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Letter to the House Ways and Means Committee, Oversight Subcommittee on Pensions

May 04, 2011

Dear Representative:


On behalf of the 3.2 million members of the National Education Association, we would like to express our opposition to the H.R. 567, the Public Employees Pension Transparency Act (PEPTA), scheduled for consideration in the Oversight Subcommittee during this week’s hearing on “Transparency and Funding of  State And Local Pension Plans.”  We believe this legislation will create a distorted picture of plan funding – creating confusion among decision-makers and potentially leading states to abandon public pension plans.

Protecting the economic future of public school employees is not only the right thing to do, it is the smart thing to do - it ensures a high quality workforce and a healthy economy.  But, in order to retain the most accomplished individuals in our classrooms, we need to take care of them now and in the future.  This country demands a lot from its teachers and others who work in public schools and rightly so.  Education professionals enter and stay in the profession, not for the money, but because they are dedicated to helping their students learn and prepare for the future.  They don’t expect to be wealthy, but they do expect and deserve a decent retirement.

Plan benefits for education employees are modest.  The pension of a full career education employee replaces only a portion of the salary earned while working, and educators’ salaries are so low that their pension provides only a modest living in retirement.  The average retirement benefit for public employees is $22,600 and for many of them, including nearly half of all teachers and over two-thirds of firefighters and public safety officers, it is in lieu of Social Security.  State and local salaries on which these pensions are based are lower than those for private sector employees with comparable education and work experience, even when benefits are included.

The focus on pensions as a solution for budget shortfalls is misplaced, and will only undermine the secure retirement earned by public employees and further jeopardize economic recovery.  Public pension plans are not in crisis.  Participants do not all retire on the same day and draw down their pensions.  On the contrary, pensions are funded and paid out over decades.  Public employee retirement systems have substantial assets.  There is currently $2.7 trillion already set aside in pension trusts for current and future retirees.  Boston College researchers project that public pension funds are sustainable and have sufficient assets to pay benefits now and into the future.  New research by the National Conference on Public Employee Retirement Systems based on the most recently reported data found that “although media coverage has focused on a handful of troubled funds, most funds are managed responsibly and maintain strong funding levels.”

Public employee pension checks represent a vital, continuous source of spending in every state, city, and community across America.  Some 7.3 million retired Americans receive a monthly pension check, which translates into enormous economic benefits.  The over $175 billion in annual benefit distributions from pension trusts are a critical source of economic stimulus to communities throughout the nation, and act as an economic stabilizer in difficult financial times.   For example, expenditures made from state & local pension benefits for fiscal year 2005-2006:

  • Had a total economic impact of more than $358 billion;
  • Supported more than 2.5 million American jobs that paid more than $92 billion in total compensation to American workers;
  • Supported more than $57 billion in annual federal, state, local tax revenue; and
  • Had large multiplier effects.  Each taxpayer dollar invested in state and local pensions supported $11.45 in total economic activity, while each dollar paid out in benefits supported $2.36 in economic activity.

The real key to viable employee pension plans is to ensure that our economy continues to recuperate in a healthy and responsible way.  Instead of looking at taking away retirement security from public employees and demanding unneeded action to change their benefits, we should protect them while working to restore retirement security for all American workers. 

Thank you for your consideration of our views on this important issue. 

Sincerely,

Kim Anderson        
Director of Government Relations 

Mary Kusler
Manager of Federal Advocacy