Striking Boeing workers put spotlight on pensions

Union members react as it is announced back in September that the union has rejected a proposed Boeing contract and will go on strike.

Union members react as it is announced back in September that the union has rejected a proposed Boeing contract and will go on strike. JASON REDMOND/AFP via Getty Images

 

Connecting state and local government leaders

Growing pressure to bring back pensions isn’t isolated to the private sector. Amid inflation and a tight labor market, state and local governments have felt it too.

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More than 30,000 Boeing machinists have been on strike for nearly six weeks. On Wednesday, union members rejected a second contract by a two-thirds margin. Now, it looks like the strike will go on a while longer.

The sticking point? A defined-benefit pension plan, which Boeing suspended a decade ago in favor of defined-contribution, or 401(k), retirement plans. Boeing machinists want their old pension back.

The shift in the private sector from pensions to 401(k)s has been going on for decades, but now there’s more pushback from workers and unions. Many experts say the change to 401(k) plans have left millions of people unprepared financially for retirement, thanks to stock market declines, high fees and longer lifespans, among other issues.

And the pressure to bring back pensions isn’t just in the private sector. State and local governments have been feeling it as well. 

While defined-benefit pensions are more common in government—think unionized workers like teachers—they are rarer than they were nearly two decades ago when efforts were made to limit and reform pensions following the Great Recession. Global stock market declines between 2007 and 2009 slashed assets by a third.

In the aftermath, thousands of governments enacted pension reforms and cuts—freezing or eliminating cost-of-living increases, raising the retirement age, and reducing employer and hiking employee contributions. They also created different benefits for new employees. 

The reforms largely worked. Pensions now have 74% of the assets they need to meet all their future unfunded liabilities, and the Equable Institute, a bipartisan nonprofit that promotes public sector retirement security, predicts that will rise to 80% this year.

But as state and local governments face a tight labor market, a few are rethinking pensions in a bid to recruit and retain talent.  

Lawmakers in New York state, for instance, rolled back reforms enacted in 2012, and Rhode Island has similarly reversed some of the changes it made, repealing the suspension of full annual cost-of-living adjustments for state employees who retired before 2012 and lowering the funding threshold for reinstating COLAs to 75% from 80% for those who retired after July 1, 2012. 

The moves led Fitch Ratings this week to raise a flag of caution. 

“Enacted and proposed actions that offer more generous benefits will lead to higher required contributions and liabilities in the short term and could affect long-term credit stability if states adopt additional rollbacks to the early 2010s pension benefit revisions over the next few years,” said the ratings agency.

In addition to the changes in New York and Rhode Island, Fitch also noted that pension changes have been discussed in Illinois. And this week, a bill that would give pension increases to more than 60,000 retired school and government workers passed the Pennsylvania House by a comfortable margin. If enacted, opponents warn it could saddle taxpayers with a $1 billion bill.

“More recently, those of us on the states team have seen increasing evidence bubbling up that there has been an impetus to revise these changes, spurred, in part, by the rise in inflation and a tight labor market,” said Douglas Offerman, senior director of public finance at Fitch Ratings. 

“In general, we would argue that the changes that have been made have positioned pensions to be more stable and less of a risk going forward,” he added.

That doesn’t mean state and local governments can take their foot off the gas pedal. States have indeed narrowed the gap between promised pension benefits and money set aside to pay for them, but the shortfall still amounted to $836 billion in fiscal year 2021, according to the Pew Charitable Trusts.

“Pensions are not flashing red at the magnitude they maybe once were,” Tom Kozlik, head of public policy and municipal strategy at HilltopSecurities, told Route Fifty last year. “But it's absolutely not the time to no longer care about pensions just because the overall funding levels are a little stronger.”

“If governments make changes that increase their liability, that would create challenges over time,” said Eric Kim, senior director and head of the U.S. States Rating team at Fitch Ratings. “We are flagging, as enhancing benefits could put pressure down on ratings.”

News to Use
Trends, Common Challenges, Cool Ideas, FYIs and Notable Events

Abortion
How abortion is impacting state supreme court races. Abortion rights has become a focus in several state supreme court races, reports the newsletter Abortion, Every Day. In Indiana, for example, three of the five justices are up for reelection, and abortion-rights activists have launched a campaign to oust them over their support of the state’s abortion ban—encouraging voters to “hold them accountable for their decision at the ballot box.” There are similar moves at play across the country, even in Texas, where the Find Out PAC is targeting three state supreme court justices. This time around, CBS News reports that Planned Parenthood Votes and the National Democratic Redistricting Committee are spending $5 million on state supreme court elections.

