HB 61 Moves to Senate Floor, LASERS Board Opposes Bill

Excerpt from The Advocate - Legislative Briefs - May 16, 2012

Gov. Bobby Jindal's proposal to move new state employees to a 401(k)-type pension plan cleared another legislative hurdle Tuesday night.

The Senate Finance Committee, without objection, sent House Bill 61 to the Senate floor for debate.

The committee vote came when the administration and the legislature's retirement system actuaries gave conflicting testimony and reports on the financial impact of the change.

The administration's Boston-based actuary predicted savings to the state and less exposure to new pension liabilities.

The Legislature's actuary said there would be state costs and could leave state employees without sufficient retirement income to last throughout their lives.

The Louisiana State Employees Retirement System opposes HB61 - the so-called cash balance plan, its executive director, Cindy Rougeou, told the panel. It had previously not taken a position.

"Significant risk is shifted to the employee," Rougeou said.

LASERS will continue to provide updates on retirement legislation, so check the website daily.

Pension Bills Rewritten

By Marsha Shuler
Capitol news bureau

May 15, 2012

The state Senate put conditions Monday on Gov. Bobby Jindal’s plan to increase state employee contributions to their retirement, including that the employees would have to get a pay raise first.

There has been no general state employee pay raise for two years and some employees have gone three years without a raise.

The Senate-passed legislation would also stop the increase in the amount of money employees contribute to their own pensions until court challenges over the measure’s constitutionality are finished, which could take years.

Another change would stop the increase when the pension system liabilities are declining.

The rework of Senate Bill 52 differs from Jindal’s original plan to impose an immediate 3 percent employee contribution increase beginning July 1. The employee’s contribution would have offset the state’s contribution to pension system and that money would have gone to help balance the budget.

As it cleared the Senate, the legislation would allow a 2 percent contribution increase, which would be phased in one-half percent a year beginning July 1, 2013, for more than 50,000 employees. Then, its imposition would be subject to the Senate-approved hurdles. The money would go toward the pension systems’ long-term liabilities.

Bill sponsor state Sen. Elbert Guillory, D-Opelousas, did not object to any of the changes. “The step we take today is as responsible and gentle as a step could be,” he said.

The Senate approved the bill on a 24-12 vote, shipping it to the House for debate.

There was no discussion on the pros or cons of the legislation. The limited questions concerned impact on employees who have had no pay raises and could be facing furloughs.

State Sen. Francis Thompson, D-Delhi, asked whether the increased contribution called for would have employees contributing more than they would benefit.

“No sir, I’m not aware of any possibility along those lines,” Guillory said.

The Louisiana State Employees’ Retirement System, called LASERS, fiscal actuary reported last week that a majority of employees would be subsidizing other people’s benefits. That poses a constitutional problem as well as means that the increased contribution amounts to a payroll tax, LASERS Executive Director Cindy Rougeou said.

State Sen. Rick Ward III, D-Port Allen, sponsored the amendment to forestall any increase until a general 4 percent raise is granted employees. There’s no money for one in Jindal’s proposed budget for the fiscal year beginning July 1.

Kristy Nichols, Jindal’s deputy chief of staff, said in a prepared statement that the bill as passed “continues to meet the same goals we have had since day one ...”

Jindal has said the changes are needed to reduce state government pension costs, which have been escalating and taking money away from health care and education.

The contribution increase was part of Jindal’s pension package that would require employees to contribute more while working longer for decreased benefits.

Another part of the package would move new state employees to a different retirement plan similar to a 401(k) but without employees being subject to investment losses. Employees would contribute 8 percent, the state 4 percent and employees get the benefit of LASERS investment earnings.

Earlier Monday, the Senate Retirement Committee advanced the House-passed measure, HB61 sponsored by state Rep. Kevin Pearson, R-Slidell.

The panel revamped the measure to strengthen disability and survivor’s benefits and close the door on current employee participation in the new “cash balance” plan.

State employees today have a “defined benefit” plan with guaranteed lifetime benefits based on years of service and compensation. Jindal has contended that is too expensive for the state.

The Legislature’s actuary has concluded that the new plan would cost more while potentially leaving some retired state employees destitute as their lump sum benefits run out.

The administration’s contract actuary — Buck Consulting — claims there would be savings and the state’s exposure to escalating pension liabilities would be more limited.

LASERS actuary Shelley Johnson said the savings in the Buck analysis comes as the risk is transferred to employees.

The package of bills involved members of LASERS, hazardous-duty employees and judges exempted, and the higher-education members of the Teachers Retirement System of Louisiana, or TRSL.

