In the most compelling scene of the critically acclaimed movie "The Revenant," Leonardo DiCaprio’s character, as he is walking through the woods, is gruesomely mauled by a 600-pound grizzly bear. This momma grizzly appears out of the deep foliage with no warning but the rustling of bushes and a low, guttural growl. DiCaprio is bowled over, chewed up and tossed around like a rag-doll as the raw power of the bear dominates the proceedings for five full minutes. It is a scene that sticks with you, and will have you looking over your shoulder when you are alone in the woods, probably for the rest of your life.
But even scarier than DiCaprio’s run-in with the grizzly is the wild bear market we have stumbled into during the first couple of weeks of 2016. Stocks are off to their worst 10-day start ever. China is in distress, the Middle East is at war, oil prices are collapsing as the global glut grows, business lending is down, industrial production is declining, and our retail spending growth rate is at a seven-year low. About the only positive we have going for us right now is that consumer sentiment is high, but that will likely change when Americans receive their end of month 401(k) statements.
The mauling of investment funds has begun, and no group will be harder hit than state and local public employee pension funds. I have written multiple times in this column about the challenges state and local pension systems are facing across the country, and about the dire need for reform. Depending on whose numbers you believe, nationally we have anywhere between $1 trillion and $4 trillion in unfunded pension liabilities at the state and local level. Taxpayers are on the hook for these liabilities, and over the past several years required pension contributions to offset previous market losses have skyrocketed, diverting tens of billions of dollars in resources away from other core government services annually. And that was before this latest bear market. Unfunded pension liabilities will be much, much worse if stocks continue to get chewed up and tossed around in 2016, requiring more and more transfusions of taxpayer cash to make them whole.
While there might not be much we can do at this point to avoid the damage inflicted on Utah’s pension funds by the 2016 bear market, the Legislature certainly should not make matters worse. But this is precisely what state Rep. Rich Cunningham is attempting to do again this year with HB86, HB117 and HB47. Cunningham has been actively working over the last couple of years to make it easier for public employees to “double dip” (to collect a pension while working as a full-time public employee).
Under current law, if a public employee retires and returns to full-time work with another public employer within one year, they are required to suspend their pension payments until they re-retire. Cunningham proposes lowering the one-year separation requirement to a mere 60 days. Actuaries for the Utah Retirement System project that Cunningham’s proposal will add more than $220 million in additional pension debt to the system that is already billions of dollars underwater. (here is the link to the report: http://le.utah.gov/interim/2015/pdf/00005090.pdf ) Cunningham’s legislation will cost taxpayers more than $25 million in new pension contributions each year. All so a few thousand public employees can prematurely “retire,” continue to do the same or similar work, and collect both a pension check and a paycheck.
Cunningham’s HB86 would add insult to injury at a time when Utah’s taxpayers and pension system can least absorb it. We can’t afford to be mauled twice.
Dan Liljenquist is a former Republican state senator from Utah and former U.S. Senate candidate. He is nationally recognized for work on entitlement reform.