Public pensions are under threat of cuts in Chicago. Rhetoric surrounding the issue seems to ignore the influence of Tax Increment Financing (TIF) on reducing critical revenues for the City of Chicago. Nearly one out of every ten property tax dollars collected gets diverted into TIF accounts. Good Jobs First seeks to put current pension costs (known as employer normal costs) into comparative context with revenue diverted into TIF accounts. Any fair budgeting discussion of pensions must include the enormous revenues diverted by TIF.
The brief’s key findings are:
– Although the introduction of defined contribution plans by some states has received considerable press attention, activity to date has been modest.
– Moreover, most recent shifts involve either hybrid plans or cash balance plans, rather than stand-alone defined contribution plans.
– The changes appear driven by a desire to avoid future unfunded liabilities, to reduce investment and mortality risk, and to help short-tenure workers.
– Such changes transfer risk to participants but, if the new plans enhance the likelihood of responsible funding, they could also offer some increased security.
From the summary:
One of the major vehicles in the Affordable Care Act (ACA) to increase health insurance coverage is an expansion of Medicaid to adults with incomes at or below 138% of the federal poverty level (FPL). While this expansion was intended to occur nationwide, it was effectively made a state option by the Supreme Court decision on the ACA. In states that do not expand Medicaid, many poor uninsured adults will not gain a new coverage option and will likely remain uninsured. This brief examines the impact of this coverage gap by race and ethnicity. In sum it finds:
Today, there are significant racial and ethnic disparities in health coverage among adults. Overall, among adults, people of color are more likely to be uninsured than Whites (27% vs. 15%), with Hispanics at the highest risk of lacking coverage (33%).
Given these high uninsured rates, the Medicaid expansion offers a particularly important opportunity to increase health coverage among people of color. Overall, more than half (53%) of uninsured adult people of color have incomes at or below the Medicaid expansion limit.
However, in states that do not expand Medicaid, millions of poor adults will be left without a new coverage option, particularly poor uninsured Black adults residing in the South, where most states are not moving forward with the expansion. Four in ten uninsured Blacks with incomes low enough to qualify for the Medicaid expansion fall into the gap, compared to 24% of uninsured Hispanics and 29% of uninsured Whites. These continued coverage gaps will likely lead to widening racial and ethnic as well as geographic disparities in coverage and access.
From the introduction:
Over 115 million individuals live in the American South today, and together, they account for over one-third (37%) of the total U.S. population. The South is racially and ethnically diverse and home to a large share of the nation’s people of color. As such, efforts to improve health in the South have significant implications for the advancement of health and health equity nationwide.
The South has faced longstanding disparities in health and health care, although significant variation exists between southern states. As a group, compared to those in other regions, Southerners are more likely to be uninsured, less likely to have access to needed health services, and more likely to experience a number of chronic health conditions. Yet, many southern states have also adopted innovative approaches to improve their health systems, particularly in the delivery of care, that provide key lessons for improving access to health coverage in the South more broadly.
Health Coverage and Care in the South: A Chartbook provides key data on the demographic and economic characteristics of the southern population as well as their health status, health insurance coverage, and access to care today.
Together, these data offer a snapshot of health care in the South, highlighting both opportunities for advancement and challenges relating to improving health care and health equity looking forward.
Section 1: Demographics
Section 2: The Southern Economy
Section 3: Health Status
Section 4: Health Insurance Coverage
Section 5: Access to Care, Delivery Systems, and the Safety Net
Section 6: Medicaid’s Broader Role
Health Coverage and Care in the South in 2014 and Beyond
Source: Jessica Stephens, Samantha Artiga and Julia Paradise, Kaiser Commission on Medicaid and the Uninsured, Issue Brief, April 2014
Social Security spousal benefits were established in the 1930s to help support wives who are financially dependent on their husbands. It has since become more common for both spouses in a couple to work, with the result that, in more cases, both members of a couple are entitled to Social Security or other government pensions based on their own work records. Social Security does not provide both a full retired-worker and a full spousal benefit to the same individual. Two provisions are designed to reduce the Social Security spousal benefits of individuals who are not financially dependent on their spouses because they receive benefits based on their own work records. These are:
• the “dual entitlement” rule, which applies to spouses who qualify for both (1) Social Security spousal benefits based on their spouses’ work histories in Social Security-covered employment and (2) their own Social Security retired- or disabled-worker benefits, based on their own work histories in Social Security covered employment; and
• the Government Pension Offset (GPO), which applies to spouses who qualify for both (1) Social Security spousal benefits based on their spouses’ work histories in Social Security-covered employment and (2) their own government pensions, based on their own work in government employment that was not covered by Social Security.
