Blame Amazon for America's underfunded public pensions

Blame Amazon for America's underfunded public pensions
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You have to give Amazon credit. In a rare public auction, the retail giant promised up to 50,000 jobs at a second headquarters, or “HQ2,” and sat back while 238 cities and states tripped over each other to offer the most lucrative tax break packages. While most of the bids have yet to be disclosed, some are staggering, especially considering the same states have recently claimed they don’t have money for pensions, education, infrastructure, or other state priorities.

Illinois and New Jersey, two states notorious for underfunding their public pensions, are suddenly flush with cash when Amazon comes calling. Illinois’s bid with Chicago is priced at $2 billion. New Jersey’s bid with Newark more than triples that at a whopping $7 billion. Since 2000, New Jersey has ranked last among the 50 states in making its annually required contribution to the pension system.

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After pushing through harsh benefit cuts for workers, Gov. Chris Christie further shorted pension payments by almost $2.5 billion in his 2014 and 2015 budgets. New Jersey is so strapped for cash that it can’t keep its promise to workers, contributing money they have earned into their pension systems, yet it has $7 billion to offer Amazon?

Now, you might say, New Jersey must be in this situation because of its overly generous pensions. But in fact, a study from the New Jersey Policy Perspective found that New Jersey ranks 95 out of 100 in generosity among the largest public sector pension plans. Pension benefits in New Jersey average $26,000 annually. While New Jersey shortchanged retirees, Christie has granted more economic development subsidy deals worth hundreds of millions of dollars than any governor in U.S. history.

Some of his costliest deals simply paid companies to move around within the state, and the appearance of “pay to play” surrounds the many deals in which executives at subsidized companies gave large contributions to Christie’s reelection campaign, the governor’s mansion fund, or the Republican Governors Association while Christie headed it. Before New Jersey makes any more corporate handouts, it should be forced to pay the bills it already owes to its firefighters, teachers, and public employees.

Amazon isn’t the only corporation seeking handouts from states at the expense of other critical state services. With the blessing of the White House, Taiwanese electronics manufacturer Foxconn played states against each other for a new liquid crystal display factory. Michigan offered $3.8 billion, while the state’s legislature switched the default retirement plan for teachers to an inadequate 401(k)-style plan.

It’s hard to believe that Michigan “can’t afford” to invest in education and retirement security for teachers. Foxconn ultimately chose Wisconsin, where the state, by its own admission, will take at least 26 years to break even on its deal. Wisconsin took a risky bet on a technology product that could easily become obsolete 10 years from now.

Taxpayers should be wary. There should be outcries in all 238 jurisdictions that bid for Amazon. Where is the accountability? It’s your money that won’t be used to keep classroom sizes reasonable for your children. It’s your money that won’t be used to fill the potholes that damage your car. It’s your money that won’t be used to adequately staff fire and police stations. As one economist recently explained, the place that “wins” the Amazon HQ2 deal could actually overspend and end up a big loser.

Politicians may tell you that pensions are to blame for public service cuts, but corporate tax breaks and subsidies dwarf pension costs in most states. Not to mention, pensions are a proven economic engine for states. So if you live in one of the 238 places courting Amazon, demand that they disclose their HQ2 bids and live up to their existing obligations first.

Bailey Childers is executive director of the National Public Pension Coalition.