This Billionaire Thinks Your Pension’s Too Big
When former Enron trader and Texas billionaire John Arnold donated more than $1 million to a November 2014 initiative to reform the public pension system in Phoenix, pension activists took notice.
According to a recent report on the website Politico, Arnold’s donation to Proposition 487, also known as the Phoenix Pension Reform Act, constituted close to 75 percent of total donations for the ballot measure, which failed. Had it passed, it would have moved new state employees from a defined benefit plan into a less generous (and less expensive) defined contribution plan such as a 401(k).
But don’t worry, you can count on John Arnold to be back waging war against that hard-earned pension fund you’ve paid into over many years.
“In nearly every single battle over public pensions, we can follow the money trail back to John Arnold,” said Jordan Marks, executive director of the National Public Pension Coalition, a union-funded organization. “It’s a highly coordinated national effort that comes from the same dark-money, ideological source.”
At the state level, Illinois’ public pension fund is the most troublesome in the nation, with more than $100 billion in unfunded liabilities. A state plan to address the shortfall would reduce cost-of-living adjustments, raise the retirement age and lower employee contributions. But its fate remains uncertain after Sangamon County Circuit Court Judge John Belz declared the cuts unconstitutional. The Illinois State Supreme Court will hear the case in March.
But Dean Baker, co-director of the liberal Center for Economic Policy Research, says that plans are in decent financial health, so long as they’re about 70 percent funded. A recent study from Boston College’s Center for Retirement Research indicated that a healthier stock market has already helped improve funding for public pension plans, and that by 2017, assuming a healthy stock market, most public plans would most likely be funded at least 80 percent.
Baker added that while a $1 trillion shortfall might sound alarming, over a 30-year period it wasn’t particularly worrisome. “The idea that this is an impossible burden—that’s just nuts,” he said. “I think they have done a lot to exaggerate the size of that number. It sounds really big, it sounds really scary.” Arnold and others, Baker said, use that number “to force drastic changes in the structure of pensions.”