Candidate John Lewis Speaks at Annual Meeting
Congressional candidate John Lewis met with MPEA members May 16 at this year’s Annual Meeting in Billings.
Lewis, a fourth generation Montanan, provided those attending with his position on a number of issues important to labor, discussed a number of issues important to Montana and its economy and answered questions from MPEA members.
The Billings native noted that the support of labor has been essential to his campaign. He observed that Montana is surrounded by right-to-work states then said he supported collective bargaining, the proposed increase in the minimum wage and that he would oppose efforts to hurt working families.
Lewis said there was a well-funded effort to privatize social security, to further limit the rights of workers and to eliminate collective bargaining, and, that he was “willing to go the distance for working families.
“Whoever emerges among as the GOP congressional candidate will have access to big resources,” Lewis said. He then asked members to get involved in his campaign by discussing his position with at least 10 friends and family.
He said he believed there was a real divide between rural and urban community priorities then cited the Farm Bill as an example of the real need for a rural needs advocate. It took six years of negotiations for Congress to pass a five year bill. He said he would also work to make college more affordable again because he believes access to quality public education was one of the cornerstones of democracy.
Lewis expressed his concern for Montana’s aging population and said he would oppose any fundamental changes to either social security or Medicare.
In a question and answer session, Lewis was asked about his position on corporate taxation. He explained he was for a simpler code and believed there was a need to eliminate tax havens and also believes in closing tax loopholes that make it easier to ship jobs overseas. A tax haven is a country that offers foreign individuals and businesses little or no tax liability in a politically and economically stable environment. Tax havens also provide little or no financial information to foreign tax authorities. Individuals and businesses that do not reside a tax haven can take advantage of these countries’ tax regimes to avoid paying taxes in their home countries. Tax havens do not require that an individual reside in or a business operate out of that country in order to benefit from its tax policies.
A Yellowstone County public assistance worker queried Lewis on getting people out of poverty. He said he believed raising the minimum wage was a good start and that there were a number of efforts in other states that were proving useful. He then cited Virginia Governor Terry McAuliffe efforts to expand Medicaid so a greater number of the poor could receive health care.
Clint Oman, public health and human services, said politicians seem unable to address issues and asked Lewis “how do you get the House off the dime?” Lewis said that “they are in constant campaign mode back there (Washington D.C.) and there needs to be a break in the gridlock.”
Lewis was also asked by a Revenue Department member “what would be the most unpopular thing that you would stand up for.” He responded that “one would be continued military reductions. We have five massive bases in Europe; continued reductions could begin there.
Lewis was born in Billings, reared in Missoula, has been married since 2001 and with his wife, Melissa, has two small children.
Commissioner Bucy Spoke at This Years Annual Meeting
The importance of collective bargaining, the on-going need to educate and train Montana’s work force, and, the need to close Montana’s wage gap between men and women were the principal themes of Labor Commissioner Pam Bucy banquet speech at MPEA’s Annual Meeting May 16 in Billings.
Bucy has a long history of public service having worked in the Department of Labor and Industry, as an assistant attorney general for seven years and as a prosecutor in the Lewis and Clark County Attorney’s office.
She told members that “you can’t have high quality services without having high quality public servants.” Bucy stressed her support of collective bargaining as an ingredient in securing and keeping high quality services. At an earlier meeting with members, Bucy explained that she was from a large Townsend family where her dad worked as a miner. “There was no health insurance for our family of seven or decent wages until my dad joined the Operating Engineers union.” Bucy, who describes herself as a “long-term” public employee, noted that in the last legislative “we had no one talking right-to-work.”
She sees Montana’s economy as one that needs to continue to grow and that must be built on a foundation that isn’t possible without a trained and educated workforce.
Toward this end, Bucy is one of the principal participants in Governor Bullock’s Main Street Montana Project. Wherever and whoever has been met with to date has stressed the importance of a well educated and well trained workforce. Some of the key ideas Bucy, mentioned included the importance of lifetime education from pre-school through adulthood. She also discussed the alignment of the state’s educational system with the needs of a changing economy. Development of job skills through apprenticeship programs was also discussed. She also made a case for getting women in traditional apprenticeship programs so they could become carpenters, electricians and plumbers.
The gap between what men are paid and what women receive for the same work is a problem desperately in need of correcting. Bucy noted that Montana now ranks 40th in the nation on “equal pay for equal work.” She also noted that this was an improvement.
“Women work just as hard as men and closing the wage gap is an important working family issue,” Bucy said. She also explained that an audit of the differences was expected near the end of May.
As mentioned earlier the labor commissioner intends to encourage more women into what have been men’s jobs such as plumbers, electricians, carpenters and construction. Bucy reminded members that unions have been and remain one of the significant forces helping to narrow the wage gap.
Bucy said she believed much of the wage gap problem was cultural but that “something was wrong when the garbage man starts at $20 an hour and the CNA (certified nurse assistant) starts at $9an hour.”
