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Key House Subcommittee Holds Hearing on Dangerous Pension
Bill
May 9, 2011 – The House Ways and Means Subcommittee on Oversight held a
hearing May 5 on the highly controversial Public Employee Pension Transparency
Act (H.R. 567). The hearing was called by the chair, Representative Charles
Boustany Jr. (R-LA), and featured witnesses from think-tanks, the financial
sector and state government.
IAFF General President Harold Schaitberger submitted a
statement
for the record to ensure that all subcommittee members understood the IAFF’s
position.
The IAFF has steadfastly opposed the Public Employee Pension Transparency Act (PEPTA)
since it was introduced in the previous session of Congress. It would require
state and local governments to file a report with a new federal bureaucracy at
the U.S. Treasury that shows what the financial status of their pension plan
would be if the plan invested only in Treasury Bills that pay approximately 4
percent. If a jurisdiction failed to issue such a report, it would lose the
tax-exempt status for its bonds. Losing the tax exempt status for state or local
bonds would prevent jurisdictions from undertaking critical infrastructure
projects like building bridges and roads.
The IAFF has argued that H.R. 567 should be renamed the Public Employee Pension
Elimination Act because that is what the bill will ultimately do. Reporting a
pension’s financial status based on the Treasury bond rate would dramatically
exaggerate the plan’s unfunded liabilities. This would give the false impression
that pension plans are going bankrupt and lead to calls to eliminate defined
benefit pension plans altogether in favor of 401(k)-style defined contribution
plans.
Chair Boustany and Representative Devin Nunes (R-CA), the author of the
legislation, argued that the bill is necessary to prevent pension plans from
going bankrupt. But the Democratic members of the Subcommittee responded that
the bill is merely a thinly disguised attack on public unions and their defined
benefit pension plans.
Representative John Lewis (D-GA), the ranking Democrat on the Subcommittee, said
in his opening statement, “Today, Republicans … paint teachers, fire fighters,
librarians and nurses as villains in their quest to widen the gap between the
rich and the poor. Our neighbors are not the villains. They are not the cause of
the current economic situation. They are simply hard-working Americans trying to
retire with dignity and escape poverty as they age.”
Representative Ron Kind (D-WI) sarcastically applauded Wisconsin Governor Scott
Walker for taking away collective bargaining rights from public employees in
order to address “the crisis that our pension fund is only 99.8 percent funded.”
Representative Jim McDermott (D-WA) added: “Republicans are using this
Subcommittee as a political tool to attack the middle-class workers who teach
the children of wealthy people and the cops and fire fighters who keep them
safe….”
And noting that California has seen more than its share of fiscal problems,
Representative Xavier Becerra (D-CA) disputed the notion that unfunded pension
liabilities have led to state budget shortfalls.
The next step for the legislation remains unclear. Because the Oversight
Subcommittee that held the hearing does not have the authority to vote on
legislation, it would fall to the full Ways and Means Committee to schedule
action. While the bill’s sponsors are pushing hard for committee consideration,
no date has been set.
The IAFF is working with Ways and Means Committee members of both parties to
block action on any bill that would undermine public sector pension plans.
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