Social Security bills raise concerns

Congress may soon force municipal workers who are outside the Social Security system to come in out of the cold. Those employees and their employers, however, may feel more like they are having their feet held to the fire.

A bipartisan Social Security reform bill currently before Congress would require cities to enroll all new hires in the federal system by the year 2000. The bill, introduced by Sens. Judd Gregg (Rep.N.H.) and JohnBreaux (Dem.La.), follows up on the recommendations of the National Commission on Retirement Policy.

Additionally, an earlier Senate bill, introduced by Daniel Moynihan (Dem. N.Y.), ranking Democrat on the Senate Finance Committee (which makes Social Security policy), includes the same provision. “Including state and local workers is not only constitutional, it is fair, since most of the 5 million not covered by Social Security receive Social Security benefits as a result of working at other jobs,” Moynihan said in a speech at Harvard University.

Mandatory participation would seriously affect municipal and county governments in California, Texas, Illinois, Massachusetts, Ohio, Colorado and Louisiana. Employees of those states, particularly teachers, firefighters and police officers, account for more than 75 percent of the 4.9 million state and local workers who are covered by private retirement plans.

The rationale for including local government workers in Social Security was laid out by a federal advisory council in January 1997. “There is an element of unfairness in a situation where practically all contribute to Social Security, while a few benefit both directly and indirectly but are excused from contributing to the program,” read a council statement.

Besides equity, however, there are financial reasons to include city and county workers. “Mandating coverage for all newly hired public employees would reduce Social Security’s long-term financial shortfall by about 10 percent, increase participation in an important national program and simplify program administration,” says Cynthia Fagnoni, director of income security issues at the General Accounting Office.

(Fagnoni does admit that mandating Social Security coverage for all new hires “would resolve only a part of the trust fund’s solvency problem.” She also says that mandatory Social Security coverage would mean a 7 percent increase in payroll for state and local governments, costing $9.1 billion over the first five years.)

Pro-mandatory participation arguments are nothing new. Although Congress has always rejected them, it did pass bills limiting the flexibility of local government workers to remain outside the system.

Those staunchly opposed to mandatory participation understand that congressional sympathy for their position may be declining. The National League of Cities, traditionally opposed to such efforts, has asked Doug Peterson, one of its senior policy analysts, to take a look at whether the organization should change its position on the issue. “We may want to re-examine our position if there are suitable trade-offs,” Peterson says.

Robert Scott, secretary/treasurer of the Colorado-based Coalition to Preserve Retirement Security, does not think there is any trade-off that would convince his members to join Social Security. (The coalition represents local and state workers in public retirement plans. Currently, about one-third of all state and local government employees — about 5 million people — are covered by public retirement plans rather than Social Security.) In testimony before Congress, Scott cited a number of studies that he said showed that benefits under Social Security would be less than those under public pension plans.