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| Briefing Book |
| White House Conference |
Louisiana Association of Public Employees' Retirement Systems
P.O. Box 14619
Mandatory Coverage of Public Employees is a Bad Idea and Offers No Real Solution to Fix the Social Security ProblemSocial Security was formed during the Roosevelt Administration as a social "safety-net" to offer supplemental income for retirees and to provide a means of support for those members of society who were incapable of earning that means of support themselves. At the time, the Federal government told public employees that there were 10th Amendment Constitutional concerns and that they were not going to even be offered the opportunity to share in the government's generosity. If a retirement and safety-net was desired by public employees, then the only alternative they had was to form their own retirement system. So that's what they did. And those defined benefit systems progressed with the times, while Social Security remained stagnant. Now, almost 70 years later, the gulf between the two is so great that there is no longer any comparison. Now proponents of this provision are willing to overlook the ethical and Constitutional concerns in what is becoming apparent as a grab for this last source of untapped income for Social Security. The sad truth is, however, that the SSA has already reported bringing all of the public employees not now currently paying Social Security into the system will only extend solvency two years. Upon further examination, the 1Oth Amendment concerns are still intact. Furthermore, there is a question of ethics when public officials try to force over 5 million citizens nationwide and 250,000 citizens from the State of Louisiana from retirement systems that provide far better benefits into a system that is universally recognized as broken and headed toward collapse. One of the misconceptions about mandatory Social Security coverage is that the benefits are comparable or similar. But the chart at the bottom of this statement shows how the retirement systems in the State of Louisiana now offer almost twice as much in benefits for retirees as Social Security can. It is possible to obtain 100% of your salary in retirement benefits if you spend an entire career in public service. But the maximum anyone can draw from Social Security is approximately $17,500 per year. This fact means that people who would have enjoyed comfortable retirements would be shifted to a category of earnings slightly higher than the poverty level. Additionally, these people could become potential burdens for the other Federal and state social safety-nets since their Social Security benefits would place them in such a low income bracket. If new hires were allowed to enter their respective retirement systems, then the dangers of that are far less since their retirement income would be significantly higher. This brings us to one of the biggest misconceptions in this debate. It is assumed by proponents that the imposition of mandatory coverage upon new hires at some point in the future will only affect those new hires. The reality is that forcing Social Security upon new hires would effectively close existing retirement systems and thereby eliminate the ability to offer additional benefits for retirees, like cost-of-living allowances and health care. So these changes would have severe long term impacts by destabilizing the retirement and disability security of current and future retirees in these systems. Mandatory Social Security coverage has significant impacts on the ability of the employers - public agencies - to perform the services they are charged with providing. The additional expenses placed upon these employers would mean that they would have to restructure budgets and pick and choose between services. Education, public safety, government services and the taxpayers would all suffer if this unfunded Federal mandate were to be imposed upon the States and their political subdivisions. For example, in Louisiana alone, the additional cost to the taxpayers in the first five years is estimated to exceed $750 million dollars. There is an additional burden on the State of Louisiana, where mandatory Social Security coverage could not be simply substituted for existing retirement benefits. The State Constitution and laws dictate that employees in public service MUST belong to their respective retirement system. Until the laws are repealed and the Constitution modified, employees and employers are faced with, on average, a payroll tax of 12-16% each! Such a burden becomes impossible for many on the already low salaries found in many public service sectors. Mandatory Social Security coverage is a bad idea because it would cause significant financial harm to present and future retirees, new hires, the employers and public agencies and the taxpayers who would be faced with this additional burden if implemented. Forcing people who would belong to viable and healthy retirement systems offering far superior benefits into Social Security is simply bad public policy. Instead, policy makers should be examining these retirement systems and use their success as a model for reforming the broken Social Security system.
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