The Hostile Threat:

Opponents To Defined Benefit Plans and TEXPERS Response

Texas Association of Public Employee Retirement Systems TEXPERS

Contents
Introduction Hostile Organizations
Laura and John Arnold Foundation Texas Public Policy Foundation American Legislative Exchange Council American Enterprise Institute, Heritage Foundation Charles & David Koch, Cato Institute, Freedom Works, Americans for Prosperity

Hostile Individuals
Michael C. Nichols Bill King Elena Farah

Conclusion

Introduction
Many groups and individuals have put Defined Benefit plans for Texas public employees in their sights, erroneously claiming reform is needed and Defined Contribution plans are the only viable option. Many are true ideologues and only consistent presentation of facts can prevail to counter their misguided assertions. TEXPERS has been monitoring these hostile threats to DB plans and engaging in various public forums as necessary to thwart their efforts.

We will succeed!

Hostile Organizations

Laura and John Arnold Foundation

About Laura and John Arnold

John Arnold
2011 net worth at $3.3 billion Former natural gas trader at Enron before Enron collapse CEO of now closed Centaurus Energy Master hedge fund, based in Houston, Texas.

Laura Arnold
Houston-based attorney Former executive at a Houston-based energy company On Teach for America Board

Laura and John Arnold Foundation

Founded in 2008 Provided initial financial support to California Pension Reform Top Analyst Josh McGee
Author of LJAF special report on pension reform BS/MS Industrial Engineering, Ph.D. Economics, University of Arkansas Serves as VP for Public Accountability Issues for LJAF Adjunct faculty member for Rice University Professional background is in education reform, not pension reform.

Published papers:
Creating a New Pension System GASB Wont Let Me A False Objection to Public Pension Reform

TEXPERS Assessment, Response and Plans

Assessment Arnolds seem to be joining billionaires club for political activity Billionaires have plenty of disposable income to affect public policy through elections support, campaign financing Response TEXPERS countered puff piece in Houston Chronicle about Arnolds with Op-ed Blog articles provide accurate info about pension reform and counter LJAF assertions Plans Continued monitoring of political activity Lobby and campaign financing activity of LJAF must be countered through TSR PAC

Texas Public Policy Foundation

About Texas Public Policy Foundation

The Texas Public Policy Foundation is a 501(c)3 nonprofit, non-partisan research institute. The Foundations mission is to promote and defend liberty, personal responsibility, and free enterprise in Texas and the nation by educating and affecting policymakers and the Texas public policy debate with academically sound research and outreach.

About Texas Public Policy Foundation

TPPFs Center for Fiscal Policy published numerous studies in 2011 opposing DB Plans Talmadge Heflin: Director
Former elected representative for Harris County, on both Ways and Means and Appropriations Committees Now Testifies before committees

Recently held a private forum in 2011 where Bill King and other noted DB opponents spoke to shortcomings of DB plans Supports converting all public sector DB plans into DC plans

Talmadge Heflin

TEXPERS Assessment, Response and Plans

Assessment TPPF is politically connected to many in the conservative Republican establishment. Talmadge Heflin is potentially formidable. Ties to Gov. Perry may take sensitive handling. Response TEXPERS maintains vigilance on Texas Pension Review Board hearings and presents its own testimony to counter assertions of Heflin and others. Plans Continued monitoring of activity Continued response as needed Continue offering expert testimony to counter Heflin as needed

American Legislative Exchange Council

About ALEC
Authors model legislation for state legislators to implement. Accepts large corporate donations in return for writing the legislation and pushing it to friendly legislators around the country. Policy Goals per ALEC website: States should consider replacing their outdated defined-benefit pension plans with 401(k)-style defined-contribution plans for new employees. This would provide new employees with secure and portable retirement assets, and could potentially eliminate the nearly $3 trillion in unfunded pension liabilities facing the states. Two papers promoting DB to DC:
Rich State, Poor States: ALEC-Laffer State Economic Competitiveness Index Public Employee Other Post Employment Benefit Plans

About ALEC
Board Members are Whos Who in Corporate America
.

National Chairman Mr. W. Preston Baldwin, Centerpoint360 First Vice Chairman Mrs. Sandra Oliver, Bayer Corp. Second Vice Chairman Mr. John DelGiorno, GlaxoSmithKline Treasurer Mr. David Powers, Reynolds American Secretary Ms. Maggie Sans, Wal-Mart Stores

Other Board Members Companies Energy Future Holdings Johnson & Johnson PhRMA American Bail Coalition Kraft Foods, Inc. Pfizer Inc, Reed Elsevier, Inc. DIAGEO, AT&T Peabody Energy UPS Intuit, Inc., Koch Companies Public Sector, LLC , Coca-Cola Refreshments Altria Client Services ExxonMobil Corporation Salt River Project State Farm Insurance Co

About ALEC
The ALEC Texas Connection Rep. Charlie Howard Rep. Jim Jackson Sen. Kel Seliger