Immigration
New York City is paying for migrants to leave and Texas is the top destination. Texas has boasted of busing more than 45,000 migrants to New York City. Some are going right back. New York has issued 4,507 one-way tickets to Texas through a voluntary program that transfers asylum-seekers out of the city, according to Mayor Eric Adams’ office. That’s almost 10% of the 47,000 trips that New York has paid for starting in 2022 amid an influx of more than 200,000 migrants that strained public services. The ticketing program has helped slash the number of asylum-seekers reliant on the city, as have other initiatives such as application assistance for work authorization and a policy limiting shelter stays, Adams said earlier this month. The top destinations for migrants asking to leave the Big Apple also include Illinois, Florida and Colorado, as well as other parts of New York.

Campaign Finance
Growing bipartisan support for Maine initiative to get dark money out of politics. While political parties have tried to set themselves apart from one another this election cycle, leaders across the political spectrum in Maine have found a common interest in one of the state’s ballot initiatives, which ultimately seeks to get dark money out of politics nationwide by instigating a lawsuit with the goal of getting the U.S. Supreme Court to rule on super PACs. Question 1 on the Nov. 5 ballot, which aims to place limits on donations to political action committees that independently spend money to try to support or defeat candidates, has been endorsed by 128 civic and business leaders in Maine. The initiative stems from legal scholar Lawrence Lessig, who told the Maine Morning Star that there has also been growing excitement in democracy reform circles across the U.S about the effort.

Artificial Intelligence
U.S. Department of Labor releases AI best practices for employers. The federal agency released a list of artificial intelligence best practices for developers and employers this week, aiming to help employers benefit from the potential time and cost savings of AI, while protecting workers from discrimination and job displacement. The best practices include ethically developing AI, with training that protects and takes feedback from workers; creating a clear governance system to evaluate AI used in the workplace; and auditing AI systems for potential impacts of discrimination. The implementation of AI systems has the potential to displace workers. To mitigate this, employers should reach out to state and local workforce programs for education and upskilling so their workforce can learn new skills, the policy suggests.

Abortion
States revive lawsuit to sharply curb access to abortion pill. A lawsuit seeking to restrict the abortion pill mifepristone—a case the U.S. Supreme Court threw out this year—has reemerged in a version that presents new challenges for abortion-rights supporters and the federal government’s ability to regulate abortion medication. The revised lawsuit was filed this month by the conservative state attorneys general of three states—Idaho, Kansas and Missouri—against the Food and Drug Administration in the same federal district court in Texas as the original case. It seeks to reverse numerous regulatory changes the FDA has made since 2016 that greatly expanded access to mifepristone. It also asks for new restrictions, including to outlaw the medication for anyone under 18. And it takes aim at the fast-growing practice of prescribing abortion pills through telemedicine and mailing them to patients, including those in states with abortion bans.

Crime
Number of young people accused of serious crimes surges in New York City. The number of people under 18 accused of major crimes, including murders, robberies and assaults, has increased sharply in New York City in the past seven years, police department figures show—a steep trajectory that has alarmed law enforcement officials. Last year, there were 4,858 major crimes where a minor was accused or arrested, up from 3,543 in 2017—a 37% increase. Crime committed by adults also rose in the same period, and the proportion of youth crime in 2023 remained a very small fraction of overall crime, about 3.8%, the same as it was in 2017. The spikes, which have been particularly pronounced as the city emerges from the disjointed pandemic years and which mirror a national trend, have reanimated a decades-long argument over how to deal with young offenders.

Transportation
Waymo’s plan to encourage public transit use? Providing credit on its app. Robotaxi company Waymo is launching a pilot program to give Bay Area riders a $3 credit if they’re picked up near certain public transit stations. The pilot will run through Nov. 15, and is the first of its kind by a robotaxi company, according to Waymo. The company said it plans to use data from the pilot to design future programs to offer first- and last-mile rides. The new offer is part of an ongoing campaign to sell autonomous ride-hailing as an asset to cities and transit agencies that face dire funding shortages, reported Bloomberg this week. But studies over the past 15 years suggest that even with a $3 credit, few travelers are likely to take journeys that combine transit and robotaxis. The reasons why ride-hailing underperforms as a first- or last-mile solution, according to these studies, are intuitive. People dislike transfers, and those paying for a car ride can generally afford to avoid them.