The GPO reduces Social Security spousal or widow(er)’s benefits by two-thirds of the pension from non-covered government employment. The GPO does not reduce the benefits of the spouse who was covered by Social Security.
Opponents contend that the GPO is imprecise and can be unfair. Defenders argue it is the best method currently available for preserving the spousal benefit’s original intent of supporting financially dependent spouses and also for eliminating an unfair advantage for spouses working in non-Social Security-covered employment compared with spouses working in Social Security covered jobs (who are subject to the dual entitlement rule)….
Prior to 1984, neither federal civil service employees nor Members of Congress paid Social Security taxes, nor were they eligible for Social Security benefits. Members of Congress and other federal employees were instead covered by a separate pension plan called the Civil Service Retirement System (CSRS). The 1983 amendments to the Social Security Act (P.L. 98-21) required federal employees first hired after 1983 to participate in Social Security. These amendments also required all Members of Congress to participate in Social Security as of January 1, 1984, regardless of when they first entered Congress. Because CSRS was not designed to coordinate with Social Security, Congress directed the development of a new retirement plan for federal workers. The result was the Federal Employees’ Retirement System Act of 1986 (P.L. 99- 335).
Members of Congress first elected in 1984 or later are covered automatically under the Federal Employees’ Retirement System (FERS). All Senators and those Representatives serving as Members prior to September 30, 2003, may decline this coverage. Representatives entering office on or after September 30, 2003, cannot elect to be excluded from such coverage. Members who were already in Congress when Social Security coverage went into effect could either remain in CSRS or change their coverage to FERS. Members are now covered under one of four different retirement arrangements:
• CSRS and Social Security;
• The “CSRS Offset” plan, which includes both CSRS and Social Security, but with CSRS contributions and benefits reduced by Social Security contributions and benefits;
• FERS and Social Security; or
• Social Security alone.
Congressional pensions, like those of other federal employees, are financed through a combination of employee and employer contributions. All Members pay Social Security payroll taxes equal to 6.2% of the Social Security taxable wage base ($117,000 in 2014). Members first covered by FERS prior to 2013 also pay 1.3% of full salary to the Civil Service Retirement and Disability Fund (CSRDF). Members of Congress first covered by FERS in 2013 contribute 3.1% of pay to the CSRDF. Members of Congress first covered by FERS after 2013 contribute 4.4% of pay to the CSRDF. In 2014, Members covered by CSRS Offset pay 1.8% of the first $117,000 of salary, and 8.0% of salary above this amount, into the CSRDF.
Under both CSRS and FERS, Members of Congress are eligible for a pension at the age of 62 if they have completed at least five years of service. Members are eligible for a pension at age 50 if they have completed 20 years of service, or at any age after completing 25 years of service. The amount of the pension depends on years of service and the average of the highest three years of salary. By law, the starting amount of a Member’s retirement annuity may not exceed 80% of his or her final salary.
There were 527 retired Members of Congress receiving federal pensions based fully or in part on their congressional service as of October 1, 2012. Of this number, 312 had retired under CSRS and were receiving an average annual pension of $71,472. A total of 215 Members had retired with service under FERS and were receiving an average annual pension of $40,560 in 2012.
