“In Washington, public employees who commit a crime don’t lose their taxpayer guaranteed retirements, and teachers can earn the right to a lifetime retirement after working for as little as five years.”
That’s the lede of a KING 5 story posted on its website tonight. It continues,
“KING 5 asked the state for a list of all the teachers who have had their Washington teaching license revoked and compared that list to a list of all the public employees receiving a pension. … That led to a list of 22 teachers, most who had been convicted of crimes against children, who together have received about $5.1 million above their own retirement contributions, interest included as of the end of 2014. … That’s about $236,027.95 on average per person.”
KING 5’s story includes the list, with each of the 22 teachers’ names, their monthly pension amounts (which range from $387.19 to $3,539.41 per month), and columns listing their “contributions & interest” paid into the pension system, cumulative pensions “received,” and a column labeled “difference” that subtracts the first from the second. For the 22 teachers, that “difference” adds up to about $5.1 million, in individual amounts ranging from about $33,000 to almost $457,000.
KING 5 makes it sound like this “difference” comes from taxpayers. But, on close reading, its story doesn’t say that. It merely leaves readers (and viewers) with that impression. Based on what I know about the state pension system, which is a lot, that impression is highly misleading.
The state Department of Retirement Systems manages 8 major state pension programs, most with multiple pension plans, i.e., teachers, state employees, judges, firefighters, etc., have separate and distinct pension programs, with different plans whose membership and benefits may depend on when the employee was hired, or on election by the employee. They are funded by payroll deductions from the employees’ salaries; there may or may not be an employer contribution but if so that’s functionally a part of the employing entity’s personnel costs and not a taxpayer subsidy.
Washington is one of about three or four states whose public pension system is fully funded; i.e., it has enough funds to pay all actuarially-computed future benefits. As far as I know, there are no direct taxpayer subsidies of any of Washington’s public pension programs; that is, no money appropriated from general revenues by the legislature is going into any of the pension funds administered by DRS.
Then what is that “difference,” and where does it come from?
I don’t know for sure. When I was in grade school, my math teacher made me “show my work.” KING 5 didn’t. In fact, they appear not to have given these figures any thought at all. They simply published figures from DRS without any analysis — and without asking where the “difference” came from.
KING 5’s story doesn’t even tell us what interest rate was used to compute “contributions & interest.” My guess is this is a figure that DRS uses, but I don’t know. It could be anything — a statutory rate, a fluctuating market rate, or an assumed rate (e.g., the 0.25% that banks currently pay on savings accounts). I’m almost positive, though, the “difference” didn’t come from legislative appropriations of tax monies, so if taxpayers aren’t making up the “difference,” it doesn’t really matter what interest rate was used because that “difference” has to be coming from investment returns.
Investment returns can be very substantial. In fact, they’re the bulk of the money that’s returned to public employees as pension payments after they retire. This isn’t to say that employee contributions, accumulating over a 25-year or longer working career aren’t substantial. But let’s see how a single public employee might be able to collect over $450,000 more than he paid in, “with interest,” through investment returns.
This is simple math and you can do it yourself on a calculator or Excel spreadsheet. I’ve done this a couple of times recently. About two years ago, I ran an Excel sheet that assumed a 3.5% dividend yield with an annual 5% dividend growth rate. Over a 40-year period, with dividends reinvested, the dividend income would increase by a factor of roughly 21 times. That is, if you invested $1,000 at age 25 in stocks yielding, on average, 3.5% and raising dividends by 5% a year, by age 65 your dividend income from that investment would grow from $35 a year to $741 a year — without any additional contribution of principal. That’s the “power of compounding,” and is why 6% of a public employee’s paycheck invested over a period of 25, 30, or 40 years can pay for a pension of $2,500 or more a month for the rest of his/her life without any taxpayer subsidy.
There are several permutations to KING 5’s story. I’ll briefly discuss them here, but first, I want to explain where KING 5 got the idea for this story from:
“What! It’s that gut reaction of, ‘Oh, my gosh!’ This person is in prison for this and they are receiving several thousand dollars a month? What?!” exclaimed Anne Marie Gurney, a researcher with the Freedom Foundation, a conservative policy group in Washington state. Gurney contacted KING 5 with concerns about the state’s pension laws.
That’s right, a rightwing think tank and propaganda shop contacted the TV station with an agenda to peddle, and an apparently guileless reporter ran with it. Not much, if any, critical thought went into this story; so let’s add some.
1. Bashing public employees is a favorite activity of anti-government conservatives. Ex-teachers in prison for molesting vulnerable children? A perfect example of how evil public employees can be. And also an opportunity to take a slap at teachers’ unions by portraying them as powerful protectors of misbehaving teachers. KING 5’s story doesn’t pass on this opportunity; it quotes a union rep as saying “I would fight it,” in reference to a Republican-proposed pension-forfeiture law. The union rep isn’t quoted for any other purpose (such as explaining that the money in state pension funds originated from employee compensation, not taxpayer subsidies). There are some larger conservative agendas hidden away here, too, such as replacing public schools with charter and private schools, and the government-is-too-big and we’d-all-prosper-under-smaller-government memes. KING 5’s reporter is being used by Freedom Foundation to push these agendas.
