Around late 2007, early 2008, did you notice something about your 401(k) or 403(b), your retirement accounts?
If you’re like most of us, you took a hit, a big hit if you were heavily invested in stocks.
Just like public pension plans did. Even Arizona’s best one, one of the best in the country, the ASRS pension plan, one that covers most government workers, including teachers.
Prior to 2008, that retirement fund was solvent, just like yours. The pension was fully funded, the investments sound, even conservative. Unlike some states’ plans, which chose to gamble on riskier products.
But if we listen to some of the so-called reformers today, the plans and the folks who contribute to them are the villains.
We hear from the Right that public pension plans — even ones as sound as the ASRS — are unsustainable, that public employees receive huge retirements and “Cadillac benefits.”
And in some cases — particularly the law enforcement and politician pension plans in Arizona — there is some truth to that.
But with the state’s largest, ASRS, neither is true.
The average pension in the ASRS system is $19,000 a year, hardly extravagant. And the health plan is a retiree-funded one, with taxpayers footing none of the bill; a retiree with his family on it will pay about $12,000 a year for the health insurance. In fact, the recent Pew Study of state pension plans noted that Arizona’s health plan is the strongest funded in the nation. In addition, Arizona government employees have always been required to provide 50 percent of their retirement contribution, matching the taxpayers’.
Hardly Cadillac.
But public pension critics want you here in Arizona to believe that our pension plan is just like the ones we hear about in other states, where employees were required to contribute little to their plans and receive very generous benefits.
They are correct in that the most egregious parts of public pension plans need reform. No one should argue that.
But are the public employees really just freeloading villains living off the public trough, as the more vociferous critics would have you believe, so much so that the pensions are unsustainable?
Not in Arizona. However, if the ASRS plan did sustain losses in the last few years — just like your individual plan did — does that make it the Bad Guy?
Or is the Bad Guy part of public pension critics, attempting to change the subject?
Was your 401 or 403 decimated because of the state’s pension plan? Or was it something else that caused the dramatic decline?
We know the answer to that: Politicians of both parties who urged banks to provide more housing loans, unethical bankers who gave mortgages to people clearly unable to qualify for loans, Wall Street financiers who packaged those loans into products bought by your stocks and states’ pension plans, in part based on ratings agencies like Moody’s and Standard and Poor giving those packages solid ratings even when it was clear they were junk, an administration who weakened the regulatory agencies charged with overseeing the financial services industry.
And when the housing market blew apart, the entire financial house of cards created by the banks and Wall Street came crumbling down. And with it, many of our individual retirement accounts and many of our states’ pension plans, plans that up to the financial debacle in 2008 were sound.
Now, these same folks who helped crush our plans are the very ones leading the charge against public pensions, having the nerve to claim they are unsustainable even as they were the ones who made them so.
Worse, they are setting us up for the same thing in the future: Banks too large (even larger now) to fail, Wall Street remaining largely unregulated, some of the same questionable practices that got us into this mess continuing unabated.
And some in the Right Wing media are willing accomplices, telling that there is too much regulation of Wall Street and not enough public pension reform.
In the meantime, we’re being set up again as the fall guys, somewhere in the future once again seeing our retirement funds go belly up because of the practices of some in finance.
And while some call for pension reform, they are curiously silent as some of the very people who created the Wall Street Doomsday continue to make obscene amounts of money in salary and bonuses, still treating Wall Street like it’s Las Vegas and they are playing with house money.
Only it’s not — it’s our money.
Even as they do so, they want us to see public employees as the villains who are ruining states.
So, yes, some public pension reforms are needed, ironically in part due to some of the critics’ own behavior in the last decade. But as long as the financial services industry remains unreformed, we are likely to see ourselves back in 2008 soon enough. And public pensions will have nothing to do with it.
Mike McClellan is a Gilbert resident and former English teacher at Dobson High School in Mesa.
pir8fan posted at 7:30 am on Wed, Jul 18, 2012.
Mr McClellan has made an excellent analysis of the ASRS Defined Benefit Pension Plan. Unfortunately, this topic has become a political issue, and therefore, Facts are not allowed in the conversation. The only thing that makes the ASRS plan a Cadillac Plan is its plan health (not to be confused with health plan), and that plan health is a direct result of Paul Matson's leadership and team.
Thank you Mr McClellan for a thoughtful, accurate, FACTUAL, neutral analysis.
