Hatch to push pension legislation this year

By Bernie Becker - 01/10/12 04:42 PM ET

Sen. Orrin Hatch (R-Utah) said Tuesday that he would push legislation this year to revamp pension systems for state and local government workers.

Hatch, ranking member of the Senate Finance Committee, noted in a statement and a newly released report that public pension programs are more than $4 trillion in debt, and said he would work to ensure that the federal government did not have to bail out state or local entities.

And while the Utah Republican did not offer many details on his planned legislation, or when it would be released, Hatch did suggest that state and local governments need to scrap their current use of defined-benefit plans.

Under that sort of plan, retirees are guaranteed a certain monthly payment, which often takes into account the length of their tenures and salaries before retirement.

“The public pension crisis plaguing our nation demands a real solution,” Hatch said in the statement. “Over the coming weeks, I will be putting forward ideas to reform public pension programs in a meaningful way that doesn’t leave taxpayers on the hook.”

The announcement from Hatch comes after groups on the left and right have spent months arguing over benefits for public workers, following pushes by Republican governors in places including Wisconsin to limit collective-bargaining rights.

In the report released Tuesday, Hatch declared that the current issues with public pensions were caused by more than just the 2008 financial crisis, as some analysts have said.

To bolster that claim, the report notes that, even before the 2008 crisis, roughly 40 percent of state and local pension plans could not fund 80 percent of their liabilities, a level experts generally consider healthy.

Hatch also used the example of his own state to underscore his point that governments need to move away from defined-benefit plans, saying that Utah had ably administered its program and still saw debt on its plan balloon to $3.45 billion in 2010.

“When a prudently managed pension plan can create a financial crisis for the taxpayers of a state or municipality, it is time to question whether the risk to taxpayers associated with the defined benefit pension structure is appropriate,” the report stated. “Defined benefit plans pose unacceptable financial and service degradation risks for taxpayers and retirees.”

But Dean Baker, co-director of the left-leaning Center for Economic and Policy Research (CEPR), took issue with both the argument from Hatch that states and localities need to move away from defined-benefit plans, and that blaming the fiscal crisis for the current pension issues understated the problems.

Baker told The Hill that, while states might in some cases be billions in the hole when it comes to pension liabilities, they will also likely be able to make that shortfall up over 20 or 30 years.

“It’s just cheap rhetoric,” Baker said about the Hatch report. “There are state and local governments where, at least on average, they’re not going to face a particularly big burden.”

Baker also noted that defined-benefit plans are less volatile for workers than other retirement plans.

Hatch’s legislative proposal will come on the heels of a push from other congressional Republicans to explicitly ban the federal government from bailing out states and localities that can’t meet their retirement obligations.