LASERS and TRSL oppose the bills affecting current employee benefits, claiming they unconstitutionally break employee contracts. In addition, they argued that the pension system liabilities are the fault of past administrations approving but not funding benefits, not employees.

Voting FOR increasing state employee contributions under certain conditions (24): President Alario and state Sens. Adley, Allain, Amedee, Appel, Broome, Brown, Crowe, Donahue, Erdey, Guillory, Heitmeier, Johns, Kostelka, Martiny, Morrell, Morrish, Nevers, Peacock, Perry, J. Smith, Walsworth, Ward and White.

Voting AGAINST SB52 (12): State Sens. Buffington, Claitor, Cortez, Dorsey-Colomb, Gallot, Mills, Murray, Peterson, Riser, G. Smith, Tarver and Thompson.

Not Voting (3): State Sens. Chabert, LaFleur and Long.

SB 52 Passes Senate, Amendments Added

SB 52, which increases the employee contribution rates by up to two percent for all non-hazardous duty LASERS members, passed on the Senate floor by a vote of 24 yeas, 12 nays, and three not voting. Four floor amendments were adopted during the debate, one seeming to make the increase contingent upon individual employees receiving a four percent merit increase.

The Administration's proposal for SB 52 calls for a four year phased in employee contribution rate. The schedule is as follows:

0.5% - beginning July 1, 2013
1.0% - beginning July 1, 2014
1.5% - beginning July 1, 2015
2.0% - beginning July 1, 2016

Please continue to monitor the LASERS website for updates on legislation impacting LASERS members.

Votes Canceled on Pension Revamp Measures

By Marsha Shuler
Capitol news bureau

May 10, 2012

Gov. Bobby Jindal’s heavily revised state employee pension revamp stalled Wednesday in the Louisiana Senate.

State Sen. Elbert Guillory abruptly canceled planned votes on the two most controversial measures — those raising employee contributions and retirement age — after it took two votes to gain state Senate passage of a third measure that would effectively reduce employee benefits.

“I need to count my votes,” Guillory told reporters later about the delay.

Neither Guillory nor Jindal chief of staff Stephen Waguespack said the change of plans indicates they feared that the legislation was in trouble.

Waguespack said the administration planned to meet with state Senate leadership Wednesday night and decide whether to take the other bills in the pension package up Thursday or wait until early next week.

Guillory launched debate on the three-bill pension overhaul package as Gov. Bobby Jindal declared Wednesday “State Employee Appreciation Day.”

Guillory said the legislation is not as harsh as it was when Jindal proposed it because of changes senators made after talking to state employees and retirement system executives.

The package of bills “make the responsible changes in a gradual, gentle, non-destructive fashion,” said Guillory, D-Opelousas.

Guillory said something must be done to erase long-term liabilities of the pension systems so promised benefits will be there and retired employees not end up in “welfare lines.”

The changes will result in $100 million going every year toward paying off the retirement systems’ long-term liabilities, he said.

The changes impact the retirement of more than 50,000 members of the Louisiana State Employees Retirement System — except hazardous duty employees and judges — and higher education members of the Teachers Retirement System of Louisiana, called TRSL.

The state employee system, called LASERS, and the Teachers system claim the legislation unconstitutionally breaks contracts with employees as they alter terms and conditions.

The Louisiana Retired State Employees Association has said it would go to court if the changes become law.

Guillory asked senators to approve Senate Bill 47 first. SB47 would change the computation of pension system benefits from an average of three years of compensation to an average of five years average compensation. The Senate version would phase the change in a month at a time with it completed by July 2015.

On a first vote the measure came up one vote shy of the 20 votes needed for Senate passage with a 19-16 vote. Guillory said he was surprised. Jindal’s staffers were watching the proceedings from a gallery beside the chamber.

After some scrambling, state Sen. Mike Walsworth, R-West Monroe, said his machine had malfunctioned and sought a revote.

The Senate agreed and approved the amended bill on a 23-13 vote.

But the hiccup prompted Guillory to delay votes on the other measures.

“I was taken by surprise. There were several votes that should have been yeas that were nays,” said Guillory. “There are several I need to talk to among my colleagues and see what problems they may have.”

Action was postponed on:

• Senate Bill 52 would increase state employee pension contributions by 2 percent, phased in one-half of 1 percent a year until July 1, 2016. Jindal had set out to impose a 3 percent employee increase all at once.
• Senate Bill 749 would establish new retirement ages depending on years of employment for people with fewer than 20 years of pension membership. Jindal set out with an age 67 retirement age proposal with few exemptions. The Senate version exempts more longtime employees and sets up different ages for different years of employment.

Before approving SB47, the final average compensation measure, the state Senate rejected an attempt to exempt higher education employees.