Accuracy posted at 8:59 am on Wed, Jul 18, 2012.
There is more than one ASRS……
Arizona State Retirement System (ASRS) www.azasrs.gov
The Aviation Safety Reporting System (ASRS) asrs.arc.nasa.gov
The American Society of Retina Specialists (ASRS) www.asrs.org
chatmandu002 posted at 11:52 am on Wed, Jul 18, 2012.
So is the ASRS underfunded now? By how much? Do you want us to pay more taxes to refund the program or do you want the employees to pay more into the fund? Or should we reform the ASRS to move people to a 401K fund like program?
Trying to blame the right wing media and their accomplices, of which there are few, for the outrages against over generous government pensions isn't going to fly. The government sector pensions ARE overly generous in most states and most are severely underfunded, especially the public sector union pensions.
Financial industry reform? How much reform do you want? Haven't the democrats passed several financial reforms? Or are you calling for the complete takeover of the financial industry by the government? Besides the only one playing with "our money" is the government. And yes the government is playing fast and loose with "our money" almost like they were in Vegas. Making bets on who will or won't succeed according to political policy.
Leon Ceniceros posted at 2:53 pm on Wed, Jul 18, 2012.
WAAAHHHHH......WAAAHHHHHH......WAAAHHHHHHHHH.....POOR MISTREATED TEACHERS.........NOW THAT'S A ...........HOOT.
DON'T BELIEVE ME....THE JUST GO INTO YAHOO SEARCH...TYPE IN....AZ REPUBLIC "PUBLIC PENSIONS, A SOARING BURDEN"....THERE IS A COMPREHENSIVE 8-PART SERIES ON ....A.S.R.S. ...THE ARIZONA STATE RETIREMENT SYSTEM.
A.S.R.S........IS IN THE ARIZONA HARD-WORKING (AS OPPOSED TO THE "HARDLY-WORKING" EDUCATORS WHO HAVE A 2 1/2 MONTH PAID SUMMER VACATION, 11 PAID HOLIDAYS AND 12 PAID SICK DAYS)....TAX-PAYERS ARE IN THE HOLE FOR .......$10 BILLION DOLLARS (BILLION WITH A "B").
YES, FOLKS...YOU WONDER WHY THERE IS NOTHING LEFT OVER IN THE STATE BUDGET FOR EDUCATION....FOR EXTRA POLICE....FOR EXTRA FIREMEN....TO FIX OUR HIGHWAYS AND BRIDGES..........WELL, SIMPLE EXPLANATION.......OUT OF THE YEARLY ARIZONA BUDGET.....$1.5 BILLION DOLLARS HAS TO GO TO PAY THE ......"CADILLAC PENSIONS"....AND THE ..."CAVIAR RETIREMENT HEALTH CARE BENEFITS" OF OUR ......TEACHERS, PROFESSORS, POLICEMEN, FIREMEN, TRANSPORTATION WORKERS AND STATE GOVERNMENT WORKERS....$1.5 BILLION A YEAR FROM A ...........RECESSION-SQUEEZED TAX BASE (THE COST OF THE ARIZONA STATE RETIREMENT SYSTEM HAS GONE UP ....500% SINCE 2000..........FIVE HUNDRED PERCENT INCREASE......FOR WHAT.
ARE OUR STUDENTS BEING TAUGHT ...500% BETTER NOW THAN THEY WERE 12 YEARS AGO ???
ARE OUR POLICEMEN, FIREMEN, PUBLIC WORKERS.....WORKING 500% HARDER NOW THAN THEY DID 12 YEARS AGO ???
THE ANSWER IS A BIG FAT .........................N.O.
YOU WANNA FEEL SORRY FOR SOMEBODY...THE LOOK IN THE MIRROR BECAUSE THE ARIZONA HARD-WORKING TAX PAYER IS THE ......SUCKER....IN THIS ARIZONA STATE RETIREMENT SYSTEM .....FIASCO.
chuckles3 posted at 3:46 pm on Wed, Jul 18, 2012.
My retirement plans changed after the last crash, now I have to pay more to have the same retirement I planned for.
Your plan took a hit too Mike. Who should pay for the difference?
You are all about leveling the playing field it seems. Time to pony up.