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Members Vote to Support Governor’s Proposal to Fix PERS
A motion to support Governor Schweitzer’s proposed plan to fix the public employees retirement system’s fiscal problems was endorsed by MPEA at its Annual Meeting June 16. The Governor’s approach to correcting the unfunded liability within PERS followed a discussion on the system by former MPEA executive director Tom Schneider.
Schneider, who first became involved in the retirement systems in 1956 as an employee of the Teachers Retirement System, said PERS is underfunded by $1.6 billion. “I understand where the figures come from but it is incorrect to think this underfunding has to be made up today.
“We have a 30-year period, there is nothing immediate. We can get a handle on it by moving slowly and in the right direction, but we have to start now!” Schneider explained.
He then began to discuss House Bill 122 from the 2011 Legislative Session. “They only implemented half of the PERS Board’s proposed bill and that’s the part that reduced benefits. The other half of that legislation was to increase employer contributions and those provisions were stripped from HB122.”
In reviewing the Governor’s proposal, Schneider explained that it made progress by attacking the unfunded liability in five-year increments. “The Governor’s proposal is the other half of House Bill 122 plus House Bill 632 which used some of the unobligated coal tax revenue.” More specifically, for PERS the Governor has proposed that employers and employees each contribute an additional 1 percent to the retirement plans, raising an estimated $13.7 million per year from each source, and the state would contribute an estimated $18 million per year from coal-tax severance funds. There would be an additional local government contribution as well.
The Governor has said “By the year 2020 we will be actuarially sound.”
Schneider also touched on legislative staff attorney David Niss’ opinions of making changes to the system for current employees. Schneider said Niss had told both the State Administration and Veterans Affairs and Legislative Council that “what exists for current employees is a contract you can’t break, but if you try here is a road map that will provide you with the most credibility.”
Schneider concluded his remarks by noting that he had spent 55 years working to improve the systems “and I’m not going to walk out now.”
Schneider was asked to distinguish between a defined benefit plan and the defined contribution structure being promoted by some politicians. It was explained that a defined contribution plan has no annual guaranteed annual benefit adjustment, places all risk on the employee and provides no guarantee that there will be anything there when it comes time to retire. “A simple illustration of my problem with the DC approach is the fact that the retirement systems lost $3.5 billion dollars when the market fell in 2008. If the employees had been in a DC plan, THE EMPLOYEES would have lost $3.5 billion dollars out of their own pockets.”
Schneider also said it is actually cheaper to fund the present system. He also noted that taking new employees out of the pension mix is fiscally stupid because new contributors are needed to fund the benefits of those who retire and without them unfunded liabilities grow.
Actuaries Cost Defined Contribution Conversion
There was legislation in the 2011 session to eliminate Montana’s defined benefit retirement structure and replace it for new hires with a defined contribution system that places all risk on employees and eliminates a guaranteed monthly amount. MPEA expects to see that legislation again in the 2013 session.
Anticipating reintroduction of such a change staff at the Montana Public Employees Retirement Administration (MPERA) had its actuaries perform an analysis to determine the financial effects upon the Public Employees Retirement System if it were closed to new members as of July 1, 2012 and all future eligible employees would be placed in a defined contribution system.
The actuaries from the Cheiron firm began by noting that at the last valuation date of June 30, 2011, PERS had an unfunded liability of $1.6 billion, which was 150 percent of current covered payroll. Paying off the unfunded actuarial liability depends upon contributions from future payrolls. If the system is closed to new members, the covered payroll of the defined benefit plan would decrease each year.
The actuaries note that there are two immediate impacts. First, such a change would cause an immediate increase in the amortization amount and consequently an immediate increase in the annual required contribution. Second, the actuaries currently develop figures based on a rolling 30-year period, meaning that they restart the 30 years at each valuation date. With a closed membership, the actuaries would move to a closed amortization period of 30 years from the date that the system is closed to new members.
So, what are the costs!
In the fiscal year beginning July 1, 2012, the actuaries expect contributions of about $85 million but these would drop below $15 million by 2036; this assumes that the current employer contribution rate of 7.13 percent will continue for all future years
According to the actuaries, if you assume contributions equal to the annual required contribution were made for each year beginning July 1, 2012, the contributions would need to be increased to $216 million in 2012 and then would slowly decrease , but would still be almost $140 million by 2036. Put another way, as a percentage of pay the employer contribution would increase from about 18 percent in 2012 to almost 67 percent of pay in 2036.
The actuaries note that the advantages to a defined contribution system is that the contribution becomes fixed and predictable and that there are no unfunded liabilities. Additionally, these plans are more portable and have lower administrative costs.
At the same time, according to the actuaries, studies have shown that rates of return in defined benefit plans consistently exceed those obtained in individual defined contribution plan accounts. Another advantage of defined benefit plans is the pooling of longevity experience; early deaths offset the cost of those whose lifetimes far exceed the average. Also, since large defined benefit plans are ongoing, investment losses can be absorbed and recovered by future investment gains over long periods of time.
The actuaries summed up their report to MPERA by noting that for a given level of contributions, retirees will receive more income from a defined benefit plan than from a defined contribution plan.