Report blames Pew-Enron for manufacturing public-pension 'crisis'

A new report out Thursday by a left-leaning think tank aims to turn the political discussion about public-employee pension benefits on its head.

The Philadelphia-based Pew Charitable Trusts and the right-wing Laura and John Arnold Foundation are working together in multiple states to “manufacture the perception of crisis” in pension funding and to press for lawmakers and governors to cut retiree benefits, concludes the Institute for America’s Future report.

“If you can focus the state budget debate on pension shortfalls, you can distract people from all the money going out the door for corporate subsidies,” David Sirota, the author of The Plot Against Pensions report, said in an interview. “It’s a brilliant political strategy, a huge bait and switch.”

John Arnold is a billionaire hedge-fund manager from Houston who was a trader for Enron, the now defunct energy firm that grew rich on market manipulation and accounting fraud before it collapsed in 2001. (The Enron scandal was infamous because of the hits pension funds took from suddenly worthless investments in the company, especially among its own employees).

Pew, of course, has built a reputation as a sober, down-the-middle analyst of public policy issues and politics through its research arms. To Sirota, the charity is serving as the sheep's clothing the right-wing wolf has slipped on to seem more palatable.

Arnold’s foundation has partnered with the Pew Public Sector Retirement Systems Project to campaign for pension cuts in states such as California, Rhode Island and Florida.

Pew numbers have been cited in Pennsylvania by Gov. Corbett’s administration as part of his effort to change the pensions for teachers and state workers from the traditional defined-benefit approach, which guarantees levels of retirement income, approach to 401 (k) style accounts that are subject to market fluctuation and risk.

Corbett calls the underfunded pension system the “tapeworm” that is eating the state budget, but the legislature declined to move on his proposed reforms in the budget session that ended June 30. Pew recently has been meeting with public-employee unions and lawmakers in Harrisburg, said Stephen Herzenberg, an economist and director of the Keystone Research Center, a labor-oriented think tank.

Pew estimates that there is an annual shortfall in public-employee pension funding of $46 billion, while Sirota argues from New York Times data that the states are spending $80 billion a year on corporate subsidies – such as economic development grants and loans – and tax cuts. Some scaling back of those state programs could help solve the pension crisis without slashing benefits, he says.

The full report is scheduled to be released Thursday afternoon. Stay tuned for updates.