By: Vincent Vernuccio
Special to The Examiner
08/16/10 12:05 PM EDT
A bill introduced by Sen. Robert Casey's (D-PA) is a micro targeted bailout which could have drastic ramifications, resulting in billions of taxpayer dollars being funneled to union pensions.
Sen. Dick Durbin (D-IL) gave a boost to a massive taxpayer bailout of union pension funds just before Congress’ August Recess. Durbin, who is Senate Majority Whip, joins notable Democratic Senators such as Roland Burris (D-IL), and Al Franken (D-MN) as the fifth cosponsor to Casey’s Create Jobs and Save Benefits Act of 2010.
The bill would create a special fund in the Pension Benefit Guarantee Corporation (PBGC.) PBGC uses private premiums paid by pensions to insure retirees are paid if a plan sponsor becomes insolvent. If passed, the bill would use tax payer dollars to shore up some underfunded union pension plans. The use of public funds to insure private pension plans is a first for PBGC which has not used public moneys in the past.
Last October the Washington Times was the first to identify bailout language in similar legislation, introduced in the House sponsored by Rep. Earl Pomeroy (D-ND).
The draft would allow union-controlled multiemployer pension plans to form alliances with one another. It also would create something known as a fifth fund that the Pension Benefit Guarantee Corp., with taxpayer help, would use to prop up failing union pension plans…..
Mr. Pomeroy proposes putting the taxpayer on the hook now. In a stark departure from the traditional role of PBGC, the draft bill states that "obligations of the corporation that are financed by the [fifth fund] shall be obligations of the United States." For the first time, PBGC liabilities will be borne by taxpayers. The fifth fund could make available billions of dollars to prop up union pensions.
Union pension plans have been in trouble for years and the latest economic downturn has only exasperated the problem. In 2008 the Department of Labor listed 230 union plans as being either endangered -less than 80% funded-, or critical -less than 65% funded-. In a year the number skyrocketed to 640.
In 2009, Moody’s Investors Service estimated the union pensions to be underfunded by $165 billion dollars.
PBGC has not fared much better. According to a report released earlier this year, PBGC has a deficit of $21 billion. The report also predicted the Corporation’s shortfall could be as high as $34 billion by 2019.
Today, the Wall Street Journal reported:
The PBGC is already significantly underfunded and taxpayers are its ultimate backstop. Yet the Casey bailout could dump as much as $165 billion in new liabilities on the PBGC, while multi-employer plans would get a clean bill of health. What a deal.
This cause has taken on new political urgency, and no less than Senate Majority Whip Dick Durbin has endorsed the bill. The reason for the rush is new rules that may soon be issued by the Financial Accounting Standards Board (FASB), the green-eyeshade outfit that dictates how companies keep their books. Those proposed rules would expose the multi-employer time bomb.
Anti-spending watch dog groups have been sounding the alarm on the Casey Bill and Pomeroy Bills for months. In May, 50 free market and anti-tax organizations co-signed a letter urging congress to “oppose legislation which provides the framework for a taxpayer funded bailout for failing pension plans.”
The Casey Bill has been slow to gain traction, but now, with the second highest Democrat in the Senate backing the bill, that all could change. When Congress returns from recess a new bailout battle is likely on Capitol Hill.