Emmer: Public Employees’ Retirement Association program hammers both the young and democracy (column)
Editor’s note: Find a cited version of this column at http://www.vaildaily.com.
Colorado’s Public Employees’ Retirement Association, or PERA, is short nearly $23,000 per Colorado household. That’s $50 billion, or $240,000 per PERA member, per Government Accounting Standards Board guidelines. To catch up, expect the poor to pay less and the rich to pay more.
If PERA was the only such mistake, then the damage could be spread wide enough and thin enough to be extracted without much squawking.
Unfortunately, PERA is just one of a flock of such mistakes. The United States is riddled with gasping and grasping pension schemes, from the biggest to the smallest. Retirement shortfalls are routinely turned into unsustainable government debt. It’s a global problem and a global threat, made worse by political cowardice.
Most citizens want government to work well. They would be delighted if it were more focused, effective and competent. They would prefer it to be maximally democratic and minimally coercive. Full disclosure would help, too.
Secure retirement is a goal worthy of government attention, yet PERA has botched its job. It thought it could forecast the future. Oops. Its shortfall is equal to 110 percent of the money that it has accumulated.
Like other big policy mistakes, this burden falls primarily on the young. PERA’s old-school pension takes money from young employees and transfers it to PERA veterans. It quietly fleeces a wide swath of more mature workers, too.
Teacherspensions.org put together an amusing explanation of how the system works. Search YouTube for “Teacher pensions, explained in less than 3 minutes.” The general scheme it describes applies to all PERA members, not just teachers.
PERA’s shortfall hits young people with two more hammers. First, PERA’s proposed fixes push the financial burden on taxpayers far out into the future. Youth cannot use that money for their own priorities as they take political control. It robs them of democratic power over their own affairs. Gene Steurele, an 8-pound brain at the Urban Institute, makes that point well in his book “Dead Men Ruling.”
Second, to the extent that less money for schools damages student achievement, students are in harm’s way. When they grow up, they will have more debts to pay and less brainpower to earn their way.
PERA veterans undoubtedly want to be a contributing part of a socially just system. Instead, they have been compromised. They are unwitting recipients of tainted money, just as their juniors are their unwitting benefactors. PERA veterans are right to have ethical qualms. They can reciprocate youth’s favor by supporting PERA reform that is fair to the young.
PERA has a further deficit, one of democracy. It is a “my way or the highway” operation, based on a questionable “it’s for your own good” justification. Members must accept PERA or find another job.
Despite their power, PERA and its politicians have little responsibility. They will not be changing your oil or doing your laundry to make you whole. Instead, they charge you for the damage they have done and go on their merry way.
Ideally, bureaucracy is the servant of democracy. Yet bureaucracy and democracy are natural enemies. Each struggles to force the other to its will. It is entirely likely that more democracy could have saved PERA’s bureaucracy from itself. Here’s how:
Democracy is grassroots choice. If workers could opt out of PERA, then its will to survive would have forced a fix, probably decades ago.
Instead, PERA is built on a model of human behavior that might be summarized as this: PERA’s unselfish, honest experts advise unselfish, honest legislators to help dedicated public employees manage their money to retire safely.
That theory assumes organizations can self-diagnose and self-correct when the inevitable problems arise. PERA is human, and humans have egos and egos have pride. Pride resists self-criticism and so, too, self-correction. If this is right, then there is a flaw in PERA’s foundation.
It has been said, “In theory, theory and practice are the same. It is only in practice that they differ.” So here we are: failure in practice, theory in shambles, young people sacrificed. It is time for better policy theories and better public practice and better treatment of the young.
Vince Emmer is a financial analyst who runs Citizens Due Diligence in his off hours. Reach him at firstname.lastname@example.org.