Public employee pensions pose what may be the biggest threat to municipal and the state budgets - and the economy in general. All over the country, we've seen local governments, big and small, go bankrupt because of poorly managed government pensions.
Politicians have promised public employees guaranteed retirement benefits that are increasingly straining the ability of younger workers to pay. We've seen the dilemma as it pertains to our Memorial Health System's debt to the Colorado's Public Employees' Retirement Association. Statewide, the system has an unfunded liability of $26 billion, and it's likely to get worse.
Given the state of public-employee pensions, imagine if state politicians decided they should create and maintain a pension system for private-sector employees. What a laugh. That would never happen, given the pickle we're in.
Or would it?
From the "we can't make this stuff up" category comes House Bill 1377. The bill could easily lead state government to establish a public pension for Coloradans working in the private sector.
It would mandate creation of a "task force... to develop recommendations for increasing the percentage of residents in the state who have adequate retirement security."
"In Colorado, eighty percent of workers in small firms with less than fifty employees lack access to a retirement plan in the workplace, with eighty-six percent in firms with less than eleven employees lacking access," the bill says.
Colorado State Treasurer Walker Stapleton reacted to the bill with a simple and concise assessment:
"This is the definition of insanity," Stapleton said.
House Speaker Mark Ferrandino, a sponsor of the bill, acknowledged at a recent hearing that state government may have to subsidize some of the pension's fixed costs. Let's see . They claim to need $1 billion more each year for K-12 education. They cop poverty when confronted with transportation and higher education expenses. They can't get their current pension obligations in order. Yet, some state politicians think they should take on more pension liabilities involving private businesses and their employees.
It's true that many small employers don't offer 401(k) plans, but any working American has access to much the same savings mechanism in the form of an IRA. The IRA comes with no employer match, but that makes it just like a lot of 401(k) plans offered in the corporate world. When employers don't offer matching funds, it's generally because they're struggling to offer adequate take-home pay. Matching funds don't come from thin air. They come from the limited overhead an employer has available for overall compensation.
Government cannot give health care to all individuals, and it cannot give them retirement funds. It can only meddle in financial affairs that have long been the left to the discretion of employers and employees.
The bill, at this juncture, includes nothing to prevent the state from mandating employer matches to any future pension. As such, it would likely become an unfunded mandate that would serve as another jobs-killing hurdle for Colorado businesses and workers.
Indeed, it would be nice if more Coloradans could find a way to pack away cash for retirement. But a new state fund - one that will likely burden small business - cannot be the answer. Without small businesses providing good jobs, retirement funds are the least of our concerns.
People need to feed their families today. Increasing the state's role in retirement - a task we know it cannot manage - is a recipe for disaster. More precisely, as Stapleton says, it's downright insane.