We’ve been pointing out the negatives of this for, what, a year?
In Frankfort, Kentucky, the state legislature is currently debating the retirement future of its public workers. The six plans that make up the Kentucky Retirement Systems have $33 billion in underfunded liabilities, a situation that is putting a strain on state and municipal finances at a time when the state can least afford it. In early January the mayors of Kentucky’s two largest cities, Louisville and Lexington, publicly called on the governor to support pension reform, arguing that the pension costs on their cities were “spiraling out of control.” Among those advising Kentucky lawmakers is the Laura and John Arnold Foundation — the private foundation of former Enron trader turned hedge fund manager John Arnold and his wife. Kentucky is just one of many states where Arnold is seeking to play a role influencing the highly contentious pension debate, and not everyone is happy to see him.
The Arnold Foundation advocates a move away from traditional defined benefit models toward pension plans that, it argues, are more sustainable — either some kind of defined contribution plan or a so-called cash balance plan, which represents each individual’s savings in the fund as a cash balance available upon retirement. Last year the Arnold Foundation began a partnership with the Pew Charitable Trust, a Washington, D.C.–based not-for-profit, to further its reach. To date the two groups have given advice and assistance in 24 jurisdictions, and the Arnold Foundation has spent around $7 million on pension reform efforts in states such as Arizona, Colorado, Illinois, Montana, Nevada and Rhode Island.
“The unholy alliance between Pew Center on the States and the Laura and John Arnold Foundation showcases how an ideologue like John Arnold can partner with a seemingly nonpartisan organization to push a sloppy policy proposal,” says Steve Barger, coordinator for the Kentucky Public Pension Coalition and managing member of Steve Barger Consulting. “The Arnold Foundation has made no effort to hide their disdain for public employees — and that conviction is now coming out in the form of recommendations to eliminate the traditional defined benefit pension plans in Kentucky and other states.”
Meanwhile, the rest of the media sits on its hands.