Opinionated @ CFE

Why You Should Choose Dan Liljenquist for US Senate

Mar
21

I write a post daily from now until the state convention about why I think Orrin Hatch has no business being in the US Senate. Tearing down someone you don’t like it really easy, though, and it does nothing to highlight who is a better choice. In many cases, we say “yeah, he sucks, but what other choice do we really have?” In the US Senate race, that choice is clear: former state senator Dan Liljenquist.

Some of the biggest problems facing us as a country are fiscal. All too many Republicans and Democrats are ignoring structural problems in our entitlement systems, instead doubling down on tax cuts and/or deficit spending in the vain hope that it will create enough economic activity to plug the gap without making difficult choices. These elected officials are ignoring reality, kicking the can down the road so that future generations can pay the price for their imprudence.

Dan Liljenquist has a proven record as someone who can tackle these needed reforms. He touched the third rail of politics, entitlements, not once, but twice and lived to tell the tale. The state of Utah now stands to save many billions of dollars in retirement and Medicaid costs. These same reforms are now being implemented in dozens of other states that now look to Utah as a legislative model. Many legislators wouldn’t accomplish in three decades what Dan did in three years.

“But what about seniority”, many will cry. I say the seniority system is nearing its end. Freshmen like Mike Lee, Jim DeMint, and Rand Paul managed to be heard immediately, leading Harry Reid to remark that he had never seen new senators wield such immense influence. Dan has already proved he has the mettle to start working on day one on very serious problems. Despite being new in the Utah State Senate and being told that there’s no way he can propose major legislation, he did the legwork anyway and came out on top, passing arguably some of the most significant legislation of the past decade. Someone who can so effectively sell their good ideas is as valuable on day one as they are many years down the road.

It’s also important to have a senator whose power will not depend on which party is in power. Party power comes and goes. The only way to wield influence in those “off” years is to be a consensus-builder, something Dan has a proven record of. In addition to taking input from within his party and from the minority party, he also reached out directly to those affected by the legislative changes to see how he could win their support. In the end, what started as a controversial change in retirement for state employees became a universally-acclaimed landmark piece of legislation earning Dan the coveted Legislator of the Year award.

A legislator who can build consensus around badly-needed reforms without bench-warming first is something we desperately need right now. Waiting won’t make it better. To borrow Dan’s campaign slogan, it’s time.

12 Responses to Why You Should Choose Dan Liljenquist for US Senate

  1. “The state of Utah now stands to save many billions of dollars in retirement and Medicaid costs. “

    I can’t comment on Medicaid(I am not familiar with the changes their), but his pension “reform” is little more then using a cut to the matching rate of the retirement plan to create the appearance of savings in unrelated area’s to push a particular agenda.

    First his claims of a $6billion dollar short fall depend on the pension fund only returning 3% for the next 30 years, This is a complete lie, last year the pension fund returned 13.8% and its 30 year average is around 11%. The break even point was 7.75% well below any danger to the tax payer.

    Second his claims of “double” dippers increasing costs are ludicrous. This is for 2 reasons one Utah already had rules that prevented spiking(the act of getting a temporary raise for the last year of employment to boost what a pension pays out), And second When a worker leaves the State still has to replace the position with a new worker, meaning the net cost is is the same or in some cases in the States benefit because the pension payout is based on the retirement date and additional “credits” don’t further accrue after 35 years(depending on the position this is set to between 1.5% to 2% per year of the at retirement pay rate, for a maximum of 70% of the at retirement pay rate).

    Third, The Utah constitution doesn’t allow the legislature to change the already guaranteed benefits owed to public workers, So already guaranteed benefits if their where actually a shortfall(which their isn’t) the State would still have to pay to backfill.

    Forth, The Utah legislature create a new tier of retirement that all new hires will be placed in that has a lower matching rate older employee’s and forces them into either a 401k plan, or a 401k/pension hybrid plan.

    His reform is little more then a back door pay cut for State employees, and a ideological push to force people into junk 401K plans. This isn’t reform. Reform would be a new retirement system of some sort or expansion of a system that actually works(such as SS), expanding a broken system like 401K’s is just backwards.

    • catherine johansen

      The fact that private sector workers can no longer foot the bill is irrelevant, right? The fact that we who pay for public sector pensions have no pension doesn’t matter to public sector leeches. Oh how I wish public sector workers had to exist in the free market for five minutes! Try the hard cold real world where we’ve seen our pay decrease 20-40% in the last few years, then cry me a river about having to contribute to your own retirement!

