Speakers: Cincinnati Pension Crisis ‘Worse than You Think’; Opponents Stage Counterdemonstration
by Edward D. Hyde
On October 10th, the local lawyers’ chapter of the Federalist Society and the Buckeye Institute jointly hosted two speakers to discuss Cincinnati’s public-employee pension system and proposed reforms. More than sixty people came to hear economist Scott Beaulier and former principal deputy commissioner of Social Security Andrew Biggs address the topic over lunch at the University Club of Cincinnati.
The event, headlined “Worse than You Think: Cincinnati’s Underfunded Pensions and an Analysis of Potential Reforms”, started with Professor Beaulier, who argued that public-employee pension systems tend to be subject to certain kinds of structural problems, but that successful reforms are possible. Excerpts:
Mr. Biggs addressed the situation of Cincinnati in particular and the proposed reform that will be on the ballot next month (for city voters) as Issue 4. He argued that a reform like Issue 4, while not a silver bullet, is an important first step to avert disaster. Excerpts:
(Full video here, with introduction by Mr. Alt: about 23 minutes.)
Mr. Biggs is the author of the report “Worse than You Think: Cincinnati’s Underfunded Pensions and an Analysis of Potential Reforms”, published last month by the Buckeye Institute. According to the report,
Cincinnati’s current public employee retirement plan, the Cincinnati Retirement System (CRS), is a traditional “defined benefit” (DB) pension plan that is far less fiscally sound than commonly understood. By some accounting standards, CRS is optimistically underfunded by $862 million. But a more accurate measure, the “fair market valuation” preferred by most economists, reveals unfunded liabilities of over $2.5 billion and a funding ratio of only 35%.
On the street corner outside the University Club, Issue 4 opponents Cincinnati for Pension Responsibility held a counterdemonstration. An audience of around ten people heard remarks by local attorney Paul De Marco, whom the Cincinnati Enquirer describes as “a leader for Catholic Democrats”; Sister Monica McGloin; and former City Council candidate Bernadette Watson. The speakers were introduced by local political consultant David Little. Video:
Standing behind them is Democrat-endorsed City Council candidate Michelle Dillingham. Also on hand was AFSCME Ohio Council 8, a chapter of the American Federation of State, County, and Municipal Employees, AFL-CIO.
The group that put the proposed reform on the ballot, Cincinnati for Pension Reform, has created the Web site Save Our Cincinnati: Yes to Issue 4. According to them,
Issue 4 is a charter amendment on the November 5 ballot that would change Cincinnati’s pension system by switching new city employees who are hired after January 1, 2014 to a retirement plan similar to a 401 (K). Current city workers and retirees would keep their pension benefits.
A YES vote on Issue 4 allows Cincinnatians to prevent our city from becoming the next Detroit, where unfunded pension obligations forced the city into bankruptcy.
They provide the full text of the proposed amendment to the city charter here. The group points out that Cincinnati’s credit rating was downgraded earlier this year, apparently because of the city’s unfunded pension obligations, and that the state auditor has said that the
They have also released a TV ad:
Issue 4 opponents Cincinnati for Pension Responsibility have created the Web site Cincinnati Says No on Issue 4; Citizens for Responsible and Accountable Government (CRAG), a political-action committee formed “to expose the truth about Issue 4”, has created a companion Web site. They point out that accountant and Xavier finance professor David Hyland has written a report entitled “Review of Charter Amendment Petition, Proposed Article XVII: An Ineffective Treatment That Could Kill the Patient”. He concludes,
It is my opinion that the Proposed Amendment represents a dangerous, haphazard and unnecessary approach to attempting to reform the CRS which will almost certainly cause the City to incur significantly increased pension-related expenses for the foreseeable future. For this reason, I believe that the Proposed Amendment is not in the best interests of the citizens and taxpayers of Cincinnati . . . .
The opponents offer more arguments against the amendment under the heading “Truth about Issue 4” at the CRAG Web site.
The proponents respond to some of the criticisms here.
The “Worse than You Think” event invitation describes Scott Beaulier, Ph.D., as the Adams-Bibby Chair of Free Enterprise and Associate Professor of Economics at Troy University, and the Executive Director of Troy University’s Manuel H. Johnson Center for Political Economy; his full CV is available at his Web site. The invitation describes Andrew G. Biggs, Ph.D., as a Resident Scholar at the American Enterprise Institute, and the former principal deputy commissioner of the Social Security Administration; his CV is available at AEI’s Web site.