[Congressional Record Volume 146, Number 66 (Wednesday, May 24, 2000)]
[Senate]
[Pages S4339-S4340]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      REBUTTAL ON SOCIAL SECURITY

  Mrs. HUTCHISON. Mr. President, yesterday the Senator from California, 
Mrs. Boxer, came to the Senate floor to discuss Social Security reform. 
In her discussion, she took on the issue of some of the Texas 
municipalities that had chosen to opt out of Social Security and 
attempted to show they were doing less well than anyone in the Social 
Security system today. I want to refute some of those remarks, 
especially the ones that referred to these counties in Texas, and give 
the other side of the story.
  She attempted to show that municipal employees in Texas, particularly 
Galveston County, are not doing as well under their own retirement plan 
than if they were part of the Social Security system.
  Just in the last few minutes, I talked to the county judge of 
Galveston County, Judge Yarborough, who is a very good Democrat, a very 
good person, and is doing a good job in Galveston County. He says in 
the 5\1/2\ years he has been county judge, he has never had one 
complaint from an employee in Galveston County and, in fact, has had 
many retirees come up to him and say how glad they are that they have 
their own retirement system rather than having been forced into the 
Social Security system back in the eighties when they were allowed to 
opt out.
  First and foremost, because this is important, this was somehow 
linked to Governor Bush's Social Security plan. There is no linkage 
whatsoever. In fact, the opt-out was done in 1981 by Galveston and a 
few other municipalities around my State, and there were others around 
the country. There was a window during that time in which county and 
municipal employees were able to opt out of Social Security, and 
Galveston County did decide to opt out.

  I hope as we go into the future and as we talk about Governor Bush's 
Social Security plan, we will not attempt to link that window when some 
municipalities opted out of Social Security to Governor Bush's plan. 
That is important because Governor Bush has said all along, from the 
very beginning when he put his plan forward, that, in fact, we would 
have a choice under his plan. Anyone wanting to stay in the present 
Social Security system would have that option.
  That is a very important distinction to make because people might 
want to keep that option after they have looked at the alternative that 
will be available, but, in fact, millions of Americans will decide that 
they want to have a part in making some decisions on their own for the 
Social Security tax they pay.
  Nearly 5 million municipal employees across the country are not part 
of the Social Security system. One such area is the city of San Diego. 
The rates of return on these pension programs are very good--so good, 
in fact, that the California Senators sent a letter to President 
Clinton in which they said:

       Millions of our constituents, who will receive higher 
     retirement benefits from their

[[Page S4340]]

     current public pensions than they would under Social 
     Security, are appealing to their elected representatives in 
     Washington. We respectfully urge you to honor the original 
     legislative intent underpinning the Social Security system, 
     and exclude this provision from any reform plan you consider 
     during the remainder of your term.

