Beyond the state's looming $6 billion deficit, Minnesota's candidates for governor on Thursday waded into what is likely to be another key fiscal fight for the next administration -- retirement benefits for public employees.
The state's pension system, which covers more than 700,000 workers and retirees, was recently found to be about $12 billion short of the amount it would need to pay benefits.
DFL candidate Mark Dayton said government has an obligation to provide secure retirement benefits to its workers, even if some adjustments to payouts and contributions are needed.
Republican Tom Emmer and Independence Party candidate Tom Horner called for broader changes that would transition the state away from the defined payouts of pension plans to 401k-style plans that now dominate the private sector.
Under those plans, employees contribute a certain amount, but payouts depend largely on investment returns.
Emmer, in particular, said the gap between public and private sector employees has grown too large.
"They [public employees] get the guarantee of their future, while the rest of us, if we're lucky enough to have a 401k plan, are watching it ride the rollercoaster of the market and we're either delaying retirement or we're wondering if we're ever going to be able to retire," Emmer said during a debate sponsored by the Twin West Chamber of Commerce at General Mills.
Recent U.S. Bureau of Labor Statistics show that nearly 80 percent of public workers are covered by traditional pension plans that offer a secure benefit, compared to only 20 percent of private employees.
Horner said the state should keep pensions for existing retirees and older workers, but transition younger employees and new hires to investment-style plans that would gradually reduce the state's pension obligations.
The state's public pension systems have been dogged for years by inaccurate predictions, inadequate contributions and high benefit payouts, jeopardizing Minnesota's ability to cover long-term commitments to retirees.
With the nation's plunge into deep recession, Minnesota's retirement funds have lost about a sixth of their value over a little more than the past two years. Current funding levels are floating at the bare minimum recommended by the federal government.
A strongly bipartisan coalition in the Legislature attempted to ease the shortfall this year with a bill that requires bigger contributions from public workers, school districts, cities, counties and the state, and that slows pension benefit increases to retirees. Dayton said a similar fix may be required in the future.
'Gold-plated' benefits
During the debate Emmer claimed public employees earn far more than private employees.
"Not only do our public employees make on average 30 to 40 percent more than private sector employees in the same positions -- similar positions -- but then they have health care insurance that's gold-plated health care, while people in the private sector are lucky if they keep [it]. And then you get to the pension aspect," Emmer said.
Dayton, who has been endorsed by public employee unions, challenged that assertion.
"People who work all their careers in the public sector, they don't make a lot of money in total and they don't have a lot of retirement income, but they have secure income," Dayton said. "They bargain for those retirement benefits." He pointed out that teachers, in particular, buy their health insurance through the private market.
"To denigrate people because they want retirement security is really misguided," Dayton jabbed at Emmer.
Emmer's campaign cited several federal studies showing wage disparities between public and private sector employees, though none addressed Minnesota specifically.
The state Department of Employment and Economic Development said public administration employees in Minnesota make about 7 percent more than private sector employees in comparable positions. Those figures do not include public workers in education or health care. The department did not have figures comparing wages for all public workers to their private sector counterparts.
Horner said government should not "pull the rug out from under" older workers. Overall, he said, the pension solution will come from a combination of higher employee contributions, lower benefits and higher taxes.
"The Democrats, they're not going to try to challenge the public unions. ... But the Republicans aren't going to challenge Minnesotans to do what's right. We need a governor who's willing to do both," Horner said.
'Virtual contract'
The state already faces a lawsuit over pension changes earlier this year. The suit by some retirees claims the state violated their constitutional rights by effectively reducing benefits.
The House passed the overhaul 116-16 with the support of most Republicans. Emmer voted no. Legislators on both sides who supported the bill said its failure would only have delayed a more expensive bailout and exposed some retirees to financial ruin.
The changes were projected to save the state $2.1 billion in pension costs over five years. It reduces scheduled increases in pension checks and increases payments by local workers and state and local governments.
Eric Roper • 612-673-1732 Pat Doyle • 651-222-1210
