No broken promise to end gainsharing

Gov. Christine Gregoire's bill to phase out pension "gainsharing" for state and local government employees is a reasonable compromise between the interests of public employees and taxpayers, and ought to be accepted.

Most of our readers may be wondering what gainsharing is, because they don't have it. Let us explain. In a traditional pension plan, the employer promises the employee a certain amount of money each month as of retirement age. Part of the employee's pay goes into a fund that is invested in stocks and bonds. The fund pays the pension if it can, but it is a practical device only. The obligation to pay is the employer's, and the amount promised does not depend on the investment results for the fund.

Gainsharing is raising the amount promised when investment results are good — in this case, increases of 10 percent a year for three years in a row. When this plan was concocted during the dot-com boom, its supporters said it would cost the taxpayers nothing. It was like capturing the overflowing foam off a mug of beer.

But the gainsharing was not balanced by any loss-sharing, and was, in fact, a new benefit set to cost taxpayers several billions over the next 25 years.

The governor's bill has been introduced as SB 5779 by Sen. Margarita Prentice, D-Renton, and HB 1771 by Rep. Helen Sommers, D-Seattle. It is a reasonable compromise. It allows employees with gainsharing to have one more bite of the apple, in 2008. Then no more.

Under the governor's bill, the present value of benefits for today's employees is reduced by $1.135 billion.

Employee unions are objecting to this, saying the benefit was promised to them. Legally, it never was. That is indisputable. In rhetoric, it may well have been promised, just as zero cost was promised to taxpayers. These are rhetorical promises, and trade at a discount.

We support the governor's bill. Gainsharing costs too much, and is a benefit unimagined in the private sector. There are other uses for the public's money.