Pension pixie dust
Dayton Vetoes pension bill that passed with overwhelmingly bipartisan support.
Kim Crockett was one of many perplexed observers scratching their heads when Governor Mark Dayton vetoed a pension bill that was vetted by the Pension Commission and passed overwhelmingly in both houses of the legislature, 120-3 in the House and 61-1 in the Senate.
Crockett, vice president and senior policy fellow at the Center, for five years has monitored the ticking time bomb of Minnesota’s unfunded pension liabilities, while educating Minnesotans about this “off the books” but non-negotiable multibillion-dollar shortfall. “We must keep our promise to retirees but that doesn’t include compounding annual COLA increases.”
Dayton objected to a one-year reduction in cost of living adjustments, which was projected to save about $81 million over decades. “I am a critic of the status quo but the bill would have helped stabilize the funds,” she said of the veto. “Dayton claims to be a fan but public unions objected so he vetoed it.” The bill also lowered the teacher fund’s assumed rate of return from 8.5% to 8.0%, still much too high but an improvement.
Crockett thinks most Minnesotans are no longer fooled. “I think we have succeeded in educating voters. They know pension math is wishful thinking topped with pixy dust,” Crocket said. “Now we need to reframe the problem by talking to younger employees, explaining to them that almost half of their pension contribution is going toward an unfunded liability for somebody else’s pension. And there isn’t going to be anybody there to do that for them.” Crockett says the best way to keep pension promises is by shifting younger employees to a defined contribution benefit.