The American Legislative Exchange Council (ALEC) is out with a new report today—Keeping the Promise: Getting Politics Out of Pensions—highlighting a big but little-known problem plaguing pension systems everywhere: political manipulation.
An excerpt from the report:
Unfortunately, many lawmakers and pension plan officials have other priorities besides doing what is best for workers. They see the billions of pension fund dollars they manage as an opportunity to advance their own agendas. Rather than investing to earn the best return for workers, they use pension funds in a misguided attempt to boost their local economies, provide kickbacks to their political supporters, reward industries they like, punish those they don’t and bully corporations into silence and behaving as they see fit. [emphasis mine]
As lawmakers and trustees knowingly make inferior investment decisions, sacrificing better returns in order to advance political agendas, pension funding declines, jeopardizing workers’ retirement benefits and leaving taxpayers to pick up the tab. This reckless decision to place political agendas ahead of what’s best for workers is known as pension fund cronyism, and it is happening every year in pension funds across the country.
Public pension plans’ susceptibility to political convenience is a major reason why the problem has reached such epic proportions. According to the report: “when a risk-free rate of return is used, the national funded ratio for state pension plans is a meager 35.1 percent, with almost $5.6 trillion in unfunded liabilities. That staggering figure is more than 30 percent of the gross domestic product of the United States.” [emphasis mine]
That staggering level of pension debt, as well as concerns over political manipulation, offer another reminder that it’s time for change in Texas!