      • The claim that public employees are leaches is a popular one, but it’s entirely unjustified. We work hard for our living, the same as everybody else. I work extra hours, I’m on call (unpaid) nearly 24 hours a day in case something happens. I do my best to ensure that the taxpayers of this state (myself included) are getting their money’s worth out of my services. I have experienced a decrease of 20% in effective income the same as everybody else in this crappy economy – food, fuel, and energy all cost substantially more than what they did just a few years ago. We’re ALL feeling the burn here – I don’t see how that somehow makes me a leach.

        A pension was part of the reason I went to work for he state rather than somewhere I could make 20% more (and yes, I have had offers in that realm). It’s an incredibly valuable benefit that allows the state to pay employees considerably less. I believe that with proper planning there is no reason why a pension system can’t be sustainable, although that is certainly not my area of expertise.

        I wouldn’t be opposed to a change to the way the retirement system works, but (much like luminous) I don’t feel it’s reasonable to expect employees (private OR public) to shoulder 100% of the risk involved with a retirement system. It’s not that I feel I deserve something above and beyond what others have, it’s that I feel EVERYBODY should be able to plan for retirement without stressing over the possibility that, at age 65, your 35-40 years of work will disappear overnight.

        What is needed is another option – maybe something akin to a defined contribution coupled with a reasonable minimum return guaranteed by the employer. As mentioned above this isn’t my area of expertise so it’s possible that such a system could not work. It makes sense. It doesn’t seem ridiculously complicated. It still allows me to plan for a fixed worse-case scenario instead of shooting in the dark about how much I’ll have to work with.

    • Throwing out random numbers without a cogent argument does not a rebuttal make. What’s the relevance of your statements? Why won’t you make a case for why a taxpayer-backstopped pension is superior to a defined-contribution plan for ALL parties, not just employees? Why won’t you address the problems with “kick the can” pension increase promises making costs get realized decades after they are made? Why won’t you address the future required needs of the pension fund to meet current and future obligations, including replacing losses? You’re dancing around the big issues and it’s not helping your case.

  2. https://www.urs.org/pdf/SummaryReport/2010/summaryReport.pdf

    By all means read the report from the horses mouth yourself!

    The numbers I sited are in it!

    “Why won’t you address the problems with “kick the can” pension increase promises making costs get realized decades after they are made?”

    Inflation and cost of living increases are factored into the actuarial projected cost of the pension plan.

    “Why won’t you address the future required needs of the pension fund to meet current and future obligations, including replacing losses?”

    The Utah pension fund did in fact lose money in the 2007 crash, But at no point did the pension fund drop below 80% funded(the water line generally used to determine whether the fund is bankrupt or not). It is completely normal for a pension fund to float between 80% and 120% funded as the market moves up and down.

    And so long as the pension fund stays above 7.75% return rate(which is well below its long term average), and mind you every year above this number lowers it, The state will never need to backfill any money.

    “Why won’t you make a case for why a taxpayer-backstopped pension is superior to a defined-contribution plan for ALL parties, not just employees?”

    I won’t because BOTH pension funds and 401K’s are bad systems. We need a retirement system that isn’t tied to your employer, with open transportable accounts and/or national universal accounts, That must include an insurance component, and have a shared risk between the account holder and the account manager. Unless both parties are on the line for loses then the accounts just like 401K’s will continue to be a disaster.

    Real reform won’t move people from a working but somewhat flawed system(pensions) into a horridly broken criminally corrupt system(401K accounts).

    And I will stress again the insurance component that pension funds have and 401K accounts don’t. This is the biggest problem with “savings” modelled retirement accounts, Their is no way to design a draw down plan given the unknown quantity that is how long a person will live, And this gets even more uncertain if you include health care costs.

    • I’m not sure where in that report you’re getting pictures of sunshine and rainbows. The data shows precipitous increases in benefits paid (more than a 62% increase from 2005 to 2010) without a similar increase in assets (less than 29%). If that’s not a recipe for disaster, I don’t know what is.

      You still haven’t explained why taxpayers should be the ones to bear the investment risks for state employees. Still waiting on that one.

    • “(more than a 62% increase from 2005 to 2010)”

      Yes their was a market crash in 2007, we all noticed!!!!, If we narrow the dataset to just 2008 in fact we can make it look even worse!!! As I said the goal rate of 7.75% is enough for the fund to pay all of its obligations, Yes a one year -23% hit sucks but pension funds are designed to handle this sort of thing.

      “You still haven’t explained why taxpayers should be the ones to bear the investment risks for state employees. Still waiting on that one.”

