In an article published today, the State Journal-Register's Doug Finke digs into GOP gubernatorial candidate Bill Brady's proposal to do away with pensions for new state employees and offer them 401Ks instead (with no employer contribution). He noted that such a plan "might actually increase the cost of retirement programs" to the state and got this response from Ralph Martire:
“It is idiotic on every level,” said Ralph Martire, executive director of the Center for Tax and Budget Accountability, a leading critic of state budgeting.
I did some calling around on this issue yesterday and got much the same impression. What Brady seems to have overlooked is that the state's teachers -- who make up about 80 percent of the government workforce -- don't get Social Security. That means the state doesn't have to pay the 6.2 percent federal payroll tax on these workers. If new employees were instead offered a 401K, the state would have to start paying that tax and there's reason to believe that this would actually be more expensive than the current pension system. Add to that the administrative costs of managing two retirement programs and ... you get the picture.
Chalk it up as just the latest evidence that Brady doesn't understand the ramifications of his own policy prescriptions.