  It is clear that if municipal employees are earning higher rates of 
return and want to stay in their own retirement plans, they should not 
be forced into a system of lower returns, and it should be a choice 
they have. I agree with the Senators from California in their goal.
  I will now talk about the specifics of the Galveston plan. Many of 
these same Galveston employees have urged me to oppose their inclusion 
in Social Security.
  Some of the information that was used on the floor yesterday was 
based on a GAO report, but if my colleagues read the report carefully, 
they can see the clear differences between Social Security and the plan 
in Galveston County.
  First, it is important to remember that, in Galveston, they have a 
basic retirement plan that every employee puts money into and on which 
they have returns. That plan is separate. In 1981, they were allowed to 
opt out of Social Security so that their 7 percent they would have paid 
into Social Security would, in fact, go into a supplemental plan. In 
Galveston County, we are talking about a supplemental plan to their 
basic retirement plan, so everything they get with the 7 percent which 
they put into their own supplemental plan is over and above their basic 
retirement system.
  The GAO said that ``outcomes generally depend on individual 
circumstances and conditions.'' So each case is taken on an individual 
basis--it is hard to make broad statements about the plan. The annuity 
each retiree receives is based on the contributions and the time served 
in government; it is not a defined benefit formula, such as Social 
Security. Nevertheless, the plan is designed to provide a return 
similar to Social Security, which it does, and it has some features 
that are even better.
  The GAO noted that ``The Galveston plan also has a very conservative 
investment strategy that has precluded investing in common stocks.'' 
The Galveston supplemental plan only relies on Government bonds and 
very safe Treasury-type investments, and the average return has been 
approximately 8 percent per year. When one compares that to Social 
Security, however, it is very high.
  The Heritage Foundation has estimated that some workers are getting a 
1- to 2-percent return on their money from Social Security.
  Also, comparing the Social Security plan to the Galveston plan, it is 
not accurate because the Galveston plan is a supplement, not the basic 
retirement system.
  Lastly, the GAO noted one critical point that was left out of the 
Washington debate: The Galveston plan benefits are fully funded, GAO 
says, ``while Social Security's promised benefits cannot be met without 
increasing revenues.''
  Thus, the Galveston plan is financially sound. It is not dependent on 
significantly increased contributions or massive tax increases to meet 
its promises.
  Here, in Washington, we have promised benefits without developing a 
plan to pay for them. In Galveston, no retiree is subject to the mercy 
of the Congress that the benefits might change.
  Here are some of the facts about the differences between the 
Galveston plan and Social Security.
  For individual earners without a survivor benefit, the monthly 
annuity figures for retirees are nearly identical or better than Social 
Security. For low-wage workers, there is a $1 difference. For workers 
with wages over $25,000, they would earn nearly $200 a month more under 
the Galveston plan than they would under Social Security.
  A worker earning $50,000 will earn nearly $1,000 more every month.
  If you have a 45-year work history, the numbers are higher across the 
board at every income level in the Galveston plan.
  The Cato Institute also reviewed the Galveston retirement plan. For a 
worker who earns $30,000 for 30 years, he or she will have a $320,000 
investment in retirement. This is based on a 4.5-percent return when, 
in fact, Galveston is getting 8 percent.
  I should also note that the numbers in GAO are based on a 4-percent 
return each year. So the numbers in GAO are very low in their 
estimates, and most workers are going to receive a much higher benefit.
  According to Cato, the employee with the $320,000 in savings could 
earn a monthly annuity of $2,494, compared to Social Security, which is 
$1,077.
  So according to Cato, the monthly annuity would be $2,494 for a 
Galveston employee, compared to $1,077 under Social Security.
  The county of Galveston believes the average annuity is approximately 
7.8 percent for every $1,000 in retirement funds. The Social Security 
Administration thinks that is too high and made the GAO use a lower 
annuity figure. So the monthly annuity figures used by GAO are lower 
than for the Galveston workers.
  I think it is very important that we take this debate out of the Bush 
plan or the Gore plan when we are dealing with the employees in cities 
such as San Diego, CA, or Galveston County, TX, because it is very 
clear that the Galveston County employees have a major benefit. As the 
county judge said this morning: Retirees come up to me every day and 
say thank goodness.
  Another good feature of the Galveston plan is that if the retiree 
does not use up all of the retirement when that person dies, it is 
passed on to the spouse or the children. That does not happen in Social 
Security.
  I think it is very important, if we are going to build up a stability 
in our working people and their families, that we would have this kind 
of alternative with which the Galveston County employees are very 
pleased.
  I think it is very important that we not put this in the political 
realm. If we are talking about the actual numbers, I think the 
municipal employees that were allowed to opt out in the early 1980s are 
mostly happy with their plans. They like the choices they have. 
Galveston was very conservative and did not go into the stock market.
  But I think the bottom line is that we need to give people a choice, 
a choice to stay in the Social Security system as it is today and have 
the exact same returns that they would be entitled to under Social 
Security, or if they choose not to do that, and they do want to have 
some control over their own taxes they pay in--maybe 3 percent of the 
12-plus percent they pay in Social Security--I think we ought to let 
them do that. Because even with the stock market fluctuating, the 
returns show that they will do better and they will be able to give 
their children something they have not been able to under the present 
Social Security plan.
  I thank the Chair and yield the floor.
  The PRESIDING OFFICER. The Senator from Missouri.

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