Congress Wants Union Pension Bailout, but Can't Afford Promises

COMMENTARY Social Security

Congress Wants Union Pension Bailout, but Can't Afford Promises

Mar 29, 2016 2 min read
Rachel Greszler

Senior Research Fellow, Roe Institute

Rachel researches and analyzes taxes, Social Security, disability insurance, and pensions to promote economic growth.
Many workers have been promised far more in pensions than their employers — public or private — can afford to pay them. Puerto Rico, for example, will soon have to start tapping general revenues for some $750 million annually just to cover its pension IOUs.

Stateside, a similar day of reckoning fast approaches the United Mine Workers of America. Unfortunately, as the UMWA’s pension fund nears insolvency, some lawmakers want to bail it out.

That would set a dangerous precedent. Rewarding the irresponsible and reckless actions of UMWA officials and pension managers would encourage other plans to follow in their footsteps.

When the pension plan was created, the UMWA fought to give pensions to workers who never earned them. Since then, it has continually negotiated for and promised larger pensions than it can afford to pay. Despite its acknowledgement that its pension plan will be insolvent within a decade, the UMWA issued special pension bonuses in 2014, 2015 and 2016.

Coal mining is not an easy job. Yet, many workers took jobs in the mines — despite the hard labor and dangerous conditions — because it would at least provide a secure retirement. It’s not the coal miners’ fault that money they were promised isn’t there, but it’s also not the fault of taxpayers or the UMWA’s competitors. Yet, that’s who the UMWA and some lawmakers want to pay for the union’s irresponsible behavior.

H.R. 2403 and S. 1714 siphon off nearly a half-billion dollars annually from taxpayers and the Abandoned Mine Land Reclamation Fund (AML) to make up the shortfall in the UMWA’s health and pension plans.

The AML was established to clean up environmental damage caused by pre-1977 mines. Millions of Americans live within a mile of these abandoned and as-yet-uncleaned sites, and the AML itself is already underfunded, with assets of only $2.5 billion in the AML and more than $6 billion in high priority cleanup sites still to go. This shortfall has led the administration to ask for an AML fee increase.

AML fees are paid by coal producers according to their output. In 2015, UMWA coal producers accounted for about 9 percent of total coal production, and therefore, about 9 percent of all AML fees. The remainder came from other union mines (5 percent) and non-union coal producers (86 percent).

All non-UMWA coal companies are already forced to subsidize the UMWA’s unfunded retiree health care costs. Making them shoulder UMWA pension costs on top of that would further reduce what they can provide for their own workers, and could lead to the demise of mines now struggling to stay afloat.

The unfairness is compounded by the fact that a bailout would line the pockets of select mine owners and union officials by wiping liabilities — promises they made knowing they couldn’t keep them — off their books.

If the feds bail out UMWA pensions, the message to other troubled union pension plans will be clear: don’t worry about making promises you can’t keep; just hire the right lobbyists, pressure the right politicians, buy the right political influence, and the government will pay what you can’t.

The problem for taxpayers is: the government can’t bail out everyone. The UMWA pension fund is but one of approximately 1,300 multiemployer plans covering about 10 million participants across the U.S. Between 84 and 99 percent of these plans are underfunded, to the tune of about $500 billion.

Moreover, the federal government has its own unfunded obligations. Without reform, Social Security benefits will be cut by 23 percent in 2034. And the Pension Benefit Guaranty Corporation — the government entity that’s supposed to provide a backstop for insolvent private pensions like the UMWA — is on track to become insolvent and cut benefits by 90 percent or more in 2024.

Not a single taxpayer dollar should be used to pay the unfunded promises of favored unions. Instead, the federal government should address its own unfunded obligations.

 - Rachel Greszler is a senior analyst in economics and entitlements policy at the Center for Data Analysis.

 - This originally appeared in The Washington Post.

Originally appeared in The Washington Times