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The Nation

Private-Sector Anger Builds as Public Pension Costs Rise

Lawmakers feel the heat from taxpayers who see their own benefits wither, and traditional payouts give way to 401(k)-style plans.

October 02, 2006|Molly Hennessy-Fiske | Times Staff Writer

"It's a little bit like talking to somebody about religion," Reveliotty said. "If you say to somebody, 'You have to give back half your pension,' you can imagine what the results are going to be."

Public employees say resentful taxpayers should instead defend private-sector benefits, which continue to erode.

"Private-sector workers, who should be angry as hell at their employers for walking away from pensions, are angry at public employees," said Jon Shure, president of New Jersey Policy Perspective, a nonpartisan Trenton think tank.

He said eliminating state pensions would feed further cuts in the private sector, leaving all workers with less for retirement. "If the people who are fomenting this have their way, public benefits will stink too and we'll have dumbed it down to the way it is in the private sector," Shure said. "If anything, the public sector should set an example for how benefits should be."

If anyone in New Jersey would be expected to defend workers' pension benefits, it would be state Sen. Stephen M. Sweeney. A Democrat, longtime ironworker and union official from a blue-collar South Jersey family, Sweeney heads the state Senate's labor committee. But Sweeney has become an unexpected ally of the anti-pension crowd.

When Gov. Jon Corzine proposed raising the sales tax to fund state pensions this summer, Sweeney and two other lawmakers proposed cutting state retirement plans instead.

Their announcement split the state AFL-CIO, which includes both public- and private-sector unions. Public workers' unions dogged Sweeney, shouting him down at Trenton meetings, mailing him a pink slip, and showing up at his events with an inflatable rat usually reserved for union-busters.

Some in the AFL-CIO say pension changes are driven less by pension envy than by conservative groups such as Americans for Prosperity, Americans for Tax Reform and the Heritage Foundation. Union officials say Wall Street money managers are also pushing the changes so they can earn a windfall of fees once public pension plans are converted to 401(k)s.

But Sweeney says he received praise from private-sector union workers -- refinery shop stewards, pipe fitters and ironworkers thanked him on the streets. "The private side is looking at the public side and realizing pensions are luxuries they cannot afford," Sweeney said.

In a recent interview at the Ironworkers Union Local 399 in Westville, N.J., where he still serves as business representative, Sweeney noted that ironworkers contribute 14% of their pay to their pensions, and members of Local 399 went without a raise this year to cover rising pension costs, paying 3% more into the fund.

State workers, by contrast, received a 4.65% raise, even as their pension costs rose. State workers in New Jersey receive an average pension of $24,317 annually, compared with the national average of $19,856, according to the American Federation of State, County and Municipal Employees.

State workers have long defended their pension benefits as compensation for lower pay, but New Jersey state workers earn an average $54,742, compared with $43,970 in the private sector, according to the New Jersey labor department.

A New Jersey legislative committee now is considering state pension changes including a pension freeze, increasing public workers' contributions and raising the minimum retirement age.

Beyond New Jersey, the debate over public pensions has become an election issue.

In Massachusetts, Illinois, New York and Oregon, Republican candidates for governor proposed new 401(k)-style plans for state workers, as did Republican candidates for comptroller in Maryland and New York.

In April, Colorado began offering state workers a defined contribution plan such as 401(k)s. The mayor of Providence, R.I. plans to switch all new hires from pensions to 401(k)s in July. In Alaska, legislators voted last year to close the public pension system to new employees in an effort to stem a $6.9-billion deficit in the retirement fund.

Alaska state Sen. Bert Stedman, a Republican, warns that if states like California and New Jersey don't change public retirement benefits, they may soon face angry taxpayers.

"When the private sector has to pay for the public-sector benefit packages they can't get themselves, you're going to have a lot of political and social unrest," Stedman said. "The average homeowner, when he gets his property tax jacked up to pay his neighbor's benefit package, he's going to get upset about it. And that's what we don't want to happen in Alaska."

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molly.hennessy-fiske@latimes.com

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