2. Public employees are overpaid. No, they’re not, they’re overworked and underpaid. But conservatives peddle this lie to a gullible public in several sneaky ways. These include: (1) comparing the salary of a professional with an advanced degree employed by government with the wages of a low-skill or minimum-wage private sector worker (some of Washington’s GOP legislators have even gone so far as to propose that all state employees be paid minimum wage; and in this regard it should be noted that nearly all state jobs require, at minimum, a college degree); (2) cherry-picking the salaries or pensions of politicians, agency heads, or top managers to create an impression that all public workers receive big salaries and six-figure pensions (I don’t know what the average Washington public pensioner receives, but it’s probably something like $2,000 to $2,500 a month, if they spent their entire career in public employment); and (3) focusing on how state salaries compare to incomes in the poorest areas of the state (yes, a teacher salary of $40,000 may look pretty good to someone looking for a private-sector job in Tonasket or Waterville; but you can’t live on it in Seattle).
3. Stripping public employees of their pensions for bad behavior. This is an idea often promoted by Republicans, and it has quite a bit of superficial appeal, but that fades on closer examination. Let’s take a closer look at it. This argument usually comes up in connection with some really egregious or outrageous act by a public employee. Out of several hundred thousand federal, state, and municipal workers, teachers, police officers, firefighters, and other public-sector workers in Washington State, you can manage to find a few whose actions get you in the gut and really piss you off. These miscreants are a perfect vehicle for promoting this agenda. For example, some years ago a state ferries captain steered his ferry off its designated route and sailed it into a harbor past his girlfriend’s waterfront home so he could toot the horn at her. Unfortunately, the ferry got hung up on a sandbar, all the passengers and crew had to be evacuated, the passengers’ vehicles were stuck on the ferry, the ferry’s bottom sustained more than $1 million of damage, and the ferry was out of service for several weeks (or months, I don’t remember). This incident made big headlines at the time, all the important politicians weighed in, and there was a lot of discussion about (a) throwing the ferry captain in prison, (b) suing him for the damages, and (c) making him forfeit his pension.
Options (a) and (c) weren’t viable for legal reasons. While prosecutors may have toyed with charging him for criminal negligence, they apparently decided it wouldn’t stick. And the state couldn’t confiscate his pension because no law authorized that, and anyway, pension rights are a form of private property and you can’t just take them away. A tort claim against him to recover the state’s losses was theoretically viable, and probably was the right way to pursue (i) recompense and (ii) revenge, although as I recall, in the end, the state didn’t sue him. There may have been some question about whether he had any assets worth going after. I don’t recall if he had a wife, but if he did, and also had a girlfriend at the same time, we probably can safely assume this man didn’t have a lot of assets left after these women collected their shares. Which left his pension. I think the problem here is the practical difficulty of enforcing a legal judgment against a tortfeasor’s pension income. It basically doesn’t work, which is why lawyers don’t do it. Possibly someone in the state attorney general’s office counseled the ferry system along those lines.
The ferry captain retired. He went off into the sunset somewhere, most likely to another state or country where neither his very public fan club, his former employer, or his plural women could find him. The ferry system contented itself to be rid of him. DRS presumably knows where his monthly pension is being deposited, and where he is, but state law prevents them from revealing that information to a lynch mob, the news media, his wife (or ex-wife, whatever), or anybody else. That’s just between him, DRS, the IRS, and his conscience. And current girlfriend, if he has one. (Bar scene somewhere in the Carribbean: “Did you know I used to be a ferry captain?” “Really?”)
I’ll concede there’s a certain visceral satisfaction inherent in the notion of confiscating the pension of a teacher who had sex with a seventh-grader or a ferry captain who hijacked a boatful of vehicles and passengers and took it for an ill-fated joyride. When such people are employed by a public entity, they’re easier to get at than employees of private businesses, so it’s tempting to do to them what we really, deep down, in our souls, want to do to the private bankers. The problem is, their pensions are private property, and in this country we can’t confiscate citizens’ private property without just compensation or due process of law.
A pension forfeiture law might pass constitutional and legal muster, if it’s drafted in the right way. I haven’t researched that, so I can’t really speak to that here. (Maybe that’s something I’ll do on a slow day when there’s nothing else to think or write about.) The starting point for analysis is that pension income is private property, so to take it away, you have to get it within one of two theoretical frameworks: The confiscation must constitute either a fine or a collection of judgment.
To fine a teacher for having sex with a student, you need (a) a law making that activity a crime, which we have, (b) a conviction, which in some of these cases we have, and (c) a law that includes pension forfeiture as part of the punishment for the crime, which we don’t have. Proposed pension forfeiture laws are designed to plug this hole in the dike. But these proposals raise a number of difficult and troubling questions. Pension forfeiture is a very severe penalty, and thus may be disproportionate to the crime. Does anyone doubt that forfeiting a pension worth $571,000 in future benefits, which is what one of those 22 teachers has collected so far, would be upheld as constitutional if imposed as a fine for, say, jaywalking or shoplifting? Is that too large a fine for having sex with a student? Maybe not, but if we’re going that route, I think I’d rather see the student sue the teacher and have the student, rather than the state, get the $571,000. For the record, I’m perfectly okay with a student who has been sexually exploited by a teacher getting and collecting a judgment against the teacher for $500,000. The teacher has it coming, and the victimized student deserves it.