“The biggest problem that we have is keeping qualified professors. It is an extremely competitive field,” said state Sen. Gerald Long, R-Winnfield, who said the pension change would be detrimental.

Long’s effort failed with 13 senators voting to exempt higher education employees and 23 opposing it.

The Senate adopted an amendment sponsored by state Sen. Ben Nevers, D-Bogalusa, under which the change could not be implemented until expected lawsuits over the legislation’s constitutionality are decided.

Newest Summary of Pension Proposals as Amended by Senate Finance Committee

The newest summary of the four pension proposals, as amended by the Senate Finance Committee, includes SBs 749, 52, 47, and HB 61.

SB 749 increases the retirement eligiblity age for rank-and-file members of LASERS to up to age 67.

SB 52 increases the employee contribution rates for all non-hazardous duty LASERS members by two percent.

SB 47 provides for a 60-month FAC and applies a 15 percent anti-spiking rule for all non-hazardous duty LASERS members.

HB 61 creates a cash balance defined benefit plan for new non-hazardous members of LASERS hired on/after July 1, 2013.

Read the latest Summary of the Administration's Pension Proposals in their current form.

Please continue to monitor the LASERS website for updates.

Revisions needed for retirement system overhaul

‘Heartburn’ reduced, sponsor says
By Marsha Shuler
Capitol news bureau

May 07, 2012

The state Senate Finance Committee will be asked Monday to significantly revise Gov. Bobby Jindal’s proposed state employee retirement system overhaul, according to the Senate sponsor of the bills.

The proposed rewrite still would require most state employees to contribute more and work longer for reduced benefits but the changes would evoke less “heartburn,” said state Sen. Elbert Guillory, Jindal’s Senate pension floor leader.

Guillory said proposed changes would include:

Reduce from 3 percent to 2 percent the increase in contributions expected from state employees; and spread the implementation over a four-year period — a half-percent at a time.
Phase-in, a month at a time, using the average salary over a five-year period, instead of the current three, to calculate a retiree’s pension benefit.

Add to those groups of employees that would be exempted from changes in retirement age restrictions as well as adopting retirement ages based on years of employment.
Implement all changes on July 1, 2013.

Jindal’s proposals cover more than 60,000 members of the Louisiana State Employees Retirement System and higher education members of the Teachers Retirement System of Louisiana. Judges and hazardous-duty employees would be exempt.

Jindal said the pension law changes are needed to start addressing the long-term liabilities of Louisiana’s four statewide retirement systems, which are creating a drain on the state budget. He said the situation needs to be stabilized for the benefit of the state as well as pension system members.

Jindal’s package primarily targets only one of the systems — LASERS — that the state has underfunded for decades.

The LASERS and TRSL boards oppose the Jindal retirement package, claiming altering pension terms unconstitutionally breaks contracts state government employers made with their public employees.

The Senate Retirement Committee approved the bills in mid-April.

Guillory said the legislation was shipped to Senate Finance so the proposed amendments could be added prior to the bills hitting the Senate floor for debate, which could as early as Wednesday.

Actuarial notes accompanying each of the measures — Senate Bills 47, 52 and 749 — indicate there would be state expense, including legal costs of court challenges.

“We wanted to have a hearing on them. We want the people of Louisiana to be able to see them and read them at least a day or two,” said Guillory, D-Opelousas. Offering the changes on the Senate floor would have been “too confusing,” he said.

As the legislation moves to committee, LASERS released a new analysis by its actuary that concludes that more of its members would be paying more into the system than they would get out in pension benefits. LASERS executive director Cindy Rougeou said that makes the employee contribution increase a “payroll tax.” Last year, former House Speaker Jim Tucker, R-Terrytown, concluded it was a tax and required a two-thirds vote.

Rougeou said not only are legislators constitutionally barred from considering taxes in the current session, but tax measures cannot originate in the Senate. The state constitution requires tax measures to start in the state House.

LASERS actuary Shelley Johnson compared the employee contribution versus the career average cost of the benefit with and without the proposed 3 percent employee contribution increase.

For most LASERS employees — those hired before July 1, 2006 — Johnson found that 67 percent of members would pay more than the career average cost of their benefit. Those employees currently make a 7.5 percent contribution.

Meanwhile, 62 percent of LASERS members hired after July 1, 2006, when retirement benefit rules changed, would pay more than the career average cost of their benefit, Johnson found. Those employees currently make an 8 percent contribution.

Johnson said that means that a majority of employees would be subsidizing other people’s benefits.

“There are more constitutional issues that are presented,” Rougeou said.

