For years firefighters, nurses, teachers, social workers, roads crews and others across the country have paid a percentage of their salary toward their retirement security. Notably, in Illinois and New Jersey irresponsible politicians did not do the same. Instead, they skipped or reduced annually required contributions to their pension systems. Between 2001 and 2013, Illinois paid less than 80 percent of what it should have to its pension systems. New Jersey paid less than 40 percent of its obligation over that same time period.
In 2015, workers across the country learned if they work in a state that is naughty or nice. Responsible states that make their yearly required pension contributions, not surprisingly, have pensions that are fully funded and in some cases have surpluses. That protects both taxpayers and workers.
Other states fall in between. This year, many of those states considered adjustments to their public pension systems, and all of them rejected a move away from defined benefit pensions. Why are these states and most others choosing to stick with pensions?
First, pensions remain the best way to provide retirement security, and attract and retain quality nurses, teachers, firefighters and other public employees. Pooled risk among pension participants means no one is left to fend for themselves against market forces.
Second, 401(k)s have proved to be a tremendous failure at delivering retirement security -- with the exception of the super-rich.
Finally, pension systems are on the road to recovery post-recession. Anti-pension ideologues no longer have a manufactured "crisis" moment to scream about.
Let's look at what a few states debated in 2015:
In Nevada, legislators debated and ultimately did not move a "hybrid" proposal for state employees. Hybrid proposals, usually comprised of a reduced defined benefit pension combined with a new 401(k)-style account may, on their face, sound like a good compromise for workers. In reality, a hybrid results in reduced retirement security for workers.
Louisiana attempted to give a much-needed cost of living adjustment (COLA) to retirees. The bill would have provided, on average, a $30 a month increase in retirement benefits for retirees in two of the state's systems and a 2 percent on average increase for state police and teachers. Although the bill moved through the legislature with strong bipartisan support and was revenue-neutral, it was vetoed by Governor Bobby Jindal.
In Indiana, a broad coalition of workers and community groups banded together to pass a number of measures that protect and strengthen the state's pensions, including a bill that requires eligible employers to cover their existing liabilities in the pension system if the employer stops adding new employees to the pension system.
Another "hybrid" remains on the table in Pennsylvania, where Republican lawmakers have held the entire budget process hostage since the summer over their reckless desire to impose 401(k)-style plans on teachers, social workers, and other public employees. The plan would cost the state more and provide less retirement security. As school districts go without funding -- some may not be able to re-open after the holidays -- Republican politicians have decided gutting retirement security is one of their highest priorities for this legislative session.
All told, 2015 was a good year for working families that rely on pensions for a modest, secure retirement. The strength of funds is steadily improving and states rejected ideologically-driven attacks on pensions -- and all of this is good for taxpayers. 2016 is sure to bring new challenges, but public employees and their families can look back on 2015 and feel a little more secure about their retirement.