TEXPERS Assessment, Response and Plans

Assessment Despite its success in some states, ALEC is coming under increasing scrutiny and losing some of its corporate sponsors. ALECs ties to Wall Street Corporations and its all-out promotion of DC plans, despite their failures, is causing many to question its integrity. Response TEXPERS must connect the dots about Wall Streets sponsorship of ALEC and their self-interest in DC plans. Plans Continued monitoring of activity Continued response as needed (blogs, press releases, op-eds, media briefings) Countering research

American Enterprise Institute Heritage Foundation

American Enterprise Institute Heritage Foundation

Two policy analysts have taken up the cause of promoting the use of DC plans as the silver bullet answer to help cities and states with fiscal woes. Both are ideologically inclined and make mistakes in their analysis. Nonetheless, both have the ear of Republican lawmakers in Washington, D.C., on the Republican Joint Study Committee.

JASON RICHWINE, Heritage Foundation

Senior Policy Analyst, Empirical Studies Conducts quantitative analysis on immigration, welfare, education and family structure Joined the Domestic Policy Studies department which provides modeling and research assistance to the public policy community Articles have been published in Wall Street Journal, New York Times, Dallas Morning News

Andrew Biggs, American Enterprise Institute

Resident Scholar for State and Local Government Pensions, Public and Private Sector Compensation, Social Security Reform Previous Experience: Deputy Commissioner of SSA, Associate Director of the National Economic Council, Social Security Analyst for the Cato Institute

TEXPERS Assessment, Response and Plans

Assessment Biggs and Richwine have been published frequently in major national publications and they have the ear of the Republican Joint Study Committee, a policy making arm. Both are ideological and not practical, nor completely conversant with facts on the ground. Response TEXPERS must continue to demonstrate their errors and misguided analysis. Plans Inform Texas representatives on the Study Committee about Biggs/Richwine errors and continue to inform them of facts for Texas systems.

The Koch Brothers/Koch Industries

About the Koch Brothers/Koch Industries

Estimated combined net worth at $44 billion. Own virtually all of Koch Industries, a conglomerate, headquartered in Wichita, Kansas, whose annual revenues are estimated to be $100 billion. The Koch brothers are lifelong libertarians and have quietly given more than a hundred million dollars to right-wing causes, action groups, think tanks, and individual politicians. Libertarians are among the most outspoken critics of DB plans.

About the Koch Brothers/Koch Industries

Charles Koch co-founded the Cato Institute. David Koch created Citizens for a Sound Economy, as advocacy group created to pursue the Koch agenda. Citizens for a Sound Economy have since split into two entities FreedomWorks, heading by former Rep. Dick Armey (R.-TX) and Americans for Prosperity Foundation, which David Koch serves as Chairman.

Organizations Supported by Koch Brothers/Koch Industries

These organizations promote elimination of DB plans Cato Institute American Enterprise Institute & Brookings Joint George Mason Universitys Center for Regulatory Mercatus Center Studies Americans for Prosperity Texas Public Policy Foundation Foundation Heritage Foundation James Madison Institute Manhattan Institute Goldwater Institute American Legislative Heartland Institute Exchange Council

Politicians Supported by Koch Brothers/Koch Industries

As of July 9, 2012 Over $1.1 million dollars have been given to candidates who support pension reform.
Sen. Mitch McConnell (R-KY) Sen. Orrin Hatch (R-UT) Lisa Murkowski (R-AK) Rep. John Kline (R-MN) Rep. Paul Ryan (R-WI) Rep. Joe Wilson (R-S.C.) Rep. Lou Barletta (R-PA) Rep. Tim Walberg (R-MI) Gov. Scott Walker (R-WI)

Hostile Individuals

Michael C. Nichols

TEXPERS Assessment, Response and Plans

Assessment
Houstons systems are diligently addressing the issues that are concerns to city politicians, but politicians are known for making names for themselves when they can.

Response
TEXPERS is staying informed about the situation and monitoring closely. Houston plans will continue to address their issues locally and TEXPERS will help when asked.

Plans
TEXPERS is working to make sure other systems around the state arent viewed as having the same issues as Houston, even though the Houston situation is highly publicized and dramatized by media. Each plan around the state is different and TEXPERS is making sure the differences are understood by elected officials and media in other parts of the state.

Bill King

TEXPERS Assessment, Response and Plans

Assessment
Houstons systems are diligently addressing the issues that are concerns to city politicians, but politicians are known for making names for themselves when they can. The Houston situation provides plenty of opportunity for them.

Response
TEXPERS has already worked to minimize Kings credibility with certain Houston audiences, including the Greater Houston Partnership, by calling into question Kings unwavering ideological devotion. The approach has worked, as Kings efforts to mobilize GHP for statewide changes have been somewhat marginalized, for now.

Plans
TEXPERS will continue to follow King and make sure his misinformation efforts dont encourage other politicians to purse his cause.