Mike McClellan posted at 5:42 pm on Wed, Jul 18, 2012.
chuckles, great question:
1. No one's being asked to pay more to make up the "difference"
2. Except retirees, whose health insurance cost went up anywhere from $100 to $200 a month. I'm paying $1400 more a year than I was last year for my health insurance. You, the taxpayer (and me, too, by the way) didn't have to "pony up" a penny more.
JMJ posted at 7:11 pm on Wed, Jul 18, 2012.
Leon: Froot Loop. Reread the article. Take off your beer goggles, first. Comprehend what is being said. Stop yelling at everyone in your posts. We can hear you just fine in lower case letters.
Yawn. I'm going to go hang out with the grandkids on my Cadillac pension. What a joke.
sockratties posted at 10:34 pm on Wed, Jul 18, 2012.
Mike... good info. Keep up the good work.
as for california leon... don't feed the trolls, don't feed the useless trolls.
Leon Ceniceros posted at 11:29 pm on Wed, Jul 18, 2012.
LOL....EXCUSE ME.....EXCUSE ME.......WHAT'S THAT HUGE..."SUCKING SOUND"....THAT I HEAR EVERY TIME I DRIVE PAST A MESA PUBLIC SCHOOL......OH, YES......NOW I REMEMBER........IT'S PARENTS PULLING THEIR CHILDREN OUT OF THE MESA PUBLIC SCHOOLS IN THE THOUSANDS AND ENROLLING THEM IN ..........................CHARTER SCHOOLS.
I GUESS THEY WERE SICK AND TIRED OF THEIR KIDS BEING TAUGHT THE ...3-R's OF ........REVOLUTION, RACIAL/ETHNIC/LA RAZA STUDIES AND RADICALISM.........AND WANTED THEIR KIDS TO LEARN....READING....RIT-NIN AND RITHMATIC.
SEEMS THAT MESA'S PARENTS WANT THEIR KIDS TO LEARN PATRIOTISM AND RESPECT FOR OUR FLAG INSTEAD OF LEARNING HOW TO STAGE A STUDENT WALK-OUT AGAINST SB1070 AND HOW TO DEFACE OUR FLAG WITH OBSCENE GRAFFITI AND TOILET SEAT COVERS.
I WONDER HOW MANY OF MESA'S TEACHERS CAN EVEN RECITE THE PLEDGE OF ALLIGIANCE OR THE WORDS OF OUR NATIONAL ANTHEM....SOMETHING THE MESA SCHOOL DISTRICT HIRING COMMITTEE MIGHT WANT TO CONSIDER.
samkat posted at 6:31 pm on Thu, Jul 19, 2012.
Leon: The big sucking sound you hear is the public education funds being pulled out of public education to fund charter schools run by special interest groups who in turn take very good care of our greedy politicians who make claims they have not substantiated. PS: I agree with some of the posters, learn to type without all caps.
I am not an educator but I am at least knowledgeable enough to read and Arizona public school teachers are among the lowest paid in the nation. Mike can verify my next point but that 2 1/2 month paid vacation is anything but. The teachers are busy preparing lesson plans and getting required certification/higher ed classes they need to stay proficient and even to maintain their jobs. the critics tend to forget these folks put a lot of money and effort into obtaining a college degree and even the critics should know job skills require initial and ongoing skill set updates for progression.
It is easy to criticize someone if you are not walking in the other person's shoes.
As for the 401k plans, mine took a hit in the early 1980s and has never recovered. Ditto for my IRA and stocks. If our state legislators had an opportunity they would raid the state retirement fund as they have everything else. They do manage however to take very good care of themselves. If I was "King for a Day" they would be term limited and not covered under any state pension fund. As is, they are overpaid and basically unnecessary for the little they do while in session. I will give credit where credit is due as there are a few, but very few who actually try to do what is right for their state constituents.
JMJ posted at 7:17 pm on Thu, Jul 19, 2012.
True, Samkat. The first summer I ever had "off" was in 2011 when I retired. All prior summers were spent teaching summer school and attending workshops, mostly out of state and on my own dime. The professional development offered here was a joke, and i wanted to interact with others from all over the U.S. since our state is/was seen as such a joke when it comes to education.
This is hardly a Cadillac pension when my insurance eats so much of my expenses every month. I still have to work, even with a pension. The best part of working now, however, is that I am not locked in anywhere, and I can work when I feel like it. Those of us who were in the trenches for years are leaving in massive numbers. We are being replaced with green, inexperienced neophytes who do not have mentors--the mentors are gone.
