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Sen. Tom’s pension idea emerges as potential Senate trading card for K-12 education taxes

Post by Brad Shannon / The Olympian on Feb. 26, 2013 at 8:12 am with No Comments »
February 26, 2013 8:23 am
Sen. Rodney Tom
Sen. Rodney Tom

It’s still early in this year’s 105 day session at the Washington state Capitol. But it’s not too early to point out again that the Republican-dominated coalition in charge of the Senate is passing bills that could be valuable trading cards late in session when serious discussions of raising new revenues for K-12 public schools get going in earnest.

Until yesterday, Senate Majority Leader Rodney Tom and members of his Majority Coalition Caucus have been singularly hostile toward taxes. But as we reported here today, Tom’s  proposal to end fixed-payment pensions for state worker younger than 45 took a beating in the Monday afternoon hearing in front of the Senate Ways and Means Committee.

Tom clearly plans to press on with the ideas in  Senate Bill 5856. And for the first time he let on in an interview after the hearing that new revenues for K-12 schools could get seriously entertained by some members of the Majority Coalition Caucus, or at least by him, as controversial Senate-backed bills go over to the Democrat-controlled House for consideration.

“I think it’s an end game (situation) where there’s going to be things that they want and these are important things that we want. We’ll have to see, you know, whether the trade makes sense for both parties,” Tom said.

The pension bill – along with a proposal to use incentives or penalties to drive state workers into wellness programs that encourage workers to quit smoking or lose weight – are the kinds of end-game trading cards Tom has in mind for revenue. Another likely trading card is the package of bills that aim to cut costs again in the state-run workers compensation program that provides medical and lost-wage benefits to injured workers.

Despite dangling new revenues, Tom was careful not to identify any particular revenues. And he seemed to rule out an extension of temporary business-occupation taxes on service businesses that are expiring in June. He said lawmakers must keep the faith with voters, having said initially that those taxes would be temporary.

Democratic leaders in the House  haven’t said what they expect to be bargaining chips late in session, and it’s unlikely they’ll accept changes in the law that reduce compensation or benefits for  public sector workers, who have been weathering a series of pay cuts, furloughs and increases in their share of health-care costs.

But House Democrats do know there will be trades to be made, as we reported two weekends ago.

Last year Democrats in both chambers strongly resisted then-Sen. Joe Zarelli’s proposal to push all new state and local-government hires into the existing Plan 3 hybrid option that is one-half fixed benefit, one-half fixed contribution or 401(k). 

As it turned out, Zarelli’s plan died. One reason is that it would have undercut the ability of the State Investment Board to continue earning high rates of return for Plan 2 participants. That is because 401(k) style investments cannot be invested with the same long-term horizon and same higher-risk profiles that the SIB uses for its long-term trust funds, which is an argument that SIB George Masten revived Monday to turn against Tom’s pension plan.

Of course, Tom’s proposal is different than Zarelli’s, and some might see it as more draconian.

TVW’s tape of the hearing on SB 5856 is here:

SB 5856 would end fixed-payment pensions for Washington state employees younger than 45 and to replace those pensions with a 401(k)-style investment plan that would have taxpayers matching 80 percent of a worker’s contributions to self-directed investment accounts.

Tom says that is necessary to align public sector workers with the vast majority of private sector workers that, he argues, have 401(k) style pensions instead of fixed-payment pensions like Social Security.

Emphasizing his point, Tom said in an interview that such an alignment is necessary if lawmakers can ever hope to win public trust and support for new revenues that pay for investments in things he considers priorities – higher education and K-12 public schools.

Love or hate Sen. Tom and his ideas for pensions, but the maverick Democrat from Medina just made the session a whole lot more interesting. Stay tuned.

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