Mining Taxpayers' Pockets for Private-Pension Relief

If Congress bails out the United Mine Workers, others will come forward with their own claims.

After eight years of the Obama administration’s antagonism toward mining, the industry and its workers clearly need some relief.

The Miners Protection Act of 2015—sponsored by Sen. Joe Manchin (D., W.Va.) and co-sponsored by eight Republicans—would bail out the underfunded pension plan of the United Mine Workers of America (UMWA). The bill has been referred to the Senate Finance Committee, and Chairman Orrin Hatch is likely to take it up later this month. While the legislation seems appealing at first glance, a closer look reveals that it’s no better than fool’s gold.

The bill would transfer $490 million in federal cash currently designated for mine reclamation to the UMWA’s pension coffers. However, the abandoned mines are not going away, and the law that authorizes the federal government to put these mines in order has not been repealed. Mr. Manchin simply wants to siphon off federal money, which belongs to all taxpayers, to private pensions.

During a speech on the Senate floor in July, the West Virginia Democrat argued that the government has an obligation to protect miners’ health and retirement funds. He suggested that the 1946 Krug-Lewis agreement between the federal government and the United Mine Workers of America “created the promise of health benefits and retirement security for our Nation’s miners.”

But Krug-Lewis, which was enacted after the government nationalized America’s mines, only covered the period when the federal government owned the mines—May 29, 1946, to June 30, 1947. On July 1, 1947, the mines reverted to the private economy, and miners’ compensation was regulated by an agreement between the union and the owners. Known as the National Bituminous Wage Agreement of 1947, this document does not obligate the federal government to pay for the UMWA pension plan.

Even if the federal government had an obligation to the union, Mr. Manchin’s bill is no more than a Band-Aid. The UMWA chose to negotiate bigger raises for miners instead of asking companies to fund fully the pension plan. The union is far more popular with its members when it brings back larger cash raises and leaves the pension plan unfunded than when it brings smaller raises and a fully funded pension plan. Rather than only rewarding bad behavior, real relief should require firms to reform their pensions.

UMWA knows how to fund a pension plan. Required filings with the Labor Department show that the pension plan for the officers of the UMWA—the president, vice presidents and treasurer—is solvent. Known as the United Mine Workers of America 1974 Pension Trust Employees Pension Plan, at the end of 2014 the plan was overfunded by $4.8 million. Other mining pension plans are also fully funded, such as those operated by the Hecla Mining Company in Idaho, the Usibelli Coal Mine in Alaska, and the Pinto Valley Mining Corporation in Arizona.

Pension problems are not limited to unionized miners’ pensions. Some nonunion pensions also have deficits. The Pension Benefit Guaranty Corporation’s guarantee program for private multiemployer pension plans is at least $42.4 billion in the red. Data published last month by Pew Charitable Trusts indicate that “state-run retirement systems” faced a $934 billion shortfall in fiscal year 2014. If Congress bails out unionized miners’ pensions, others will no doubt come forward with equally valid claims.

This likely won’t come as a surprise, but the Senate co-sponsors of the UMWA bailout bill have all received significant campaign contributions from coal-mining firms over their political careers, according to the Center for Responsive Politics. The top four are: Shelley Moore Capito (R., W.Va.), $600,544; Joe Manchin, $497,248; Rob Portman (R., Ohio), $186,685; and Richard Burr (R., N.C.), $93,726.

Sens. Tom Cotton (R., Ark.) and Jim Risch (R., Idaho) both have high ratings of “7” from the Club for Growth, a testament to their fiscal conservatism. Their decisions to co-sponsor are especially surprising, even if Mr. Cotton has received $76,850 and Mr. Risch $32,000 from coal-mining companies.

Through regulations on ozone, mercury, carbon, coal-mine dust, and crystalline silica, President Obama has proudly put all public coal companies, and many private ones, out of business. When coal mining goes out of business, so too do its pension plans.

The best way for the next president to help is to end President Obama’s vendetta against the coal industry. Meanwhile, the UMWA needs to put its pension plan in order, without taxpayer cash, by raising contributions or reducing payouts. Sen. Manchin’s alternative, having the federal government bail out politically well-connected unions, would only reward poor stewardship and create negative incentives for the future.

This piece originally appeared in The Wall Street Journal

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Diana Furchtgott-Roth is a senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter here.

This piece originally appeared in The Wall Street Journal