Washington

A question of minimum funding standards if feds regulate public pensions systems

PENSION PLANS for government workers are a constant worry for state and local officials — with good reason. When a count was taken last year there were over 6,000 separate public employee retirement systems, ranging from New York's state system (417,000 members) to the Evergreen Park (111.) Firemen's Pension Fund, which at the time of the survey had no active members.

New York City's fiscal crisis focused public attention on the long-run impact of retirement benefit agreements reached with employee unions. Yet governmental pension systems are typically underfunded. No one bothers to give much thought to where the money will come from to meet their future obligations. Public pension systems are controlled by employers who have been known to invest the assets to help keep their government operations going, and occasionally to fill their own pockets or those of their "investment advisers." Participants don't always know what their entitlements are, and can't find out. Elected officials, in office temporarily, are willing to commit their governments to richer benefits, thus pacifying their work force and preserving political stability while leaving the day of fiscal reckoning to unfortunate future governors and mayors.

Proposal in Congress
Now the U.S. Congress has come up with a proposition that all this amounts to a national problem warranting federal protection. A 1974 law that established federal requirements for private pension plans excluded public plans until their special problems could be studied further. In April, the ranking Democratic and Republican members of the House Subcommittee on Labor Standards issued the report of a two- year staff survey that they agreed had documented "the need for federal legislation to correct certain deficiencies in the public pension system." They introduced a bill, the Public Employment Retirement Security Act, setting forth reporting and fiduciary responsibility requirements, guaranteeing participant access to information about the plans, and defining minimum standards of conduct for trustees and fiduciaries.

Their subcommittee is a familiar battleground for labor-management relations issues. The Democratic chairman, Rep. John H. Dent of Ligonier, Pa., is a former union leader who is recognized as an organized labor spokesman. Rep. John N. Erienbornof DuPage County in Illinois is only 49 years old but the senior minority party member. He is usually found articulating management's position on labor regulation questions. Trained in the legislatures of their respective states, Dent and Erlenborn reflect their different constituencies — one, the workers in anthracite mines and steel mills; the other, the corporate executives who live and vote in Chicago's far western suburbs.

Because the two men see eye to eye so seldom on economic regulatory matters, their cooperation on pension regulation is surprising. As a rule Erlenborn espouses states' rights and warns against the dangers of a meddling federal bureaucracy. In this instance the governors and mayors oppose the legislation as an unnecessary intrusion into business they are capable of handling themselves.

Before Congress can lend a hand, some legal-constitutional issues must be resolved having to do with the nature of federalism. Erlenborn is satisfied that the pension funds of states and municipalities — the securities that they deal in, the mobility of retired beneficiaries, for example — are sufficiently involved in interstate commerce to satisfy the usual constitutional test.

But why can't the state legislatures police the pension systems that they created for state and local governments? "From a practical standpoint," declares the Illinois congressman, "they haven't and they're not likely to." He points to certain conflicts: the lawmakers are also the fund managers who are in the position of having to weigh the funding requests against all the other state budgetary demands.

Illinois had 465 pension plans for government workers when the survey was conducted, far too many according to Erlenborn. He says other states have consolidated their local police and firemen's systems into more manageable units with much better vesting and employment transfer practices. The entire state of Ohio has only seven pension systems.

Public employee unions supported the Dent-Erlenborn bill. So did the organized teachers. The sponsors may part company, however, when it comes to what the Republican Erlenborn already sees as the probable next stage of federal regulation, if and when the House bill becomes law. That would be minimum funding standards for public employee pensions. Government unions become queasy when the discussion turns to funding standards. Such provisions would cause public officials to face up to the tax and budget consequences of the collective bargaining agreements they approve. In turn, this might make it more difficult for the unions to receive taxpayer support for their benefit requests. No meddler by instinct, John Erlenborn may have staked out an early Republican position on an entire galaxy of future issues revolving around public employee unions and the cost of government.ž

July 1976/ Illinois Issues/ 31