The pension bailout hidden within the COVID relief bill

The $2 trillion in new spending just enacted by congressional Democrats is a COVID relief bill in name only. It’s plenty of money all right, but so little of it goes to fighting the pandemic it brings to mind an observation attributed to Benjamin Franklin concerning an ox that had been mistaken for a bull.

“He’s thankful for the honor,” the great man supposedly said, “but he’d much rather have restored what’s rightfully his.”

The politicians and public sector employees whose campaign contributions keep them in office have seized on the COVID crisis to replenish the funds in their chronically underfunded pension plans while the voters weren’t looking. And they should be ashamed of themselves.

Before COVID, public pensions were in perpetual crisis, especially in blue states like California, Illinois and New York, where the Democrats now reign with impunity. The politicians and public employee unions sitting across the table from one another at collective bargaining time uses pension benefits as bargaining chips, offering unsustainable promises in exchange for political support.

All the red ink forced them to create manipulative workarounds taxpayers don’t notice until it’s too late. In California, whenever someone calls 911, the fire department is most likely the first to arrive -- not because it’s needed, but because it generates a bigger reimbursement from the feds.

According to Boston College’s Center for Retirement and Research, “The average normal cost for public safety pension benefits is nearly double that of all other government employees.” Significant portions of city budgets are now dedicated to employee salaries and benefits. As pension obligations rise, if new revenue sources cannot be tapped by, for example, bringing emergency services “in-house”, critical programs are reduced or eliminated.

Those days must end. These obligations are driving states toward default -- or were until the so-called stimulus passed.

California’s total estimated pension liability is something like $1 trillion. To balance its books, Sacramento had to get money from taxpayers in South Dakota, Florida, Utah and, other, better-managed states (through the COVID stimulus) to close the gap. Whether it will be enough to stop city fire departments from bringing private ambulance and medical services “in-house” is yet to be seen. Hopefully, it will -- which would be a good thing for taxpayers and people in need. Otherwise, the pattern of using federal reimbursements for services provided to cover the losses in underfunded public employee pension plans will continue, much to the determinant of taxpayers.

These services, essential when they’re needed, are something the private sector already provides. There’s no need for government to take them over except for politicians and professional managers who watch over the revenue stream needing more income generators. That’s never a good reason for a competently run private sector function to be turned into a public one.

Even without crunching any numbers regarding efficiency, cost or patient outcomes, we know this is a bad idea. Government-provided services are never as efficient or well-managed as private sector businesses, even when it comes to first responders like ambulances. A government-run system would be a monopoly insulated against cost concerns because it was taxpayer-funded and would leave the citizens it was supposed to serve with no recourse if its performance declined and lives were lost as a result.

In short, the ambulance and medical services subsumed into the fire department would become more like the DMV, the IRS, and the post office and a lot less like what you used to see Gage and DeSoto doing on “Emergency!.”

There are better ways to settle the outstanding pension obligations than by expanding the range of services citizens must get from the government. Moving new hires from a defined benefit plan into a defined contribution plan like a 401K or Roth IRA they would own. This is difficult to do because it would take control of the plans from union officials who currently run them, but it is not impossible.