Wednesday, July 11, 2012

Why Nonprofits Must Get Behind Pension Reform....NOW


Pennsylvania's Pension Bomb
On the day Gov. Scott Walker handily defeated the recall effort in Wisconsin, two cities in California also voted to rein in the growing Pension Monster which is eating public budget.  Voters in San Jose, CA provided a landslide victory (70%) to Measure B, a proposal to trim current and future pension obligations. 

You've heard me talk frequently about the enormous fiscal black hole which is Pennsylvania's Pension Bomb.  For example, while people in progressive circles howl about 'cuts' to education, the fact is that the state and local schools will be spending $500 million more this year....it's just that 95% of that new money is going into pay for retired teachers.....leaving just a paltry 5% for the kids.

One of the truly puzzling aspects of the battle in Wisconsin was how many nonprofits got involved...on the side of the status quo!  What's baffling is how these nonprofits lined up with a special interest which was trying to lock in the largest piece of the pie for its members.  So as that pie shrinks in the Age of Austerity, it would be the nonprofits who would be forced to shoulder the budget shortfalls, staff cuts, and eventual closure.

In the current Chronicle of Philanthropy,  William Schambra has a devastating piece asking why nonprofits support the gilded pay/benefit/pension packages of public worker unions which are crowding out spending on basic human services.  He relates:


The June elections in California and Wisconsin made clear that the public is increasingly disinclined to support an expansive government if that means not compassionate provision for the poor but rather the transfer of scarce dollars from the pockets of hard-pressed taxpayers directly into the health and retirement accounts of comfortable government workers.  Foundations and nonprofits would serve their noblest cause in the most politically savvy fashion by challenging the grip of labor unions on the progressive agenda.

 Which raises the fundamental question: Why are progressive nonprofits lining up in support of an effort which will ultimately lead to their own doom?

5 comments:

Amy Wilson said...

Michael,
Is it the increases in the costs of healthcare that are driving the increasing pension costs?
Amy Wilson

Michael Brand said...

Health care certainly is an issue, since many get to carry their present plans into retirement (as opposed to moving to Medicare). However, the real problem is overly generous benefits coupled with unrealistic expectations of what the pension funds would return.

When I first started writing about the Pension Bomb a decade ago, the numbers were that PA taxpayers would have to cover an additional $3 Billion each year....now that figure is at $6 Billion. Well there's no political will out there for a massive tax increase like that, so instead we'll see continued cuts in service.

BTW: Sometimes it appears each day brings new data which suggests the hole is evern deeper than we think.... http://www.publicceo.com/2012/07/moodys-estimate-triples-pension-debt-2-trillion/

Anonymous said...

We were at a PANO event last year when the discussion turned to the evil that Scott Walker and Tom Corbett were doing. It was then that someone spoke up with the impact of the escalating pension costs and how this mandating deep cuts in the $$$ we get to provide basic human needs. That's when it hit me that the pension crisis is a threat to my career

Michael Brand said...

Yes Anon, that giant sucking sound you hear is public pensions taking all the money we need to feed the poor, house the homeless, etc. It's not only the big problem of 2012, it's going to be the big problem of 2022, 2027, etc

Karen said...

I was at your seminar over at Centre Link in May. We used your slides about State of PA finances at our Board/Staff retreat last month and it sparked a lot of discussion. Money from the state is 45% of our budget, so we're worried and trying to plan if it all was cut.