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Sunday, March 6, 2011

State budgets are not bankrupt from worker pension plans, economic evidence proves

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According to an article by McClatchy Newspapers reporter Kevin G. Hall, public employee pension plans are not bankrupting state budgets. Hall cites in his article that is that there's simply no evidence that state pensions are the current burden to public finances that their critics claim.

The National Association of State Retirement Administrators cites, pension contributions from state and local employers amount to just 2.9 percent of state spending, on average. Another figure from the Center for Retirement Research at Boston College places the figure a bit higher at 3.8 percent.

Fueling evidence to documentary filmmaker, Progressive activist and fellow Michigander Michael Moore's speech to the Wisconsin protesters in Madison on March 5th, Hall's article also confirms that neither state nor local government pension funds are broke, as Governors like Scott Walker (R) or Michigan's Rick Snyder (R) in their efforts to end or limit the rights of collective bargain with state unions. 

In Michigan's state public workers, except for the teachers union, state police and ironically state legislators including Gov. Snyder's, retirements are funded under a 453B/401K combination plan, since 1998. Under the proposed budget, Snyder seeks allow school districts an opportunity to void Michigan Educational Association contracts by appointing a Emergency Financial Manager, with can be an individual or a corporation, without approval of the state House or Senate. 

Other proposals in Gov. Snyder budget seeks to tax Michigan Seniors, cut the state's Earned Income Tax Credit for the lowest wage earners, slash Michigan's Film Credit Incentive from 38 percent to 25 percent, cut K-12 per pupil funding by $320 dollars, and end income tax exemptions for middle class workers. Gov. Snyder would give 1.8 Billion dollars worth of tax incentives to Michigan's wealthiest corporations by restructuring Michigan Business Tax.

Reporter Kevin Hall's article cites that instead, state budgets lack money due to the fact that they are underfunded, from investments held in 401(k) plans by American private-sector employees whom sunk along with the entire stock market during the Great Recession of 2007-2009. 

"On average, with the assets on hand today, plans are able to pay annual benefits at their current level for another 13 years. This assumes, pessimistically, that plans make no future pension contributions and there is no growth in assets," said Jean-Pierre Aubry, a researcher specializing in state and local pensions for the nonpartisan Center for Retirement Research at Boston College.

Read the entire column by Hall with the economic details on why employee pensions aren't bankrupting states at the McClatchy Newspaper website.

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