AFSCME’s Truthiness Problem
Just before Maryland public sector unions held a solidarity rally in Annapolis for their peers in Wisconsin, Patrick Moran, Director of the Maryland chapter of the American Federation of State, County, and Municipal Employees (AFSCME) was kind enough to answer some questions. See video below
I asked Moran about the connection between public sector employee collective bargaining and the huge pension and retiree healthcare liabilities that not just Wisconsin but the entire nation faces. Moran replied that Wisconsin’s pension plan is 98 percent funded. However, that is only true if you believe overly optimistic government assumptions.
In 2010, official estimates did state Wisconsin’s pension system was 100 percent funding. However, analysis by the Manhattan Institute revealed that the Wisconsin Retirement System is only 72% funded. Using more accurate asset growth projection rates—required for private sector plans—and accounting for WRS’ use of “smoothing,” an accounting gimmick, which allows pension systems to hide losses, the Manhattan Institute found a $10.9 billion shortfall.
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Maryland’s State Retirement and Pension System recently adopted smoothing to hide $4.7 billion in system losses between 2008-2009. The system’s outgoing investment officer received over $95,000 in bonuses for this performance. Maryland’s pension system is underfunded by $18 billion. Add that to the $16 billion in underfunded retiree health care benefits and taxpayers are on the hook for $34 billion in pension and health care costs. That gap is roughly the same size as Governor Martin O’Malley’s fiscal year 2012 budget proposal.
The Pew Center for the States estimates a trillion dollar gap nationally between what the states owe in pension obligations and the amount actually funded.
Moran also argued that the issue isn’t about Wisconsin’s budget deficit as Governor Scott Walker has stated. Moran said Walker “just gave huge corporate tax breaks to businesses and corporations, so of course there’s a funding problem there now.” Yet again Mr. Moran isn’t entirely right on the facts. While Walker did indeed offer business tax credits, they did not cause Wisconsin’s budget deficit. As Politifact noted in rebuking MSNBC host Rachel Maddow, the idea that Walker’s tax credits created the deficit is false because they haven’t taken effect yet and are not part of the current deficit.
The truth of the matter is that through collective bargaining, public sector unions, in Wisconsin and elsewhere, arrogate more and more money from the taxpayers. Turning involuntary dues into campaign cash, public sector unions purchase the very Democratic politicians (ostensibly there to represent the taxpayers) they sit across the negotiating table with to divvy up even more taxpayer money.
At the rally Senate President Mike Miller said, “This is about power.” He’s right because taxpayers have finally decided to stop subsidizing the political power of public sector unions.