      The employer picked the account, if the employer bares no responsibility for the quality of that account then their is no motivation for them to pick a good account after they have done whatever the minimum required to obtain the tax benefit, or worse kick backs from the account manager will cause them to pick a very bad account.

      And Mythgarr points out a few other reasons as well, it is part of the exchange for lower pay then in the private industry. If you want to pass a bill that changes public worker pay rates to match that of the market equivalent for the same degree or same education level that would change things a lot. In fact I would think that most public employees would support that, mind you the tax payer might complain at the high rates he would have to pay all the time under this situation.

      And also note, I am not a public employee or plan to become one, I work as a student employee of Weber university atm.

      • Hey, I just used all of the data available on the report you cited. Don’t get angry when I use your own sources to prove my point.

        Also, your 7.75% figure is fantasyland, especially since the historical annual return on the stock market is 7% per year. The pension plan would have to consistently beat the market, something it is highly unlikely to do. With benefits paid out increasing about 10% per year, you’d need a comparable increase in assets just to cover it. Prove otherwise.

        I’m entirely in favor of swapping future obligations for current payouts. I think moving to a defined contribution plan is a good step in that direction. Not sure where we have disagreement there. It does, however, continue to avoid why 1) we should continue with defined benefit plans and 2) why the taxpayer should be the backstop for it.

        • I believe the primary cause for concern is that every push toward a defined contribution system has excluded any sort of coupling with an increase in pay. In other words, the legislature wants public employees to take their word for it that in a year or two, after getting rid of the defined benefit program, that they’ll give us a raise.

          Remind me again when any politician has earned that sort of trust?

  3. Ronald D. Hunt

    http://www.le.state.ut.us/interim/2009/pdf/00001484.pdf

    And again their problems with the assumptions on this “reform”.

    The state constitution prohibits the state from altering already guaranteed benefits so any and ALL loses that occurred in the 2007 crash WILL STILL HAVE TO BE BACK FILLED BY THE STATE. At no point are the benefits of current employees changed, altered, lowered, or otherwise made to cost less for the state with regards to the existing liability!!!!!!!!

    Again assuming that URS goes well below its long term average return rates for a extended period of time which is unlikely!

    “especially since the historical annual return on the stock market is 7% per year.”

    URS has good people behind it, and has constantly had good returns, as i said their 30 year average is around 11%.

    “I think moving to a defined contribution plan is a good step in that direction.”

    I disagree, we need a new system that includes the important insurance component that is provided by a pension fund or SS. A solution that guarantees people they will have enough money no matter how long they live is important, 401K’s on this front are a disaster.

    Most people these days are left with an amount in their 401K that puts them on a 5 to 10-15 year draw down on their 401K and are then left with only SS after that to keep them afloat.

    You want to reduce liability to the Utah tax payer and I get that, 401K’s are not the way to do it.

    We need to both reduce liability to the tax payer(actually this goes for all pension plan employers not just public ones, a worker is a worker I don’t much give a rip who they work for), and provide a good retirement solution to the employee.

  4. Nice post, Jesse. I think I’ve heard some of this argument somewhere… Oh yeah, it was in my living room last Sunday as you made it to me orally. 🙂

    I hope you guys are ready for tomorrow and that everything goes well.

  5. I read this the day you posted it Jesse, and then didn’t see the flurry of comments. I’m ticked I didn’t get in on the data sharing.

    Back when the reform was passed Steve Urquhart had a nice write up with the relevant data: http://www.steveu.com/blog/2010/01/utahs-retirement-system/

    And this is a link to the report given to the committee Dan chaired by the private actuaries contracted to study the pension fund and project out what the consequences of the market losses were: http://www.le.state.ut.us/asp/interim/Commit.asp?Year=2009&Com=INTRIE

    It aint pretty. What they found was a $6.5 billion hole in the pension. And that was *with* using a generous market return estimate. What this means is that the professional pension math nerds found that we could not grow our way out of the problem, and that the fund would be bankrupt in a relatively short period of time. That’s not partisanship talking. That’s not conspiracy against unions talking. It’s math talking. And the math said we could use 10% of our entire state budget for 2 1/2 *decades* to try and make up the losses, or we could switch to a defined contribution plan. As frustrating as that may be to people, don’t hate the legislature, hate the math.

    Also of importance here is that no current state employee had their pension benefits cut. The reform changed the pension for *new* employees hired *after* the reform went into effect.

    This means a couple of things. First, public employees did not get a pay cut. Second, new employees have the choice to weigh the salary and benefits of the state position against the salary and benefits of any private sector position, just like all the rest of us. There’s no bait and switch going on, no loss of benefits.

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