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January 2012 Policy Study, Number 12-1

   

Iowa's Privileged Class: Time for a Change!

    Summary and Recommendations
   

 

I recognize that each of us is entitled to go out and earn as much as we can convince someone to pay us. Those 424 people were successful at convincing the Legislators, state-wide elected officials, City Council members, County Supervisors, School Board members, and most importantly, taxpayers, of the state of Iowa that their skills and abilities were worth a significant amount to their agencies while they were employed and being productive workers.

 

Government salaries are public record, and any interested taxpayer can see the amount that elected officials, whom they have elected to make decisions on their behalf in these matters, have agreed to pay the government workers. By re-electing the officials who made these decisions, taxpayers are in effect stating that they agree with the decisions.

 

Yet part of the stated reason many people go into “government work” is to serve the public and their fellow citizens. Expecting those same citizens and taxpayers to fund retirement payments of well over the average annual working income of most Iowans (around $38,000) is problematic. It is time for a change in the
government-funded privileged class.

 

When the FY2011 IPERS valuation report was released in early December, showing the unfunded liability amount of over $5.7 billion dollars, the question of reinstating caps on the top pension benefits and payouts was raised.

 

A Des Moines Register newspaper article quoted State Representative Mary Masher (Democrat – Iowa City), who is both a retired teacher, a leader in the Iowa State Teachers Association – the main teachers’ union – and a nonvoting IPERS Board Member, as saying that “Iowa lawmakers were wise to eliminate the pension cap.”[68]
Masher added that Iowa was losing good public employees to other states, and that it “becomes a competition thing.” I respectfully disagree; it does not appear to have been wise. Representative Masher needs to seriously re-evaluate her conflicts of interest and work to ensure that she represents all Iowa taxpayers, and not just the teachers’ union members and public school superintendents.

 

Otherwise she should resign from the IPERS Board – voting member or not.

 

Back in December 2008, State Auditor David Vaudt, a Certified Public Accountant – who is well-known for taking his role and responsibility as “The State’s Watchdog” seriously, said in an interview with The Des Moines Register’s government reporter David Yepsen, “I think every government is going to have to take a very hard look at [IPERS] because if you look at private industry defined benefit plans have gone away a great deal because of the commitments and you’re not sure how you’re going to fund those commitments.

 

“So, we have to take a look at going forward is the defined contribution plan a better way to go for Iowa? And is there a more affordable way but still allowing for our citizens to put money away?”[69]

 

As a result of concerns expressed by Vaudt and others, legislative changes were made to IPERS in 2010, as detailed earlier.

 

By 2011, over 40 states had made legislative changes to their government pension plans.[70] These changes mostly affect new employees and vary widely, from revising the benefit formula to increasing the retirement age and years of service. Some states are attempting to delay or prevent cost-of-living raises for current retirees. Yet others, including Iowa, have raised either or both the employee and employer contribution. Additionally, many of the actions by Legislators and Governors have centered on addressing union bargaining issues, and a wide variety of eligibility and benefit factors.[71] These changes do not go far enough.

 

Resolving the long-term unfunded liabilities of the IPERS pension system is going to have to go beyond mere “tweaking” around the edges.

 

The Iowa Legislature needs to take a hard look at the pension benefit payout amounts and the retiree health-care liabilities.

 

Reinstating benefit caps is an important part – one that could, as we have seen, have significant long-term results.

 

Local officials also need to consider what salaries top government workers should be originally paid.

 

Revising the retirement benefit formula, extending vesting, addressing early retirement, and eligible age changes to current employees, not just new hires, is part of the solution.

 

The Iowa Legislature needs to take another look at IPERS in 2012 and seriously consider whether or not the burden of supporting the “privileged class” should be born by the “average” working taxpayers of the state.

 

We cannot keep kicking the can down the road and hope that a significant, long-term surge in the stock market and IPERS investment returns will restore full solvency.

 

It’s time for a change.

   

 

Click here for pdf copy of this Policy Study

 

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