In a recent Iowa View essay in the Des Moines Register, Josh Mandelbaum wrote that Republican proposals to move the Iowa public employee’s pension plan (IPERS) away from a defined benefit plan and toward a defined contribution plan are, “ideologically driven”. If by that term he means an ideology under which employee pensions should be financially sustainable and fair to both employees and taxpayers, then count me as ideologically driven also… and that’s a good thing.
In our political/government employment environment, defined contribution plans have mostly been significantly underfunded and unsustainable. In an actuarially sound defined benefit plan, the balance in the fund should have a surplus as often as it has a deficit. But, as we have seen in the past, when there appears to be a funding surplus, politicians increase benefits rather temporarily lowering the contributions paid by both taxpayers and employees. There is a built-in tendency for politicians to over-promise and under-fund because future benefits will not be paid out until many years later. Supporters of the current IPERS system like to say that Iowa has one of the most financially sound retirement systems in the U.S. IPERS is only about $7 billion short of the funds necessary to keep its promises! It has only about 81 cents for each dollar that it owes.
Defined contribution plans can have most of the same benefits, and potentially more, for employees. It does shift significant responsibility and risk to the employee to invest wisely and to not spend retirement money too fast during retirement. But, under a defined contribution plan the employees own the money in their retirement account, and can take it with them if they decide to change employers, and can leave it to anyone they wish after they die.
There will be a significant fiscal challenge that must be met if we were to make the change from a defined benefit to a defined contribution plan: If new employees put their retirement contributions into a defined contribution plan and don’t contribute to the existing defined benefit plan, the already-existing $7 billion of under-funding of IPERS will come due and need to be paid out over the next 50 – 60 years. In a big way, IPERS is still operating like a giant Ponzi Scheme – taking money from new investors to payoff old investors. (Illegal if done in the private sector.) It is time for us to lock-in the under-funding liability and stop making it worse. We need to put new government employees into a defined contribution plan.
Joel Kurtinitis had an opinion printed in the Des Moines Register on 3/25/18 (see link below) wherein he wrote that a fetus should be protected against abortion as soon as a heartbeat can be detected (around 6 weeks into pregnancy). He and other millennials may not have been exposed to the philosophical argument in favor of a woman’s right to choose abortion up to the time that a fetus is viable. A fetus is viable when it is able to live outside of the mother’s womb, either with or without assistance (usually around 24 week into pregnancy). A classical libertarian philosophical position is that every person has the right to use and control his or her own body as they wish as long as they don’t infringe on other people’s right to do the same. In the case of abortion, this means that neither the fetus nor anyone else, has the right to force the mother to carry the fetus inside her body. If the fetus is not viable, then the mother should be free to abort it. If the fetus is viable, then the mother should take reasonable care to not harm the fetus during delivery.
Link to Kurtinitis’ opinion in The Des Moines Register: https://www.desmoinesregister.com/story/opinion/columnists/iowa-view/2018/03/22/heartbeat-bill-abortion-millennials-iowa-legislature/449965002/
I agree with Iowa Senator Ken Rozenboom that people who voted for the Iowa Constitutional Amendment which created the Natural Resources and Outdoor Recreation Trust Fund were expressing their “feel-good” support for cleaner water and expanded recreation opportunities in Iowa. The Register’s opinion polls also make it pretty clear that a majority of Iowans are willing to pay a higher sales tax to fund these priorities.
As a long-time river canoe paddler, I want clean waters in Iowa as much as anyone. But raising the sales tax is the wrong approach to pay for the prevention and clean-up. Here are three good reasons why Iowans and the Iowa Legislature should not increase the sales tax in order to fund the Trust Fund, and why the Constitutional Amendment should be repealed:First, much if not most of the money will go to pay for subsidies or other incentives to the polluters to encourage them to stop polluting. (Only 7% is guaranteed to go to trails. All other categories are not guaranteed to go to recreation.) Historically, we have required polluters to stop polluting our common environment or otherwise pay fines or other penalties to force them to stop polluting and to pay for cleanup of pollution they caused. Taxpayers should not be bailing out polluters. Taxpayers should especially not pay rent to farmers to temporarily “set aside” land from production in order to reduce run-off. As we’ve seen under the federal program, if the payments stop or crop prices get too high, many farmers put fragile land right back into production.Second, if we were to increase the sales tax,the only way to stop the spending would be to repeal the Constitutional Amendment. Eventually, the need for tax money to pay for pollution prevention or clean-up will come to an end. But the Constitutional Amendment has no sunset provision so money put into the Trust Fund will be required to be spent according to the fixed formula until the amendment is repealed. We really need the flexibility of a legislative solution rather than a rigid Constitutional Amendment to solve our water pollution problem. The Constitutional Amendment should be repealed.Third, the sales tax is a regressive tax that is disproportionately paid by relatively poorer people. Poorer people pay a larger percentage of their income in sales taxes than do higher income folks.It is true that Iowa’s waterways are unacceptably polluted. This is a problem that we need government regulation to solve. A more just and fair way to finance the clean-up of our waters would be to put a tax on the pollutants – namely farm fertilizers and other chemicals. All such taxes collected could be put into a clean water trust fund, which a majority of Iowans support. There should also be appropriate fines to pay the cost of cleanup related to livestock sewage or other pollutants that are spilled into our waters. The basic and just principle is that polluters should pay the costs of prevention and cleanup, not general taxpayers.Regarding improving recreational opportunities, we have already made significant progress toward providing more and better quality outdoor recreational opportunities for Iowans. We should continue on our current incremental path that has worked well rather than significantly increasing taxes.