For the last several months, pension managers, school districts and public officials have been howling about the alarming state of employee pension funds. They tell us pension systems are dangerously underfunded and taxpayers are on the hook for potentially billions of dollars to make them whole.
U.S. Sen. Bob Casey was even floating a bill that would make the federal government the backstop for pension funds – essentially committing to a bailout if the funds ran dry.
But the brain trust at the AFL-CIO and American Federation of Teachers have come up with a new idea: let’s use the billions of pension dollars set aside for union retirees to fund real estate development.
In other words, they want to use massive sums of money sitting in a (albeit evil) bank somewhere to put union members back to work on construction projects. This from people who said former President George W. Bush was crazy for proposing the investment of Social Security funds into the stock market.
Has Rich Trumka or Randi Weingarten looked at the real estate market lately? It’s kind of not good.
From the New York Times:
“Richard L. Trumka, president of the labor federation, will present the plan at a meeting of the Clinton Global Initiative in Chicago as part of organized labor’s effort to get the federal government, banks and money managers to do more to issue bonds or create other mechanisms to finance infrastructure projects.“A.F.L.-C.I.O. officials said they planned to work with Deutsche Bank and other financial institutions in the hope of coming up with hundreds of millions of dollars to retrofit large commercial buildings. Many building owners are hesitating to do such retrofits because they are highly leveraged and do not have the cash to make the investments. The A.F.L.-C.I.O. hopes its $10 billion will provide an incentive for banks and hedge funds to develop financing vehicles to make such projects happen.”
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What happens if the real estate investments go south? Who pays to make sure Mrs. Jones and Mr. Anderson collect their full pensions on schedule? Trumka and Weingarten? Their members? Of course not. These folks have a long history of seeking bailouts from Congress when something goes wrong.
Pension funds should not be treated like union piggy banks, unless the unions want to accept the responsibility of replacing the money if the investments turn sour. Taxpayers should not be left holding the bag for a foolish self-serving union financial strategy.
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