CWA Public Sector Meeting

1. CWA Public Sector Meeting For the 2013 CWA Convention April 21, 2013 11 AM

2. Agenda • Challenges facing public pension plans • Reforms are already taking place • Pensions still get retirement right • Strategies to protect plans

3. Challenges Facing Public Plans

4. Financial: State Budget & Pension Funding Levels Down • State revenues have declined. • 2012 Q1, revenues 5.5% below pre-recession levels. • $425 billion cut from budgets in 2007-2011. • 2013 budget gap of $55 billion, states have closed. • Pension funding levels have declined. • Wall Street losses affected all investors. • Funding levels fell from 85% in 2008 to 77% in 2010. • Good investment returns in 2012 helped, but cannot make up funding gaps alone.

5. Financial: Has the Employer Contributed ARC? • Employees always make their contributions. • If employer has not paid the ARC, why balance the books on the backs of employees? • Remember that funding gaps can be paid over time, like a mortgage. • Has the employer paid its Annual Required Contribution (ARC) consistently? • Plans with the most financial trouble got that way because the state has not made its payments year after year.

6. Ideological Challenges • Research finds that political challenges often based in ideology—not financials. • “Reforms” often end up costing MORE money! • Even after “reform” passed, continued efforts at more reforms in subsequent years. • Wisconsin. • Well funded pension. • Had already increased employee contributions. • Still went after pension, collective bargaining rights.

7. Public Perception Challenge: “Pension Envy” of Private Sector Percentage of private-sector employees participating in traditional pension plans, 1981-2011 Source: US Bureau of Labor Statistics.

8. Reforms Are Already Taking Place

9. States Are Addressing Funding Shortfalls, Making Reforms • States continue to make pension contributions. • $73 billion in 2009, an increase of $1 billion from 2008. • 92% of Annual Required Contributions were made between 2001-2010. • 46 states have undergone major pension reform. • Boston College finds that: • In most states, the reforms already implemented will fully offset the impact of the financial crisis. • For all states, pension costs as a share of budgets will fall below pre-crisis levels. • .

10. Major Pension Legislation: 2009-2012 Source: National Conference of State Legislatures.

11. Employee Contribution Increases, 2009-2011 Source: National Conference of State Legislatures.

12. A Few States Have Moved from Traditional Pension Structure • “Hybrid” designs (low level DB with DC) in: • Michigan School Employees • Utah • Rhode Island • Kansas • Cash balance designs (career average, with annual interest credit) in: • Louisiana • Virginia

13. Why Pensions Still Make Sense

14. Pensions Are Economically Efficient Source: National Institute on Retirement Security, “A Better Bang for the Buck.”

15. Recruitment, Retention, and Workforce Management Research shows that... • Pensions have strong recruitment and retention effects. • Which means that pensions serve as an effective human resource management tool. • Which results in lower employee turnover. • Which increases productivity. • And encourages “efficient retirement.” Source: National Institute on Retirement Security, “The Great Recession.”

16. All Americans Value Public Pension Benefits • Pensions are broadly popular nationwide—83% favorable. • When given a choice, public workers overwhelmingly prefer pensions. • Americans believe that public employee pensions are NOT overly generous. • Americans are sympathetic to public pensions when they understand that employees contribute directly. Sources: National Institute on Retirement Security, “Decisions, Decisions,” and “Pensions and Retirement Security 2013.”

17. Pensions Provide Economic Stimulus Source: National Institute on Retirement Security, “Pensionomics 2012.”

18. Strategies to Protect Plans

19. Overall Strategy to Combat Pension Reforms • Operation facts: What is the actual problem (financial, ideological)? • Analyze the financials and reform proposals – what is full cost, effect on workers? • Build coalitions. • Mobilize members.

20. National Public Pension Coalition • National partners: AFL-CIO, AFSCME, AFT, IAFF, NEA, SEIU, NCPERS • Mission: Defend public employee pensions as the foundation of a secure retirement. • Organize early and keep abreast of reform bills • Lobbying, communications, education, mobilization • Engage allies, foster and mentor strong coalitions • In the process... • Maintain strong state/local coalitions • Reframe the debate on pensions • Position public pensions as model for retirement security

21. Offensive (Longer Term):“Retirement Security for All” • WHAT: State legislation to allow private workers to enter into the public retirement system. • WHY—Economic: Addresses key economic issue that many private workers lack good retirement benefits. • WHY—Political: Confronts “pension envy” among private employees.

22. Retirement Security for All Coalition To what extent do you agree or disagree that that all workers, not just those employed by state and local governments, should have access to a pension? • Spearheaded by SEIU, AFSCME, with AFL-CIO, other unions, AARP, nonprofits • Build off of successful legislation in California • Similar bills active in at least 6 other states (CT, IL, MD, OR, VT, WA) • Coalition is developing principles, drafting model legislation, beginning grassroots work • Idea seems broadly popular Source: National Institute on Retirement Security, “Pensions and Retirement Security 2013.”

23. Conclusion

24. Conclusions • Private plans have been in decline for decades, public plans are under attack. • Yet, pensions still make sense for most workers AND employers. • Defense: Build coalitions, get good numbers to assess the impacts of reforms. • Offense: “Retirement Security for All” initiatives may ease political pressures on public plans.

25. Questions & Comments