So glad my kids did not go into education. They saw the struggle and the amount of work that went in for the measly return. I am talking dollars and cents. There are greater rewards, of course, but tell that to the mortgage company and SRP and Century Link and college expenses and on and on. They make more than I ever did, and they can afford their families with extra to spare.
Cadillac pension? Hardly.
concernedcitizen posted at 10:59 am on Fri, Jul 20, 2012.
Mike, thank you for a great article and hopefully bringing to light that the "normal" workers who get ASRS benefits (teachers, policemen, firemen, etc., basically those at the bottom of the command chain) are the ones who get anything but a cadillac pension.
If anything, it is only the top administrators (and politicians) who get the cadillac pensions/benefits. If you want to talk about cadillac benefits, ask a US congressman (John McCain would be a good start) to disclose what they get for retirement and for their health care after they retire. THAT is a cadillac pension/health care system! No wonders people want to be become US congressmen so bad!
Maybe, just maybe, if our retirement system was a little better to teachers, and teachers got paid just a bit more for all their hard efforts, then just maybe we would get more of the high quality people that we so desperately need in education. We have a lot already, but the system does not motivate more to become educators as it is set up right now.
Ignore Leon and his ignorant comments. He doesn't understand because he has never walked in the shoes of an educator. If you want to get technical (and Leon would probably like this comment), the reason people are pulling their children from Mesa Schools and enrolling in charter schools is because of the influx of children who are not raised right and who are a poor example of behavior and can be a danger to their children. Right or wrong, a lot of people want their children to be able to learn in an environment free from distractions and significantly poor behaviors, and unfortunately that means they have to pull their kids from public schools to do so. And Mesa didn't lose 10's of thousands of students, they've lost I think about 8,000-10,000 students, a lot I suppose because of SB1070 and their families were here illegally and they didn't want to take a chance, also a lot of people moved out of Arizona recently to find jobs again, which also means a loss of student population.
I am a public school teacher, I do work my tail off, if there is any training I have to take I usually have to pay for it all myself, yes, my health insurance is covered, but it isn't that great, and I have to pay for my wife out of pocket. It is hard to keep things in perspective with people like Leon who complain about teachers all the time, I'm VERY grateful for my job and the benefits I actually do get, and I realize my situation is better than a lot of folks out there. When it comes down to it, the reality is teachers (at least those who are worth their salt), work harder than most and invest more than most, particularly if you compare to how much teachers get in return for their efforts. Yes, you have the occasional teacher who does something stupid to a child, you have that in every profession, however the majority are caring individuals who work super hard to help their students to learn. They don't have a "liberal" agenda, all the teachers I know don't have any agenda except to help their students learn the best they can.
I don't hear people who complain about "cadillac pensions" for teachers complaining about sports stars and all the millions they earn; nor about congressmen and their actual cadillac pensions; I could go on and on...
Cerulean posted at 5:23 pm on Fri, Jul 20, 2012.
I agree, Mike, thank you for this article.
Also, however off topic, I love your blogs on AzCentral titled “My new media hero: Morgan Loew” and “Let’s be honest: Trent Franks is a moron”!
Arpaio and Franks are Nth degree kooks.
bfineprint posted at 1:50 am on Sat, Aug 11, 2012.
Mike,
Very thoughtful op ed. If someone can't argue the facts, then they criticize you using non sequiturs. I would add to your article that the median ASRS pension is $15,300. That figure gives a better idea of what most state employees are receiving, prior to money being taken out for health insurance.
By the way, I told the writer of the pension stories at the Republic about state retirees having to pay 80% of their health insurance and he never included that information in his stories. As for the fact that ASRS has a $8-$10 billion liability, even though it's 75-80% funded, that isn't unusual. You have to think of it like a mortgage. That pension liability isn't due anytime soon, just like an entire 30-year mortgage amount isn't due after a few years. Finally, if the state hadn't been giving away the store the last 20 years, the state would have a lot more revenue to deal with any short-term shortfall -- $3 billion in annual revenue has been withdrawn due to continuous tax cuts that have neither increased net employment or revenue. Two-thirds to three-quarters of corporations in Arizona pay only the minimum $50 corporate tax, according to a study of corporate tax returns between 1994 and 2008. And now the state says we have to enact another corporate tax cut starting in 2014, that will take even more revenue out of the General Fund.