URBAN ECONOMIC POLICY

WHEREAS, many reports have been published about the insolvency of Social Security, the nation’s premier social insurance program which at some point in the not too distant future will not be able to pay retirees at the benefit level they are entitled to unless sweeping changes are made in the program; and

WHEREAS, various proposals to reform Social Security have been introduced in Congress that would have both a direct and indirect impact on state and local governments and their budgets, and among the most direct is a proposal that would mandate Social Security coverage for state and local employees; and

WHEREAS, the extension of mandatory coverage to new state and local employees is attractive to federal policy makers as one of several changes that can be made to shore up the Social Security system; and

WHEREAS, the Social Security Act of 1935 strictly barred state and local government employees from participating because Congress recognized that many government employers already provided adequate retirement coverage to their employees and because of constitutional concerns over whether the federal government could impose a tax on state governments; and

WHEREAS, Congressional action in the 1950s allowed states to participate in Social Security on a voluntary basis, and in 1983 state and local governments that voluntarily elected Social Security coverage for their employees lost the ability to withdraw form the program; and

WHEREAS, further changes were made to Social Security in the Omnibus Budget Reconciliation Act of 1990 to require state and local employees who are not members of public retirement plans to participate in Social Security, effective January 1, 1992; and

WHEREAS, there are well over 2, 300 state and local retirement plans in the United States that provide retirement coverage to approximately 14 million full-time employees and 5 million retirees and beneficiaries; and

WHEREAS, studies have shown that the extension of mandatory Social Security to employees who are not covered would impose a very costly unfunded mandate on state and local governments; and

WHEREAS, a recent report released by the Segal Company estimates that the total cost of shifting state and local employees to Social Security would exceed $25 billion over a five-year period and according to the Social Security Administration extending coverage to all new hires in state and local governments would only extend the financial health of the Social Security system for two additional years; and

WHEREAS, the city of Chicago has determined that mandatory Social Security coverage for new hires would cost the city $17 million in the first year and $85 million over a five-year period, with city employees required to pay a similar amount; and

WHEREAS, if state and local government employers and their employees are forced to pay into Social Security, either cost to employees will have to increase (to keep benefits levels the same as they are in the absence of Social Security) or benefits will have to decrease if contributions for a combination of Social Security and state and local retirement plans do not increase;

WHEREAS, a broad bipartisan coalition of governors, mayors, members of Congress, labor organizations, senior citizen groups and many other organizations have been working together to oppose mandatory coverage of Social Security in the interest of their constituents,

NOW, THEREFORE, BE IT RESOLVED that The U.S. Conference of Mayors urges the Administration and Congress to resist any effort to expand mandatory Social Security coverage to state and local employees.

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