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Norton: D.C. workers’ pensions ‘secure’
Delegate to Congress says federal raid on retirement fund
won’t affect retirees’ benefit payments
(Published October 26, 1998)
By REBECCA CHARRY
Staff Writer
When thousands of D.C. employees recently learned that $2.4 billion being held in trust for their pensions was to be liquidated and spent on federal programs, some city workers began to wonder if their retirement funds were safe.
A meeting held Oct. 22 at the request of Delegate Eleanor Holmes Norton, D-D.C., brought some clarification for members of the D.C. retirement board and other groups representing active and retired city employees.
Officials from the Office of Management and Budget and the Treasury Department explained that the pension funds would be paid automatically and did not require an appropriations process, Nor-ton said.
"This is what is known as mandatory spending," she said. "You don’t ask for an appropriation — it is mandatory that it be paid, like Social Security or Medicare or military pensions. It happens without congressional oversight and can’t get caught up in the appropriations process."
Some had been concerned that once the funds were liquidated, D.C. would have to ask Congress for a separate pension appropriation, a move that might jeopardize the District’s other budget requests.
The transaction costs of liquidating and transferring the funds also will be borne by the federal government and won’t come out of the retirement fund itself, Norton said.
Beyond the anxiety over the future of pension payments, the group also was disgruntled that no D.C. officials had been consulted or even warned before the Clinton administration proposed converting the pension funds to federal use, Norton said.
"The Treasury Department had not given any indication in the last year and a half that they were even thinking of doing anything like this," said retirement board chairman Betty Ann Kane.
Norton said she expects a written report from the Office of Management and Budget and the Treasury Department detailing how and why the decision to liquidate the funds was made.
"We registered our objection to what occurred," Norton said, "and we got a promise of far greater collaboration in the future.
"There was an understanding that there would be what has been absent — some continuing communication between the Treasury and the retirement board and retirees and employees," Norton added.
The federal government agreed last year to take over the city’s burgeoning pension liability as part of the deal that ended the annual federal payment in exchange for takeover of some state functions.
Kane said the transfer of the funds, which earned an average of 14 percent interest over the last 19 years, into Treasury notes earning about 5 percent interest would ultimately cost U.S. taxpayers about $1.6 billion by 2010.
"The D.C. pensions are as secure as any other federal pensions," Norton said.
At the same time, she added, its important that decision makers at OMB and the Treasury "know they are being watched."
Copyright 1998, The Common Denominator