As we continue to study the defined benefit pensions here in Minnesota, we remain committed to solutions that shun any further burden on the taxpayer, now or in the future. Currently taxpayers contribute 5% for most employees–and that is enough. But our message is not intended to beat up public employees. (Unions are a different matter.) We know many talented, dedicated public servants–and we know plenty of slackers, too! But that is beside the point. The point is to is to reinvent the state workplace–for the benefit of state employees and taxpayers.
Beyond the obvious issue of who pays for an unsustainable pension system, defined benefit pensions do not fit a 21st century career model. The average worker changes jobs 10 times throughout his lifetime—and changes careers 3-4 times. Defined benefit systems are built under the assumption that an employee works for a single employer – or at least a single type entity throughout his entire career.
Besides encouraging lifelong public employment, public employees themselves feel they are stuck in their positions because a career change means a dramatic hit to their pension. Employees who leave government before retirement face a financial penalty equal to each year’s wage inflation minus 1% per year. This amounts to a significant drop in the value of their pension over time.
On the flip side, there is zero incentive for individuals to work in government for shorter time periods because without vesting, pension benefits are lost. The debate on alternative teaching models is greatly affected by this reality.
Mark Haveman, the Executive Director of the Minnesota Taxpayers Association, published a thoughtful and fact-filled commentary recently in the Star Tribune that made the case for a new approach to public employment: “Address civil servant productivity.”
The Minnesota Taxpayers Association released a workforce compensation study late last fall that you can view on our PRP pension website here. (The study is in two parts.)
Representative Keith Downey recently made the case for looking anew at public employment, as well: Changing the Model for Public Workers in Necessary.
We have met many public servants who resent being forced to join a union—and who want to be in charge of their own retirements planning and funds. We know public servants who want to take a job in the private sector (or retire) but cannot justify doing so because of the financial hit they would take to their pension. If you are one of those public employees, we’d love to hear your story. Send it to us at firstname.lastname@example.org
As noted here recently, Rep. Steve Drazkowksi (R-28B) introduced legislation that would give state workers greater control over their careers. The legislation, which if passed, would go to voters in the form of a constitutional amendment, is generally known as a “right to work” law. Workers would have the option of either joining a union and paying dues–or not joining a union.