[Congressional Record Volume 145, Number 56 (Thursday, April 22, 1999)]
[Extensions of Remarks]
[Pages E740-E741]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      IF IT WORKS, DON'T BREAK IT

                                 ______
                                 

                           HON. BOB SCHAFFER

                              of colorado

                    in the house of representatives

                        Thursday, April 22, 1999

  Mr. SCHAFFER. Mr. Speaker, if it isn't broken, don't fix it. If it 
works, don't break it.
  I'm speaking in reference to the Social Security debate. Currently, 
some in Congress are looking at proposals to prevent the program's 
anticipated bankruptcy 32 years from now. In order to buy the system a 
couple more years of financial solvency, some of our colleagues are 
considering levying a new tax on state and local government employees 
who are currently covered by their own pension plans. They want to 
force newly-hired state and local government employees who would 
otherwise enjoy independent pension and disability programs with good 
returns to participate in Social Security which offers neither security 
nor a good investment opportunity.
  If that isn't bad enough, by mandating new state and local employees 
into Social Security, they will short-circuit state and local programs 
by shutting down the capital stream necessary to maintain current 
benefit levels. Mandating Social Security will, in essence, break what 
isn't broken while failing to fix what is.
  Mr. Speaker, five million state and local employees and two million 
retirees are covered by alternative plans. In Ohio, Colorado, 
California, Massachusetts, Nevada, Maine, Alaska, and Louisiana, over 
half of all state employees are covered by their own plans. In Texas 
and Illinois over one million employees are covered under state and 
local plans. Every state is impacted because about 75 percent of all 
public safety employees are not covered under Social Security. In 
Colorado there are more than 200,000 state, education, and local 
government employees who are outside of the federal retirement system.
  These state and local disability and pension systems were developed 
because the original Social Security Act of 1937 excluded state and 
local governments from Social Security coverage. This was to avoid 
raising a possible Constitutional question of whether the federal 
government could tax state and local governments. Congress later 
amended the law to

[[Page E741]]

make state and local government employee participation in Social 
Security voluntary in 1950. In 1983, those already participating in 
Social Security were required to remain in the federal system.
  In the absence of Social Security, Colorado state and local employees 
developed public retirement plans which have been able to provide 
solid, secure benefits at a reasonable cost. The plans earn better 
investment returns, through private sector investments, than are 
available through the current pay-as-you-go Social Security system. 
With a diversified investment fund, the state's largest public plan has 
earned an average annual investment return of over 11 percent during 
the last 25 years.
  Furthermore, the plans are designed to meet the specific needs of 
public employees. Fire fighter pension plans, for example, are designed 
to take into account early retirement ages, high rates of disability 
and the need for extensive health care characteristic of this 
profession.
  The one-size-fits-all approach of universal Social Security coverage 
would provide inadequate flexibility for safety workers' needs. 
Mandatory coverage will have additional consequences. Even on a new-
hire basis, mandatory coverage will reduce the capital stream necessary 
for investment. In many plans around the country this will cause 
benefit cutbacks including reduced credit for future service, cuts in 
retiree health care coverage and cost of living adjustments.
  Further, mandatory coverage represents a new tax and an unfunded 
federal mandate on states which would require state and local tax 
increases or a reduction in services for taxpayers. Health benefits for 
retirees would also be affected in many states.
  Private sector workers would also be affected. Most states do not 
receive any income tax revenue from Social Security payments and the 
lost state revenue resulting from mandatory coverage would likely be 
made up from increased state taxes or budget cuts.
  In Colorado, the public pension systems will be seriously compromised 
because most of the funding of benefit comes from investment income 
which would be severely cut by the transfer of significant 
contributions to Social Security. State retirement funds support 
Colorado's economy and the nation unlike Social Security funds which 
simply support other government programs. Reduced state pension 
investment means reduced Colorado capital investment. A decline in 
contributions translates into less investment in Colorado-based 
companies and real estate. Furthermore, when Colorado retirees receive 
fewer benefits they will pay fewer state income taxes.
  The potential loss of revenue to the state is significant, but the 
loss of retirement contributions and security for Colorado state and 
local workers is even more troubling. Our state's Public Employees' 
Retirement Association (PERA) anticipates an end to plan improvements 
for current participants and retirees. New hires would receive a 
combined Social Security and PERA benefit that would be slightly less 
than three-fourths of the current PERA benefit.
  To put it plainly, under mandatory Social Security state and local 
workers will lose out. New hires will lose the opportunity to 
participate in financially strong, high-earning retirement plans and 
they will be forced to partake in an inefficient system and receive far 
less or possibly nothing at all. Those already participating in state 
and local government retirement plans will experience a reduction in 
benefits when new hire funds are redirected to Social Security. In 
order to make contributions to both pension and Social Security plans, 
state and local governments will have to raise taxes or reduce 
services, in which case everyone loses.
  The only advantage Congress would realize in this scheme would be to 
buy two extra years for Social Security.
  Over the past year, I led our delegation to protect state and local 
government pension and disability plans. Letters I wrote expressing our 
united opposition to mandatory Social Security have reached your desk. 
Do not disregard them or underestimate our resolve.
  Congress must preserve the freedom of states, school districts, and 
local governments to maintain plans which best meet their needs, 
independent of Social Security. Social Security can and must be fixed 
without destroying plans upon which our constituents depend for their 
retirement.
  Mr. Speaker, if it works, don't break it.

                          ____________________