Guillory said it is “a stretch” to call the proposition a tax. “We expected a variety of procedural techniques to try to torpedo these bills ... but they would hate it a lot more if we do nothing and the systems crash and burn.”

“This is a free country. People have a right to question the legality, validity of these bills,” Guillory said. “What we are going to do is pass the best possible bills and we will let the judges and the lawyers sort out these legalities.”

Meanwhile, teachers union and retirement officials rejected an overture to include kindergarten through grade 12 teachers into the pension law changes.

A proposal floated in a behind-closed-doors meeting would have increased K-12 teachers contributions by one-quarter of 1 percent, moved to a five-year final average compensation benefits tally, and changed retirement age eligibility, said Mary-Catherine Wray, legislative and political director for the Louisiana Federation of Teachers.

“All along they have told us they don’t intend to put us in these bills and they lied,” Wray said.

Guillory said the offer was made because of potential benefits to the teachers. He said he has no plans to include teachers if they don’t want to be a part.

House OKs 401(k)-Style Pension Plan

May 3, 2012
Capitol news bureau

The Louisiana House endorsed Gov. Bobby Jindal’s proposal to move to a 401(k)-type pension plan for future state employees Wednesday night, amid criticism that it does not provide enough retirement security.

The legislation had stalled on Tuesday after the House approved an amendment that would require new state employees on the “cash balance” plan to be enrolled in Social Security too.

On Wednesday, the House reversed course, stripping the Social Security provision, then approving the measure on a 55-45 vote. House Bill 61 now moves to the state Senate.

House Democratic leader state Rep. John Bel Edwards, D-Amite, claimed the legislation constitutionally required 70 votes — a two-thirds majority — because it added to state pension costs. Edwards said the simple majority vote subjects the legislation to a legal challenge.

The measure would move state employees, including those in higher education, hired beginning July 1, 2013, into a cash balance retirement plan. Current employees could opt to join it. Contributions from employees and from employers — state government agencies — would be invested by state retirement systems, with individual accounts credited with investment earnings each year.

The plan would differ from traditional private-sector 401(k)-type plans because the employee accounts would be protected from losses.

State employees today have a “defined benefit” plan with guaranteed lifetime benefits based on years of service and compensation. Jindal contends that is too expensive for the state.

The legislation, sponsored by state Rep. Kevin Pearson, R-Slidell, is the first in Jindal’s multi-bill pension package to clear either legislative chamber. Other bills that would require state employees to contribute more while working longer for reduced benefits are pending in the Louisiana Senate.

Jindal claims the changes are necessary to bring pension system costs under control and reduce liabilities that are putting a drain on the state budget.

State Rep. Joel Robideaux, R-Lafayette, proposed stripping the Social Security provision, and getting the governor’s Division of Administration to study the feasibility of enrolling cash balance plan members in Social Security. The DOA’s findings would be reported to a special retirement panel early next year.

“Let’s get Social Security off the table,” said Robideaux. He said state representatives should be voting on “Do we want to go from a defined benefit to a plan that is more fiscally responsible for the state of Louisiana and the taxpayers?”

Robideaux said the Louisiana State Employees’ Retirement System’s liabilities have grown from $3.3 billion to $6.5 billion in the last eight years “with us doing everything we could to hold the line on the unfunded accrued liability.” He said much of the liability growth came because of the stock market crash and investment losses.

“This bill is trying to correct that growth,” he said.

But opponents said employees would need Social Security under the cash balance plan because fiscal analysis shows that they are projected to get 15 percent to 35 percent less than they do today in retirement. Pension money could run out and retirees be left with nothing to live on, they said.

In addition, opponents said the potential pension system liability for the state still exists because the plan also rests on the success of the investment market.

“Not having the safety net of the ultimate portability plan is a shame. It’s something we should not stoop to,” said state Rep. Sam Jones, D-Franklin.

State Rep. Joe Harrison, R-Napoleonville, who got the House to adopt the Social Security provision, said state employees would be exposed to the same situation as those who lost retirement income in the stock market and are now working at fast food restaurants and as greeters at department stores.

Harrison asked the House to reject the measure and move forward developing a well-thought-out plan to address the state retirement system debts.

The House voted to strip the Social Security provision on a 63-39 vote.

Before approving HB61, the House without objection added an amendment that would require the state to look at state employee pay and potential changes in rates.

“There is no doubt when you compare the current employee today and the plan they are on that I think in many cases, most cases, this is a lesser of a plan,” said state Rep. Major Thibaut, D-New Roads. “What I am concerned about is the retention and the attractiveness (of state jobs).”

“Possibly we need to change the pay scale for employees that come in and go under the new plan,” said Thibaut. He said the extra money could give the employees a chance to make other personal retirement plans.