The KING 5 story doesn’t tell us how many, if any, of these teachers were sued by their victims or how much, if anything, they’ve paid in civil judgments. I think that information is relevant, and its omission leaves KING 5’s reporting incomplete. If we’re going to strip these teachers of their worldly possession, why can’t that be done in civil courts just as well as in criminal courts? And maybe it is.
There’s another problem with confiscating pensions. Generally speaking, there’s a societal reason why the law puts pensions, IRAs, and social security beyond the reach of creditors, including judgment creditors. Everyone, even bad people, have to live on something in their old age. If you take their retirement income away from them, they’ll have to resort to welfare, in other words taxpayers will get stuck supporting them. So, even apart from any compassion considerations, how realistic and practical is it to strip someone of their retirement income? This isn’t something that works very well in the real world.
4. To be fair, a pension forfeiture law also has to reach private pensions. There’s absolutely no rational reason by public employees should be subject to forfeiting their pensions, but not private sector employees. That’s discrimination without a rational basis. If you’re going to have a pension forfeiture law, it has to apply to everyone, public and private sector alike. And that means the law has to be written in such a way that the state exercising its power to confiscate private property and income will be upheld by the courts. As previously discussed, that generally can be done only if the confiscation is structured as a criminal fine or a civil judgment.
5. Existing forfeiture laws are problematical. Mostly they’re aimed at depriving organized crime syndicates and drug pushers of the means and fruits of conducting criminal activity. Forfeiture laws may have some utility toward this end, which is why reputable elements of the law enforcement community oppose doing away with them altogether, but they’ve been so viciously abused by disreputable agencies and individuals in law enforcement that the U.S. Attorney General just revoked state and city participation in the fruits of forfeitures under federal (mostly drug) statutes. The problem is somewhat similar to speed traps designed to take money from ordinarily law-abiding people. The profit temptation is just too great, so we’ve seen, for example, the city of Philadelphia seizing a couple’s home because their son sold $40 of marijuana. And in the slimy little town of Tenaha, Texas, cops targeted highway travelers, especially minorities, and coerced them into signing over cash, vehicles, and other valuable property by threatening to prosecute them for possessing drugs (planted in their vehicles by the cops) or to take away their children. The Feds finally shut that crooked operation down, but there have been many others like it, some of which may still be operating in various little Third World corners of America. So, we’ve had experience with use of forfeiture as a law enforcement tool and means of punishing people for bad behavior, and it has acquired a bad reputation, so we really should have major doubts about whether we want our legislature to go that route.
6. The news media knee-jerking a story. I know about this, because I attended one of the nation’s leading journalism schools, and worked as a newspaper reporter before going to law school. I was guilty of the same damn thing in my reporter days. I recall several stories I slopped together without giving enough thought to what I was writing. After I became a lawyer, I learned to be much more meticulous, thorough, and careful about obtaining and evaluating the relevant facts than I ever was as a reporter.
You can’t expect a TV reporter working under a short deadline to think of all the issues I’ve raised, or to think them through critically, so I’ve taken a stab at it here. A starting point for every analysis of any sort is that life experience teaches us that everything is more complicated than it first appears. Pension forfeiture proposals have been batted around for a long time, and there are good reasons why they don’t get much traction. Conservative political advocates keep raising the idea. I think the media, public, and legislators should be wary. Political advocacy is always caveat emptor.
In my headline for this blog article, I’ve raised the question of whether KING 5’s reportage of this story is misleading. What I always want the news media to do, more than anything else, in reporting any story is to get the basic elements of the story right. I think the reporter tried, but didn’t really grasp the story or understand the issues, and this story does come across as knee-jerk and appealing to visceral instinct instead of thoughtful and informative. My biggest concern is it creates an impression that taxpayers are paying big money to teachers guilty of criminal sexual misconduct with their students, which I don’t believe is true. I believe Freedom Foundation is advocating the confiscation of private property as retribution for offensive behavior, not protecting taxpayer funds from being misspent. This at least deserves closer examination than it got in KING 5’s story.
If that’s the case, as I believe it is, Freedom Foundation’s proposal is problematical on multiple grounds, some of which I’ve pointed out above. Again taking a lesson from life experience, many things look good on paper, but turn out not to fly very well or at all. This proposal may be one of those things.
Photo: Edward Frost’s ornithopter never got off the ground. Humanity eventually flew, but not this way. A lot of legislative proposals, on close examination, are unworkable too. Probably the best ways to deal with bad teachers who sexually exploit their students is to revoke their teaching certificates so they can never be in a classroom again, throw them in jail for an appropriate number of years, and encourage their victims to sue them. Taking away their pensions is satisfying to our gut instincts but problematical from a number of standpoints.