USA Today: Public pensions becoming more generous

USA Today suggests that, in contrast to the private sector, public pension plans are offering increasingly generous benefits to their members.

Many corporations have replaced traditional pension plans, which pay monthly benefits for life, with plans that cost employers less and pay workers a lump sum when they retire. Alcoa, the world's largest aluminum producer, announced Monday that it would do so for most new employees effective March 1.

Governments have been moving in the opposite direction: increasing monthly benefits, making it easier to retire at 55 and spending more on retiree health benefits. State and local governments, which cover 21 million workers and retirees, have been adding benefits the fastest:

•A December study of 85 big public pensions in all 50 states — covering three-fourths of public employees nationwide — found that governments continued to enhance benefit formulas, ease early retirement and improve other benefits from 2000 through 2004 despite states' financial problems. The increases were enacted on top of even larger benefit changes approved from 1996 to 2000. The study, conducted by the Wisconsin Legislature, is one of the most comprehensive on the issue.

•The New Jersey Legislature has approved 17 benefit enhancements since 2000 that increased the unfunded obligations of public pensions in the state by $6.8 billion, according to a task force studying the issue.

•Average annual benefits for retired state and local workers grew 37% to $19,875 from 2000 to 2004, the most recent data available, according to the Census Bureau. The rising payments reflect the early retirement of baby boomers, who started to qualify for full benefits in 2001, at age 55, under most government pensions.

"These pensions are unaffordable," says Alaska state Rep. Bert Stedman, a Republican. "If we don't act now, we're going to have social conflict in the future between the haves and the have-nots — those with government pensions and those without."

Reg Weaver, president of the National Education Association, which represents teachers, says legislators shouldn't respond to pension problems in the private sector by attacking government pensions. "Pensions are a national problem, but it's not in the interest of workers to diminish either type," he says.