by David Moon
A new Wilshire Associates report on the status of U.S. public pensions expects that the 2016 investment returns of government employee pensions will be the lowest since the consultant began tracking the returns in 2004. This decline has resulted in a funding shortfall of more than $1 trillion—and growing.
It is with this in mind that I read that Tennessee House member Jeremy Durham (R-65th District) would remain eligible for lifetime medical insurance benefits even if his fellow legislators (or voters, for that matter) oust him from office. This despite, according to an Attorney General’s report, Durham repeatedly having inappropriate sexual contact or interactions with almost two dozen women, (Durham denies the allegations.)
Unless expelled from the General Assembly, Durham will also collect a lifetime annual pension of 20 percent of his annual legislative pay, or $4,130, after serving only four years in office. Although legislators’ stated salary is $20,884, an office allowance and daily per diem pay can push the figure above $40,000 a year.
Per capita income for all Tennesseans is $24,992.
It is a travesty that someone can receive a lifetime pension for using a public position to chase skirts. The even bigger travesty is that any elected public servant receives a lifetime pension after only four years in office.
Less than 20 percent of private sector employees have defined benefit pension plans.
The Tennessee legislators’ pension plan was amended in 2014, but existing officials are grandfathered into a program in which they earn (or, perhaps more appropriately, “self-grant”) a pension of $1,032 for each year they are in office, up to 90 percent of their salary. Durham will very likely receive more in state pension income than he was paid for 3.5 years of chasing skirts in Nashville.
Out in the real world, retirees are struggling with zero percent interest rates on low-risk investments, even after doing everything right during their working years, including saving money and paying the taxes that fund legislators’ pensions.
Those legislators, however, receive fixed, legally-guaranteed pensions, immune from the effects of negligible interest rates. If the returns of the plan fall short of the amount needed to pay benefits, taxpayers make up the difference.
I almost forgot; Tennessee taxpayers also pay 80 percent of the lifetime medical insurance premiums for current legislators.
Tennessee lawmakers officially worked 28 days in 2016. The legislature won’t convene again for a full session until sometime in 2017.
The average employed American works 224 days a year.
While government employee pension plans across the country are massively underfunded, Tennessee projects that it has set aside 98.8 percent of the assets needed to fund its obligations, among the top five public plans in the country.
With elected officials as participants in the plan, I wouldn’t expect anything less.
David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).