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Disclaimer: The author of this site maintained the campaign weblog of John Kline's opponent in the 2006 election, which made Congressman Kline a bit testy.

As with all blogs, review the facts carefully and draw your own conclusions.

Monday, April 24, 2006

Pension Reform: A Tough Call for CD2

I've written about pension reform before, about how the House and Senate have passed different versions of the bill, and may be unable to reconcile them. Ultimately, all that matters is that according to the government's pension agency, whichever version gets passed will make the pension crisis much, much, worse.

Setting that aside for the moment, it seems that House and Senate negotiators are concerned that if they don't work out a final bill soon, nothing will be passed this session at all. In this case, nothing would be better than something, but legislators understandably want to be able to go home to their constituents and point to legislation they passed, even if it was bad legislation.

The problem for Kline is that he comes from the House, a chamber that did not approve special language bailing out airlines like Northwest Airlines, based in MN-02. The Senate did. But it is this very provision which is largely responsible for the fact that the bills will hurt more than they help:

The biggest single-industry pension break in the bill passed by the Senate is for the airlines, to allow them to keep their unstable pension plans going.

Among other things, the airlines would be given 20 years to close the shortfalls in their pension funds — nearly three times as long as other companies. They would also be allowed to factor in highly optimistic assumptions about their investment returns when calculating how much they needed to contribute to their pension funds each year.

The measures were written into the bill at the request of Northwest Airlines, which is in bankruptcy proceedings and is trying to keep its pensions alive, though in sharply reduced form. Northwest sought a 14-year breather on its pension contributions.


Kline nevertheless supports the provision, because:

Rep. John Kline (R-Minn.), one of the conferees, said he favors the airline relief because Northwest is in his district and added he hopes to overcome opposition from some conferees who don't like government bailouts of companies that have over-promised their employees.

"In the case of Northwest, this is not theoretical," he said. "They are in bankruptcy. They will dump their plan on the Pension Benefit Guaranty Corp."

The House bill, pushed through by now-Majority Leader John Boehner (R-Ohio), left out airline pension relief, which many conservatives oppose.


It's got to hurt Kline that Boehner dissed him on this; Kline was one of the folks leading the charge to make Boehner majority leader. Maybe this is why Kline took his glowing praise for Boehner off his web site.

But what is Kline to do? Should he support Northwest, as he is doing now, or should he accept the better provisions of the House bill (no airline relief) and work to include the better provisions of the Senate bill as well (force companies with low credit ratings to accelerate contributions to their pension plans even more, protect older workers in the conversion to cash-balance plans)?

I'm not sure what Coleen Rowley would do if she were in Kline's place, but it's a fair bet that if Democrats controlled Congress, we might actually see a bill that helps solve the problem, rather than two bills which exacerbate it. As it is, I suppose I would like to see Kline drop the airline provision. Yes, it means that Northwest will probably drop its pension plan on the PBGC, so Northwest's workers will receive reduced benefits. On the other hand, Northwest's plan is so underfunded, and the bill would allow them such unrealistic leeway in funding going forward, that reduced pensions for Northwest workers in a foregone conclusion.

A tough pill to swallow, especially in an election year, but right is right.

1 Comments:

Anonymous Anonymous said...

Reducing Pension payouts in bankruptcy should be a CRIME. Quite simply, it is not the company's money or the government's to derate or spend. Think about it. A person who works has top priority in bankruptcy proceedings, but a retiree's pension payout does not. This was a "benefit" that is really just a part of the employees compensation. As such the employee worked and retired under an agreement that this payout would be there after retirement. Just as one works knowing a paycheck comes every month or week. The differences are these:

The retiree is beyond working years and severely limited in capabilities needed to find a replacement income.

The retiree has completed his obligation to work through the end of his term (ie fully vested).

Therefore; in my mind, this is cruel to a section of our population and a clear breach of contract that boils down to taking advantage of seniors!

http://www.cbsnews.com/sections/i_video/main500251.shtml?id=1785780n

http://www.cbsnews.com/sections/i_video/main500251.shtml?id=1785780n

7/13/2006 10:38:00 AM  

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