Elena Farah

TEXPERS Assessment, Response and Plans

Assessment Farahs academic approach to pension systems is unlikely to persuade widescale public opinion, but her research may start finding its ways into various journalists reports. Farah will likely pursue a position at a policy making institute somewhere after her graduation Response TEXPERS is working to provide Farah with additional information about how Texas pensions work. She is very green and has only a limited fact-base to build her policy prescriptions. TEXPERS is engaging directly with her to provide additional facts about facts on the ground. Plans TEXPERS will continue to monitor and engage with Farah as necessary. She already seems to be changing her views somewhat about the system in place.

CONCLUSION
TEXPERS is working on its members behalf to monitor and counter threats to DB plans from several fronts. The work is far from over and TEXPERS will continue to protect and defend its members interests.

Dedicated to Promoting & Protecting the Defined Benefit Pension Plans Earned by Over 2 Million Teachers, Firefighters, Police Officers, State & Local Public Employees & Retirees in Texas

Public Defined Benefit Plans in Texas are Under Attack.

Your retirement is being threatened by a few powerful people with political connections and a great deal of money at their disposal, who are actively trying to eliminate your Defined Benefit (DB) plan. They want to replace it with a defined contribution (DC) program, like a 401(k) plan. This would be especially catastrophic for the 60 percent of Texas public employeesmost of whom are teachers, police officers, and firefighters who are not eligible to collect Social Security benefits. Defined contribution programs were never intended to be the sole source of retirement security. They were created to supplement defined benefit plans and Social Security as one leg in the three-legged stool of retirement security. Unfortunately, private sector employers have been closing and freezing their pensions due to laws and regulations enacted since the 1970s. These laws created complicated funding rules, and increased contribution instability when employers need steady, easy-to-estimate costs from year to year. However, they dont apply to public DB plans. Moreover, most defined benefit plans in Texas are financially healthy and well

managed with employee contributions and investment earnings accounting for 72 percent of the funding. So, what does this mean?

The Public Pension Crisis in Texas is a Manufactured Crisis.

Opponents of public sector defined benefit plans have manufactured a crisis that doesnt exist in Texas and theyre attacking your retirement plan at the Texas Legislature. Theyre counting on our state legislators and the general public to be uninformed on the positive impact DB plans provide, including the economic benefits for Texas and retirement security. For example, public pension plans are a major source of economic stimulus, contributing $23.158 billion to the Texas economy. Plus, they have a huge multiplier effect, which means that for each dollar paid out in state and local retirement benefits to Texas retirees nearly $2 gets put back into the Texas economy. Whats more, public DB plans keep millions of retired Texans from requiring government assistance, which would be a major taxpayer burden and far more expensive than maintaining DB plans for public employees.

Texans for Secure Retirement is fighting to keep your Defined Benefit Plan intact.
We are fighting to keep your defined benefit plan intact by presenting facts that show DB plans are in the best interest of Texas two million active public employees, public sector retirees and all Texans. We need your help to defeat the effort to eliminate your defined benefit plan.

What is a Defined Benefit Plan

Defined benefit plans provide employees with retirement benefits using a formula that is based on an employees salary and years of service at retirement. A DB plan is funded through employer contributions, investment earnings and employee contributions. This is the type of plan youve been contributing to since you began working for the Texas state or local government.

www.texansr.org

Help Us Help You: Get Involved!

The main purpose of a retirement plan is to help people remain financially secure after they stop working. As a public employee in Texas, youve earned it. Now help us protect your retirement security by getting involved.

Texans for Secure Retirement

The members of Texas public employee and retiree groups, public safety associations, education professionals and other related alliances benefiting firefighters, police, and state and municipal employees have formed a 501(c)4 non-profit organization called Texans for Secure Retirement (TSR). TSR is comprised of the TSR Board, Advisory Committee, and more than two million teachers, firefighters, police officers, state and local public employees and retirees. The mission of TSR is to promote and protect defined benefit pension plans in Texas. Our objectives are to: Retain defined benefit plans as the primary retirement planning option for all current and future public employees in Texas; Increase public awareness about how DB plans for public employees are advantageous for the general public and the economy of Texas; Support public concern about retirement security for all Texans in the public and private sectors, and promote the view that the members of TSR are working to ensure all Texans are financially secure in their retirement; and Educate the business community about the advantages of defined benefit plans for public sector employees, employee groups and related organizations.

Who We Are

Heres What You Can Do:

Educate yourself about your DB plan and understand how it works. Join one of the committees being formed to help fight opponents of DB plans. Help raise money to get the word out to the other members of your plan, and to your community. Get to know your local legislators and let them know your point of view. Go to the TSR website (www.texansr.org) to join our email list, and Like the TSR Facebook page in order to stay informed. Donate to Texans for Secure Retirement to help fund a statewide media campaign educating legislators and the public about the benefits of maintaining defined benefit plans in Texas.

Help TSR Protect Your Defined Benefit Plan

To donate to the TSR online, visit www.texansr.org. To donate by check, mail a check to: TSR, PO Box 684601, Austin, TX 78768
Please make checks payable to Texans for Secure Retirement, and include your current employer and occupation on the memo line of the check.

100% of your donation goes to TSR.

www.texansr.org