In a perfect world, pension programs would be fully funded by stable, sustainable contributions. Fulfilling those obligations would not require dipping into neighboring municipal resources. The retirements that people have worked so hard for would be secure, and essential government services would not be back-burnered so that cities can afford to make pension debt payments.
the system was not only close to failing but that fixing it — and fast — was the only path to a sustainable future for our cities and states.
Unfortunately, we do not live in that world.
We live in a world where workers’ financial security is used as a bargaining chip. Where misguided policies of the past have put retirement systems in debt. Where misguided policies of the present are paying off that debt using money that should be going toward education or infrastructure. Where the confusion and fear around these issues makes people think twice about starting a career in the public sector.
Equable’s founding board members come from very different colors of the political spectrum, but they have one thing in common. In the last ten years, each one directly experienced the perilous state of pension systems in the United States and the political morass that typically surrounds them. And each one came to the same conclusion — in order to come up with real solutions that work for the long-term, they couldn’t afford to give politics a seat at the table.
Pete Constant first began to understand the depth of San Jose, California’s pension problems when he joined the city council. Taking office in 2007, he was appointed to represent the city on the board for the civilian employee pension plan, and later was also added as a board member for the public safety pension plan. It was there that he got a fast education in how long-term benefits are often sacrificed for short-term goals, as well as how little understanding many elected officials have of the long-term ramifications of their choices.
A former policeman injured in the line of duty, Pete knew risk when he saw it. And as the city struggled to balance its budget — six straight years with annual deficits of around $100 million — Pete also knew the shaky financial foundations of his city’s multi-billion dollar pension plans had to be improved. He made it his mission to change the way pension plans were treated at the municipal level, so that the jobs that truly make a city run — police, firefighters, teachers, sanitation workers — would remain attractive to a new generation of would-be public servants. Ultimately it was Pete’s experience on both sides of the negotiating table that helped him work with the mayor on building a path to financial sustainability. “Public pension policy can get very partisan,” he says. “Republicans disagree with Democrats and employees disagree with policymakers. Tax paying residents are often left out of the conversation. The only way to make lasting change to these complex systems is through bipartisan and stakeholder-wide solutions. All parties stand to suffer big losses if retirement systems fail.”
Around the same time, Lois Scott was dropped into the deep end of public-sector retirement politics when she was tapped to be Chicago’s Chief Financial Officer. She arrived in 2011 to find that escalating pension costs had hobbled the city’s ability to plan for the future, crippling everything they touched. Ballooning costs made Chicago financially unstable, which in turn made it harder to attract and retain residents and harder for businesses to manage their tax burdens. And addressing the pension funding challenges meant working to improve state laws since pension benefits weren’t set through the city’s labor contracts.
Though Mayor Emmanuel only asked Scott to serve for a year, she gave him four. In that time she fundamentally restructured the city’s finances. But she also realized that Chicago’s problems were not unique or isolated. “The pension crisis has been coming for a long time,” she says. “It’s not a very glamorous issue, but the simple fact is that unless we properly structure and fund people’s retirement, costs can spiral out of control, crowding out essential public services.”
Meanwhile, in Utah, Dan Liljenquist saw the problem first hand as a freshman State Senator when he was appointed to the legislature’s retirement subcommittee in 2010. After the financial crisis blew a gaping hole in Utah’s retirement fund, the underfunded pension system was threatening to bankrupt the entire state. Taking on a problem like this is typically a thankless job, with a low chance for success and a high chance of making everyone mad at you. Just the kind of thing most politicians sprint away from. Thankfully Dan isn’t most politicians. As he puts it, “I wasn’t elected to get elected, I was elected to actually do stuff.”
As a former financial consultant, Dan was trained to spot inefficiencies and improve performance. Instead of turning companies around, he put his skills to work fixing public sector retirement security. And a whole lot of Utahans are glad he did. Ten months after taking office, Dan forged a bipartisan consensus and passed a bill to preserve retirement benefits for thousands and avert the looming bankruptcy crisis.
After a long career in New York City and New York State politics, Dick Ravitch was no stranger to the inner workings of state government or municipal bankruptcy. But it wasn’t until the financial crisis that others began to understand what he already knew — the financial underpinnings of most public pension plans were flawed, and the retirement security of government workers was in serious jeopardy. When he was appointed Lieutenant Governor of New York State in 2009, he immediately began raising alarms about the state’s budget problems and how they related to public sector retirement security.
He also knew the problem was bigger than New York. So, after leaving office, Dick teamed up with famed economist (and former Fed Chair) Paul Volcker to review the fiscal health of some of the country’s most populous states. The subsequent Ravitch Volcker Report went off like a bomb in state finance offices across the country. The report had found that state pension plans were underfunded to the tune of $1-3 trillion. To keep their promises to workers, billions were being sucked out of state finances that should have been going to essential government services, from healthcare to public works. Individual officials at the state and local level had been sounding their bicycle bells for years. The Ravitch Volcker Report was a full-on fire alarm.
“Governments aren’t investing in infrastructure or education the way they need to, and they don’t have the resources to meet obligations as promised,” Dick points out. “It's a mess.”
That mess is why Equable exists. We’re a bipartisan nonprofit created by Republicans, Democrats and Independents; finance specialists, retirement experts, and economists; former public officials, former public union members, and former public workers, all dedicated to solving ongoing challenges for retirement plans, and their effects on public workers and the places they live. Our focus is cities and states whose unfunded retirement promises to threaten the stability of their government’s finances and the future of their employees. Which is to say, almost all of them.
Every day these problems go unaddressed, pension debt costs pull more money away from programs that benefit every level of society, from our schools to our roads to our first responders. Ultimately, if these costs mount high enough, they could threaten public employee benefits, creating further negative effects throughout the economy.
It’s one thing when a civic issue becomes a political football. It’s quite another when someone’s retirement is on the line. A retirement they’ve been working toward for decades. A retirement they’ve been counting on.
Equable is dedicated to educating and informing state and local governments about how best to care for the teachers, police officers and firefighters who serve them on a daily basis. We are radically bipartisan, intensely analytical, and unapologetically direct. We believe threats to retirement systems are threats to the economic stability of states, cities, and the United States as a whole. These are not threats that exist off in some nebulous future. They affect real people across the country today.
And it gets solved with math, not politics. We know because we’ve seen it work.
We want to take care of the people who make this country run. We want to make it attractive to go into government service. And we want to find ways to fulfill our promises without sacrificing services for the citizens of our cities and states.
Equable. Real solutions for secure retirement.