AFP Applauds Lincoln Councilman Jon Camp for Pension Reform Efforts
Government sector employee pensions need reform.
They are bloated, unsustainable and threaten the economic health of Nebraska’s local governments.
But don’t take our word for it, straight from the Oracle of Omaha:
“Public pension promises are huge and, in many cases, funding is woefully inadequate. Because the fuse on this time bomb is long, politicians flinch from inflicting tax pain, given that problems will only become apparent long after these officials have departed.” ~ Warren Buffett
We applaud Lincoln City Councilman Jon Camp for putting his neck on the line and demanding real reform to government sector pensions.
Councilman Camp wants to move Lincoln away from defined-benefit programs to defined-contribution. This reform will save the taxpayers millions and create a more equal field for private sector and government sector employees.
In 2011 only 21% of private sector employers provide a ‘defined benefit’ plan to their retirees, while 84% of government employees receive the generous benefit. A defined benefit plan is a guaranteed value of salary, health care and other benefits that will be distributed to retirees. Whereas the common system in the private sector – defined contribution – merely stipulates the match employers will contribute to the employee’s retirement plan. Often this is a 401K, or similar program. This discrepancy between public and private goes a long way in explaining why on average government workers receive 69% greater benefits than retirees in the private sector.
Defined benefit plans often have a COLA (Cost of Living Adjustment) provision that automatically increase the value of the benefit for the government employee. With health care, transportation, and improving life expectancy, the cost of providing guaranteed benefits to Nebraska’s government employees is drastically rising with no end in sight.
Even the Lincoln Journal Star is supportive of Councilman Camp’s reforms stating in a recent editorial:
All around the country defined-benefit retirement plans, which promise a retiree a specified income, are being phased out. They are being replaced by defined contribution plans, in which money contributed by the employee and employee are invested, but employees are not promised a specific income.
In the private sector only 18 percent of employees are covered by a defined benefit plan, according to a study released this year by the Government Accountability Office. In 1975, 88 percent of private sector workers had such a plan.
Nebraska should lead the way in reforming our state’s pension program.
Councilman Camp is right, taxpayers cannot be on the hook forever to guarantee retirement benefits that are simply unheard of in the private sector.