rank and file contribute toward their pensions throughout their working careers. According to the Center for State and Local Government Excellence, state and local public employees’ total compensation, including salaries and benefits, is approximately 7 percent less than that of private-sector workers.

In the months before the financial crisis, states had built up record rainy-day funds and started infrastructure projects. Then Wall Street collapsed, and so did the revenue that states received from taxing property, incomes and retail sales. At the same time, the demand for social services went through the roof. The result produced a terrible strain on state budgets.

If we want to solve the revenue-versus-spending dilemma, let’s take a long, hard look at what got us here in the first place-deregulation, greed, unscrupulous bankers and a bursting housing bubble.

As a result, we should not be blaming public employee retirement funds for the budget crisis we are now experiencing. Granted, down the road state and local governments and the unions who represent those workers will have to work together to solve our future budget deficits. But let’s not forget that back in 2009 it was the unions’ groundbreaking health care proposal and agreement with the city of Rochester that could result in $30 million in savings over a three-year period.

Ove Overmyer is president of CSEA Local 7420, City of Rochester Library Workers.

11/12/10 (c) 2010 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail rbj@rbj.net.

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