Law Enforcement
10 years ago, Chicago was rocked by the shooting of Laquan McDonald. Since then, reforms have been slow to take hold. On Oct. 20, 2014, a Chicago police officer fired 16 bullets into 17-year-old Laquan McDonald. Chicago has not been the same since. It was those 16 shots that forced an overt acknowledgment of long-standing, foundational problems within the Chicago Police Department and led to wholesale changes within the city’s political and criminal justice power structure. McDonald’s death prompted a lawsuit against the city by the Illinois attorney general’s office, which led to the ongoing federal consent decree. But the change many have pushed for in the decade afterward has not come quickly. More than five years after the consent decree was entered, the city has reached compliance with 7% of its requirements, according to a recent court filing.

Ballot Initiatives
The billionaire behind the bid to break Dallas city government. Three proposed city charter amendments, which one member of the Dallas City Council has described as “draconian” and the mayor and all council members have publicly opposed, could together cripple the city’s capacity for self-governance. The three city charter amendments will be on the ballot in the Nov. 5 election. If passed, they would do three things. The first, Proposition S, would allow residents to sue the city over any perceived violations of local or state law and force the city to waive its governmental immunity to such lawsuits—part of a broader trend of Texas Republicans promoting civil litigation to enforce policy. The second, Proposition T, would require an annual survey of residents that could cause the city manager to be fired. The third, Proposition U, would commit future city revenues to the fire and police pension system, which faces a $3.4 billion shortfall, and to increasing the police force to 4,000 officers (which the current police chief says would take 15 years to achieve). “If passed, [the charter amendments] would strip Dallas of the ability to self-govern by subjecting city decisions to the threat of lawsuits [and] to outside pressures from moneyed interests, like Monty Bennett,” Dallas Council Member Paula Blackmon told the Texas Observer. Bennett, a right-wing hotelier and billionaire megadonor, is financially backing the dark money group pushing the measures.

Housing
New Jersey lawmakers advance bill to ban landlords’ use of rent-setting software. The Garden State would become the first in the nation to prohibit landlords from using algorithmic software to set rent prices and reduce competition under legislation a General Assembly committee advanced Thursday. Supporters argue that the legislation is needed to stop runaway rents and greedy landlords in a state where housing costs are among the highest in the country, while critics called it unnecessary because it duplicates antitrust law. If passed, the bill would make use of such algorithms a violation of the state’s antitrust law and bar landlords from otherwise coordinating to drive up rents. The legislation was inspired by a U.S. Department of Justice investigation and lawsuit, alongside eight states, over the property management software company RealPage’s pricing algorithm this summer.

Picture of the Week

Ever wonder where the spookiest Halloween decorations are? Or, what houses in your neighborhood are handing out candy? The city of Upper Arlington, a suburb of Columbus, Ohio, has a map for that. With Halloween just a few days away, residents are running out of time to opt-in to list their home in an interactive city database. Houses that have opted into the trick-or-treating database are displayed as a jack-o-lantern, and those with Halloween decorations are shown with a haunted house. Nick Creedon, a GIS analyst for the city, told the Columbus Dispatch that he got the idea to make an interactive holiday map when driving around on Christmas Eve and noticing all the holiday decorations. He made the interactive application with the city’s mapping software, ArcGIS. Another interactive holiday map is already in the works: Creedon said the city is developing one for winter holiday decorations, and will incorporate any learnings from the Halloween map into it.

Government in Numbers

$53 billion

The estimated amount in damages North Carolina has suffered from Hurricane Helene, Gov. Roy Cooper said Wednesday.

Cooper told reporters the state's previous record for storm damage was $17 billion from Hurricane Florence, which struck eastern North Carolina in 2018. "It is no exaggeration to describe Helene as the deadliest and most damaging storm ever to hit North Carolina," Cooper said while unveiling his request to the General Assembly for $3.9 billion to help pay for repairs and revitalization. He called it a "down payment on western North Carolina's future." The state budget office generated the preliminary figure for direct or indirect damages and potential investments to prevent similar destruction in future storms.

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