I was surprised at how many readers identifying themselves as members of PERA — the Colorado Public Employees Retirement Association — agreed with my recent column urging a cutback in benefits to stave off the system’s collapse.
They weren’t even close to a majority of those who contacted me, of course. And the remainder ranged anywhere from constructively critical to rabidly so. But PERA members clearly are not all intent on pushing the fix onto taxpayers.
My critics, meanwhile, returned again and again to three themes.
Theme No. 1: My column, to quote a typical comment, neglected to mention that “PERA serves as both a pension and Social Security replacement.”
True enough. That’s why PERA should be more generous than Social Security (and, as a matter of fact, it is way more generous). Yet it’s equally important to remember that about half of private-sector workers do not enjoy an employer- sponsored pension, that this percentage has been fairly constant for decades, and that employer pensions these days are much more likely to be self-directed 401(k) plans than PERA-like programs with defined benefits.
PERA pensions are not only comparatively comfortable, their advantage will grow as more companies freeze traditional pensions or stop matching contributions to 401(k)s.
My point is not to begrudge public retirees their benefits. Indeed, more power to them. But the facts suggest they can and should contribute toward lifting PERA back toward solvency.
Theme No. 2: Public employees are underpaid — or, to quote one correspondent, “PERA employees . . . always have and still do work for the smallest wages. They certainly couldn’t afford to put money away for retirement.”
Yes, some government workers are comparatively underpaid. But many do reasonably well. As USA Today reported this year, “Public employees earned benefits worth an average of $13.38 an hour in December 2008, the latest available data, the Bureau of Labor Statistics (BLS) says. Private-sector workers got $7.98 an hour.”
But what about total compensation — that is, wages plus benefits?
It turns out that public workers enjoy an advantage there, too, according to USA Today, “and the gap has been expanding.”
Again, more power to public employees. But it’s hard to reconcile such data with the claim that they are mostly church mice unable to supplement their retirement nest eggs.
Theme No. 3: Why am I picking on public pensions when Social Security is in tough shape, too? “I wonder what your position would be . . . personally . . . if you were a member of PERA,” one reader wrote. “Would you still think that an unwillingness to go along with benefit adjustments to atone for past mistakes not of one’s own making would amount to ‘a scandalous fraud?’ ”
Yes, I think I would. After all, I favor “progressive price indexing” to help restore Social Security to financial health and yet this would directly affect the benefits I expect to receive someday.
Progressive indexing is the brainchild of Robert Pozen, a Democrat who served on President Bush’s Commission to Strengthen Social Security. As he explains his plan, “Under progressive indexing, the Social Security benefits of high earners . . . would grow with inflation, while those of middle earners would grow at a rate somewhere between inflation and the rise of wages.” Benefits for low-wage retirees would still be indexed to wage growth, which historically has risen faster than prices.
This simple change would net huge savings for Social Security — equal to two-thirds of its long-term deficit — while protecting those who need income most.
We can’t tax our way out of Social Security’s deficit without damaging the national economy, just as we can’t load PERA’s unfunded liability onto taxpayers without damaging the state’s health.
And yes, it would be a scandal — in either case — if we failed to do the right thing.
E-mail Vincent Carroll at vcarroll@denverpost.com.
