Responding to Carter Bundy

Carter Bundy of the AFSCME government employee labor union hit back today at a recent column written by Tom Molitor, and Adjunct Scholar at the Rio Grande Foundation.

While Bundy relies on a great deal of hyperbole in his article, he does make some substantive points that are worth a response.

1) Bundy notes that AFSCME was supportive of reform legislation relating to government pensions in a recent legislative session. He implies that his favored solution would solve the problem. The problem is that it won’t (as I pointed out some time ago). For starters, the Government Accounting Standards Board assumes an 8 percent rate of return for pension investments. That is not happening these days. Any pension system that relies on assumptions of 8 percent returns is not solvent.

2) According to Bundy, the size of New Mexico government has shrunk in real terms since 2003. No thanks to AFSCME of course, but it is true. The economic crisis and the fact of the economic crisis has reduced the size of government in the aggregate.

3) Bundy notes that states have not declared bankruptcy, but Molitor never asserts that they have or are. He states that they are hovering close to it. These are unprecedented times. Several bigger states like California and Illinois have been driven to the wall by public employee unions. We’ll see what happens when they can’t pay the bills.

4) Bundy notes that the Democrats cut taxes under Richardson. He is right. This was the “man bites dog” of tax cuts and illustrated just how seriously New Mexico’s tax policy had been screwed up before. But, in the aftermath of those tax cuts, those same AFSCME-backed politicians started trying to repeal those tax cuts.

5) Lastly, Bundy is correct about the illegality of strikes by public workers in New Mexico and many other states. Molitor was stating a general principle that is accurate insofar as government workers having the monopoly advantage, but his point seemed to imply that government employee strikes have happened in New Mexico. To my knowledge, they haven’t, but that doesn’t mean that public employee unions don’t disobey state laws against strikes as this article notes.

Bundy is a lawyer and a sharp guy. He makes it sound like the article is out of left field. It isn’t. Just because a state hasn’t gone bankrupt yet, doesn’t mean that it can’t happen. Just because New Mexico has a law on the books prohibiting strikes, doesn’t mean they haven’t happen in other states with the same laws on the books.

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6 Replies to “Responding to Carter Bundy”

  1. So Bundy is right on pretty much all counts? Got it.

    AFSCME tries to do the best for workers who work in state government while RGF wants to eliminate public pensions. Wonder who to believe…

    1. Not so fast. New Mexico’s government employee pension system is NOT sustainable and states are on the verge of insolvency or some kind of bankruptcy-like process (we don’t know what it will be) due in part to over-generous government pensions. We’ll test this with California and Illinois first, but New Mexico is not free of its own problems.

  2. Fully funded 401(k) plans are the only responsible way to deal with employee retirement and that would have the advantage of making the cost transparent.

  3. Excerpts from an editorial in a paper today in California:

    PENSION SYSTEMS MUST STOP USING FAULTY FORECASTS

    Pension systems depend on investment earnings to help fund workers’ future retirement pay. The higher the assumed investment returns, the less money employees and employers (taxpayers) must kick in now to fund the plans.

    But when those investment forecasts don’t pan out, pension systems are left with shortfalls, debts that taxpayers alone must make up. Employees have no obligation to help cover them.

    So the public-employee union incentive is clear: Push for high investment rate assumptions that require lower contributions now. In the short term, that frees up more government money for salaries and benefits.

    At CalPERS, actuaries have urged board members to lower the annual investment assumption below the current 7.5%, but the board, led by workers and union-supported elected officials, have rejected that.

  4. AFSCME used an 8% revenue return projection. I would LOVE to have an annual 8% return on MY retirement funds, (contributed to at a much higher rate and for a much longer period of time than any government pension plan participant and matched only partially by my employer).

    Reminds me of the corrupt way New Mexico’s legislatures and governors have “balanced the state budget” as required by law. They simply pad the amount of projected rate of return on investments so they have extra money to waste on their socialistic projects to buy votes.

  5. Private sector unions have largely, tough not exclusively, been responsible for the outsourcing of manufacturing to foreign countries, and in the process have killed the goose that laid the golden egg. They have consequently lost membership and influence. Similar fate awaits public employee unions.

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