ALEC promotes changes in pensions as part of 2014 legislative focus
This article first appeared in the St. Louis Beacon, Oct. 21, 2013 - For the last decade, one of the key groups influencing legislative initiatives in Missouri, and many other states with a strong conservative presence, has been the American Legislative Exchange Council, more commonly known as ALEC.
Founded by conservative state legislators in 1973 and funded by major corporations, the nonprofit think tank focuses primarily on economic issues but also has zeroed in on public education and gun rights as well.
ALEC and its free-market approach have taken on more prominent roles in Missouri after Republicans took control of both chambers of the General Assembly in 2003.
"Our bread and butter is state and local government," said Jonathan Williams, ALEC’s director for tax and fiscal policy.
"We don’t go out and tell people what to do at the state level. But we’re certainly happy to talk about our nonpartisan research and analysis and trends and what’s going on in other states.”
Critics contend that ALEC does more than talk. Sean Nicholson, executive director of Progress Missouri, contends that ALEC uses "scholarships" and outreach to influence legislators — and what ends up before the General Assembly.
ALEC has been given credit, or blame, for various legislative proposals in Missouri to curb teacher tenure, block restrictions on energy emissions, and expand gun rights. The group also contributed to the wording of Proposition C, the 2010 ballot measure in Missouri aimed at blocking Obamacare's mandate for individuals to purchase insurance.
Williams acknowledges, "We have a strong ALEC presence in Missouri.”
He singled out MIssouri House Speaker Tim Jones, R-Eureka; state Sen. Ed Emery, R-Lamar; state Rep. Sue Allen, R-Town and Country; and now-U.S. Rep. Jason Smith, R-Salem.
Nicholson doesn’t dispute that claim. Progress Missouri has been monitoring ALEC's activities in the state for years. "Half of our congressional delegation are former ALEC members," he said. “ALEC and its agenda are firmly integrated here in Missouri."
Progressive groups around the country also have been tracking ALEC's activities, resulting in some corporate donors to ALEC — such as St. Louis-based Express Scripts — dropping their financial support.
State pension changes high on ALEC's 2014 list
Of ALEC’s key issues heading into the coming legislative year, two could be of particular interest in Missouri:
- Proposed changes in public pensions, as ALEC encourages more states to consider shifting to “defined contribution plans," such as 401Ks, and away from traditional “defined benefit plans,’’ such as those in Missouri and Illinois.
- Continued focus on "right to work," which would do away with Missouri’s current law allowing unions and employers to require all workers to pay dues, if a majority agree to join a union.
Jones and Lt. Gov. Peter Kinder are among the most outspoken advocates of "right to work" in Missouri, with Jones emphasizing his plan to press for the legislation next year.
Kinder has predicted that some form of right-to-work proposal will be on Missouri's 2014 ballot.
As for pensions, ALEC’s Williams says the group is focusing on the national problem of state and local governments’ unfunded pension liabilities, which some estimate total in the trillions of dollars.
For many states, such as Illinois, Williams said that shortfalls in money needed to cover their pension commitments is "the No. 1 problem.” Among other things, he said, many of those states are relying on projected interest growth in their pension investments that are unrealistically high.
Williams cited recent moves by Kansas, Rhode Island and Alaska away from defined benefit plans to 401Ks.
Pension situation in Missouri
In Missouri, the head of the Missouri State Employee’s Retirement System (commonly known as MOSERS) said that legislative changes made two years ago have put Missouri’s existing pension system on a solid financial footing.
In 2010, the General Assembly approved a measure that requires state employees hired in 2011 and after to put 4 percent of their pay into the state plan. Those hired earlier put in no money. State workers must be on the job for 10 years to be vested in the pension system, compared to only five years for pre-2011 hires.
The minimum retirement age to collect a full pension was increased to 67, from the previous 62.
Gary Findlay, MOSERS’ executive director, said that at least 20 percent of all state employees are covered by the new provisions because of the state’s high employee turnover.
MOSERS’ rate of return on investments, needed to fund the pensions, averaged 8.4 percent annually over the past 20 years — rising to 10.4 percent for the current year, Findlay said.
"We’re in good shape," he said. Missouri is in better shape than many other states, Findlay continued, because the state has made a point of annually paying its own financial contribution into the system.
Pension-troubled states like Illinois, he said, have amassed unfunded liabilities mainly because they failed to make the state’s annual contribution into the system — in effect, shortchanging the fund and hoping that good investments would bail them out.
Findlay said that such a problem "is not the common condition" for most states. Missouri’s well-funded state pension system, he added, is among the reasons why the state has received a AAA bond rating.
ALEC initially had proposed a shift to 401K-type pensions in the states about a decade ago, when the stock market was booming and then-President George W. Bush was making a similar proposal to change part of Social Security.
But now, part of ALEC's pitch is that more private-sector workers have 401Ks, and no longer have defined benefit pensions. The group argues that it's unfair for taxpayers with 401Ks to foot more generous pensions for public employees.