February 24, 2009

Sick leave and pensions

I'm taking one of my rare sick days today, and while I don't have that much stamina to concentrate for a long time, I'll note just a few thoughts about debates over teacher pensions a la Chad Aldeman's comments. First, the entire debate strikes me as largely unconscious of or compartmentalized from the larger context or debates over retirement in general. First, if pension plans are underfunded, the problem is not that they're overgenerous but at least partially that state legislators aren't willing to set aside the money to put them on a sound actuarial basis. Florida's retirement system used to be underfunded, and one of Lawton Chiles's primary accomplishments as governor in the 1990s was changing that. And I figure that if my dysfunctional state can fix a pension system, so can any state.

Second, Aldeman's point about looking at defined-benefit and defined-contribution systems together rather than in an either/or sense makes sense... and anyone who talks to a financial planner will (or should) hear the basic point they all make about the triad of funding retirement (Social Security, pensions, and personal assets). Michael Katz makes a similar point in The Price of Citizenship about the public-private nature of the modern welfare state that combines different categories of institutional structures. I don't know about you, but when Michael Katz and financial planners agree on a description of retirement, I'm going to believe that.

Third, the debate has this odd "leveling down" tone to it--not in the literature that Alderman is referring to but in political debates I've occasionally seen among state legislators. Because some people don't have decent retirements, then teachers shouldn't, either. (Somehow the higher pension payouts for police and fire aren't brought up in those discussions...)  I don't understand why that is either a practical or a moral claim for public policy, but that may be my unwell state. Maybe if I had a few gazillion fewer viruses in my system, I'd understand the reasoning better.

Finally, and perhaps most importantly: any concerns you or I might have about underfunding of defined-benefit pension plans should be dwarfed by concerns about health-care costs. Social Security's structural problems are a pittance compared to health care. State pension plan underfunding is minor compared to the looming costs of health care. If you're really concerned about the next generation, give some time in the next week to learning about health-care costs. I'd start with Peter Orszag in 2007, last spring (courtesy of Brad DeLong), or yesterday.

So we're back to my being sick again. Or health care, at least. Hope you're feeling better than I am.

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Tags: health care, Michael B. Katz, pensions, Peters Orszag, teaching
Posted in Education policy on February 24, 2009 3:23 PM |