The Legislature is in its final weeks and, as a former legislator — way back when — I know they will inevitably face a number of very tough decisions. One way for them to ease the challenge is to avoid decisions which are highly questionable on merit and cost taxpayers a lot of money. Pretty obvious, right? One would hope so, but House Resolution 1040, which would end the state’s longstanding pension program, is an example of a big spending bill producing little benefit to the workers who have earned the coverage.
In a nutshell, the bill spends $5.3 billion to convert our state retirement program, giving North Dakotans less but Wall Street so much more. So why would they do that? Because Wall Street financial interests are working overtime to scrap the state’s pension so they can sell 401(k) type products as an alternative. 401(k)-type retirement programs produce fee income which is way beyond what they can get from North Dakota on pension funds.
It would be one thing if paying higher fees produced a more secure retirement product for our workers, but we all know better. My 401(k) balances are all down from a year ago and I’d be surprised if they get back to even this year. The fact is, 401(k) type plans shift a lot of risk to modest income employees. Examples of the risks include: Will enough be saved? Will the money last or is it withdrawn too soon? What about seniors who outlive their nest eggs? Most of all, what about the stock market? It goes up and down as all of us with investments know. What happens when balances are crushed just as folks need them for retirement?
Why does it cost so much to shove 401(k)-type risks onto employees? The dirty little secret about converting pension plans is that the change involves enormous costs to fund the transition. In North Dakota’s case, it is estimated to cost $5.3 billion! State after state has rejected this type of conversion based on the price tag alone!
A state Legislature that doesn’t want to fund student lunches for our kids should certainly not drop more than $5 billion to advance Wall Street interests while giving our state a raw deal in return. Back in the day, I traveled across North Dakota visiting with voters. I often heard from families who did all they could to save for retirement, only to have circumstances beyond their control disrupt their hopes and dreams for their golden years. HR 1040 piles more risk onto North Dakotans in times where we could all use more certainty, not less, when it comes to retirement income.
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The Legislature can do the right thing and continue the retirement program for our modestly paid public employees — folks like teachers, nurses or the heroes of the hour, our snowplow drivers — by maintaining the retirement plan we’ve been using for generations.
This high-pressure effort to spend the $5.3 billion to convert has been tried in other states. Almost none have been persuaded. Even those who prefer the 401(k) approach have found the strength of the present system and the cost of conversion to be just too high to be worth changing. HR 1040 is a bad deal. I hope the Legislature stands with their taxpayers and their workers instead of Wall Street in rejecting the high pressure pushing this bad idea.
Pomeroy, a Democrat, is a former North Dakota representative in the U.S. House of Representatives.
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