From the abstract:
In 2010, only 19 percent of individuals ages 50-58 whose household incomes were less than 300 percent of the poverty line participated in a pension of any kind at their current jobs, compared to 56 percent of those above 300 percent of poverty. This paper investigates this pension gap. In particular, we decompose the pension participation rate into its four elements in order to compare coverage between higher- and lower-income individuals: 1) the fraction of people who are currently working (the employment rate); 2) the fraction of workers who are in firms that offer pension benefits to at least some workers (the offer rate); 3) the fraction of workers who are eligible for pension benefits, conditional on being in a firm where it is offered (the eligibility rate); and 4) the fraction of workers who enroll in a pension plan when they are eligible (the take-up rate). We find that the substantial pension gap between higher- and lower-income individuals is driven primarily by the lower-income group’s lower employment rate and the smaller probability of working for an employer that offers pensions; when lower-income workers do have a pension plan at work, their eligibility and take-up rates are nearly equivalent to higher-income workers. We also find that the factors associated with a higher value for each element of pension participation are very consistent: higher education and income, previous pension history, and job characteristics including firm size, occupation, job tenure, and union status. Together, these findings suggest that policies such as automatic enrollment that focus on pension eligibility or take-up are unlikely to close the pension coverage gap between older, lower-income individuals and their higher-income contemporaries; instead, greater pension participation requires more jobs and, in particular, more “good jobs.”
In 2006, San Francisco became the first city in the U.S. to require paid sick leave. Since then, the momentum for paid sick leave has been building, with Washington, D.C.; Jersey City, N.J.; New York City; Portland, Ore.; Seattle; the state of Connecticut; and most recently Newark, N.J., following suit. Washington, D.C., and New York City have recently expanded their sick leave laws….
…Legislation mandating paid sick leave has been introduced in a number of other states and cities, including California, New Jersey, New York, Washington and Chicago. Efforts are also underway to enact legislation in other jurisdictions, such as Massachusetts, Oregon and Tacoma, Wash.
In a countertrend, some states have enacted preemption laws that prohibit local governments from passing paid sick leave legislation, including Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Mississippi, North Carolina and Tennessee. Wisconsin enacted legislation in 2011 that bars cities, villages and counties from enacting family and medical leave rules that differ from state standards, which effectively eliminated Milwaukee’s paid sick ordinance….
Source: Deidra Krys-Rusoff, Robert C. North, Jr., Steve Kreisberg, Steve Toole, Municipal Finance Journal, Volume 34, no. 4, Winter 2014
From the abstract:
We all know what is on the horizon. Every stakeholder in the pension and benefit reform realm is facing enormous responsibilities and challenges. Municipal analysts are concerned about how pension and benefit changes will affect the costs of the liabilities and their impact on debt repayment. At this point, there seem to be more questions than answers, including: How will state and local municipalities address the escalating costs of pension and benefit obligations when the mere discussion of solutions seems to cause problems? How successful will negotiations be among government officials and labor representation as they navigate through promises made to employees and skyrocketing costs of the liabilities? Will the legality and enforceability of enacted pension reforms be defined by the courts? The experts on this panel share their current perspectives and their strategies for the future.
From the abstract:
Pension reform has taken center stage in the public policy debate as states struggle to deal with the fallout from the Great Recession. The public pension debt crisis jeopardizes the fiscal solvency of states as well as the nation’s long-term financial health. Retirement benefits are also a critical component of income-maintenance for public retirees. In this article, we integrate and extend the pension reform movements in law, education and economics by studying teacher pensions across the United States. Our interdisciplinary approach concentrates on defined benefit plans in states that do not contribute to Social Security. Focusing on this vulnerable and important group of government workers, we aim to improve theory and practice by providing a valuable perspective as states reconsider their pension obligations.
We initially estimate the severity of the public pension problem through statistical analyses and comparisons among fifty state plans. We then evaluate the legality and desirability of existing and proposed reforms. Significantly, pension reform raises new constitutional questions that are challenging courts to arrive at an acceptable conceptual framework for consistent interpretation and application. With the foregoing financial, political, and legal considerations in mind, we suggest a comprehensive set of reform measures along with a managerial paradigm for political action. The policymaking methodology directs attention not only to the pension plans themselves, but also to the political reality of their creation and continued operation. We conclude that a comprehensive response to the public pension crisis is necessary to avert disaster and maintain plan solvency both now and in the future.