Why did Senator Ron Wyden try to bail out union pensions?

Senator Ron Wyden (D-OR) tried to pull a fast one last month to help out the United Mine Workers of America union.

While Congress, the country and the media were fixated on the twists and turns of efforts to rescue the Highway Trust Fund, Wyden and some other members of Congress pursued an entirely different agenda, using the Trust Fund legislation to bail out the underfunded United Mine Workers of America’s pension plan.

Senator Ron Wyden (D-OR)

Senator Ron Wyden (D-OR)

When the Senate Finance Committee, which Wyden chairs, first reported out a Highway Trust Fund bill it slipped in a provision advocated by Senator Jay Rockefeller (D-W.Va). The provision called for $2.7 billion of the funds to be raised to be diverted to help bail out the underfunded pension plan for retired coal miners.

Congressional efforts to bail out the United Mine Workers health and pension plans have been going on for decades.

A 1992 law authorized the transfer of interest accruing to the unspent balance of the Abandoned Mine Reclamation Fund to help for the United Mine Workers health care fund. That was followed by 2006 amendments to the Abandoned Mine Reclamation Program, which provided transfers of general funds to insure the solvency of the Mine Workers health care plans.

This time, however, Wyden’s committee proposed paying for the union rescue with a gimmick called “pension smoothing” that has been roundly criticized by liberals and conservatives alike as nothing more than a sham.

Pension smoothing lets corporations delay contributions to their employee pension plans. Because pension deposits are tax-deductible, postponing them raises corporations’ taxable income and, therefore, increases tax payments to the government.

The problem is the increased revenues from the smoothing period will be largely offset later when corporations will pay less in taxes in years when they rebuild their pension plans to make up for the underfunding period.

In other words, Wyden’s committee proposed using illusory revenue from a corporate pension gimmick to save a failing union pension plan.

The Committee for a Responsible Federal Budget excorciated both the Senate Finance Committee and the House Ways & Means Committee for using the ruse.

But there was little public debate on the $2.7 billion union rescue plan. Compare that with the furor surrounding President Obama’s request for $3.7 billion to deal with the surge of children from Central America crossing the southwest border into the United States.

Maybe Wyden, Rockefeller and the measure’s other supporters thought their union bail-out would succeed because it was in a must-pass bill.

Maybe Wyden acceded to adding the bail-out money because he knows his seat is safe no matter what.

Maybe Wyden did it as a going-away-gift to Rockefeller, who’s retiring from the senate at the end of this term.

Or maybe, even though Wyden knows pension smoothing is a farce, he could, as a liberal, care less about the growing national debt when there are favors to be granted.

Thankfully, though, his gambit failed. A Highway Trust Fund bill that transfers $10.8 billion to the Fund finally passed on July 31st after the Senate accepted a House version without the miners’ pension provision. Obama signed the law on August 8th.

But don‘t think that means the end of attempts to bail out the union miners’ pension plan. Members of Congress surely have other tricks up their sleeve.

You’ve got to watch them every second.

Replenishing the Highway Trust Fund: more budget shenanigans


It’s not just a burst of illegal immigration and a screwed up Veterans Administration that motivates Congress to try budget slight-of-hand. Rebuilding a depleted Highway Trust Fund through dubious manipulations is being tried, too.

Facing depleted resources in the Highway Trust Fund that could hold up road and bridge construction across the country, and the jobs that would come with it, House Republicans and the Obama Administration are backing a bill that would inject up to $11 billion into the Fund by, among other things, making changes to corporate’ pension contributions.

So-called “pension smoothing” would allow companies to temporarily contribute less to their employees’ pension plans.

The theory behind this maneuver is that because pension contributions are tax-deductible, companies will pay higher federal taxes over the ten-year scoring period used by the Congressional Budget Office (CBO) if they put less money into their pension plans.

Senator Mr. Wyden (D – OR), Chairman of the Senate Finance Committee, already sees this as an opportunity to cleave off some of that new revenue. He’s proposing to use about $2.7 billion of the increased tax collections during that 10-year period to help out retired coal miners, who have underfunded pension and health benefits programs.

Senator Ron Wyden (D-OR)

Senator Ron Wyden (D-OR)

Wyden has expressed concern in the past about the potential burden on the Pension Benefit Guaranty Corporation from underfunded multi-employer pension plans, in which multiple employers in the same industry contribute to a single pension fund. Of particular concern are multi-employer plans established through union contracts in contracting industries, such as coal mining. Changes in the coal industry has meant fewer employers paying into pension funds on behalf of fewer employees.

But Congress’s “solution” to the Highway Trust Fund’s shortfall is a sham because the revenues that are supposedly increased because of the pension smoothing change would be largely offset in the years after the 10-year scoring period. That’s because corporations will pay less in taxes in years after the 10 year period. In other words, no real savings are realized in the long run. But because those reduced taxes wouldn’t happen until after 10 years, they don’t count in Congress’s method for calculating budget balance.

Wyden, of all people, ought to know that the whole method of producing revenue he wants to use to bulk up the coal miners’  underfunded pension plans is bogus. But why let reality intrude.

So bizarre.

Making it even more bizarre, Republicans vehemently opposed this very same “pension smoothing” policy back in March 2014 when the Democrats proposed using it to pay for the renewal of unemployment benefits.

“When they were seeking a spending offset to the five-month extension of unemployment insurance, Democrats were happy to use a budget gimmick,” the New Republic reported. “They would have preferred to use deficit spending, but a gimmick was the next best thing. If Republicans required a spending offset, better a fake one than one that cuts spending on the social safety net or other government programs.”

You have to watch them all like a hawk, don’t you.