Voting FOR a “cash balance” retirement plan for future state employees (55): Speaker Kleckley and state Reps. , Abramson, Adams, Anders, Arnold, Barras, Berthelot, Billiot, S. Bishop, Broadwater, Burford, T. Burns, Carmody, Carter, Champagne, Chaney, Connick, Cromer, Danahay, Dove, Fannin, Foil, Garofalo, Geymann, Harris, Henry, Hensgens, Hodges, Hollis, Huval, N. Landry, Leopold, Ligi, Lopinto, Lorusso, Miller, Moreno, Jay Morris, Jim Morris, Pearson, Ponti, Pylant, Richardson, Robideaux, Schexnayder, Schroder, Seabaugh, Shadoin, St. Germain, Talbot, Thibaut, Thompson, Whitney, P. Williams and Willmott.

Voting AGAINST HB61 (45): State Reps. Armes, Badon, Barrow, W. Bishop, Brossett, Brown, H. Burns, Burrell, Cox, Dixon, Edwards, Franklin, Gaines, Greene, Guillory, Harrison, Havard, Hazel, Hill, Hoffmann, Honore, Howard, Hunter, G. Jackson, K. Jackson, James, Jefferson, Johnson, Jones, Lambert, T. Landry, Leger, Mack, Montoucet, Norton, Ortego, Pierre, Pope, Price, Reynolds, Richard, Ritchie, Smith, Thierry and A. Williams.

Did NOT Vote (5): State Reps. Gisclair, Guinn, LeBas, Pugh and Simon.

Voting Wednesday FOR stripping Social Security benefits for future state employees (55): Speaker Kleckley and state Reps. Abramson, Adams, Anders, Arnold, Barras, Berthelot, Billiot, S. Bishop, Broadwater, Burford, T. Burns, Carmody, Carter, Champagne, Chaney, Connick, Cromer, Danahay, Dove, Fannin, Foil, Garofalo, Geymann, Harris, Henry, Hensgens, Hodges, Hollis, Huval, N. Landry, Leopold, Ligi, Lopinto, Lorusso, Miller, Moreno, Jay Morris, Jim Morris, Pearson, Ponti, Pylant, Richardson, Robideaux, Schexnayder, Schroder, Seabaugh, Shadoin, St. Germain, Talbot, Thibaut, Thompson, Whitney, P. Williams and Willmott.

Voting AGAINST the Robideaux amendment (45): State Reps. Armes, Badon, Barrow, W. Bishop, Brossett, Brown, H. Burns, Burrell, Cox, Dixon, Edwards, Franklin, Gaines, Greene, Guillory, Harrison, Havard, Hazel, Hill, Hoffmann, Honore, Howard, Hunter, G. Jackson, K. Jackson, James, Jefferson, Johnson, Jones, Lambert, T. Landry, Leger, Mack, Montoucet, Norton, Ortego, Pierre, Pope, Price, Reynolds, Richard, Ritchie, Smith, Thierry and A. Williams.

Not VOTING (5): State Reps. , Gisclair, Guinn, LeBas, Pugh and Simon.

Voting TUESDAY FOR Social Security for state employees (55): State Reps. Abramson, Anders, Armes, Badon, Barrow, Berthelot, Billiot, W. Bishop, Brossett, Brown, Burrell, Cox, Dixon, Edwards, Foil, Franklin, Gaines, Greene, Guillory, Harrison, Havard, Hazel, Hill, Honoré, Howard, Hunter, G. Jackson, K. Jackson, James, Jefferson, Johnson, Jones, Lambert, T. Landry, LeBas, Leger, Mack, Montoucet, Moreno, Norton, Ortego, Pierre, Pope, Price, Reynolds, Richard, Ritchie, Schexnayder, Smith, St. Germain, Thibaut, Thierry, A. Williams, P. Williams and Willmott.

Voting AGAINST Harrison amendment(46): Speaker Kleckley and state Reps. Adams, Arnold, Barras, S. Bishop, Broadwater, Burford, H. Burns, T. Burns, Carmody, Carter, Champagne, Chaney, Connick, Cromer, Danahay, Dove, Fannin, Garofalo, Geymann, Guinn, Harris, Henry, Hensgens, Hodges, Hoffmann, Hollis, Huval, N. Landry, Leopold, Ligi, Lopinto, Lorusso, Miller, Jay Morris, Jim Morris, Pearson, Ponti, Pylant, Robideaux, Schroder, Seabaugh, Shadoin, Talbot, Thompson and Whitney.

Not VOTING on Harrison amendment (4): State Reps. Gisclair, Pugh, Richardson and Simon.