Friday, October 12, 2007

Amendment 3

Numerous publications have endorsed the passage of proposed Constitutional Amendment 3 on the October 20th election ballot. The measure would prohibit the creation of new or expanded retirement benefits for members of the four state retirement systems in Louisiana without the indentification of a funding source that would pay for the benefits within ten years:

  • LASERS - Louisiana State Employees' Retirement System
  • TRSL - Teachers' Retirement System of Louisiana
  • LSPRS - Louisiana State Police Retirement System
  • LSERS - Louisiana School Employees' Retirement System
The non-partisan Public Affairs Research Council explains:

Louisiana’s total UAL now exceeds $12 billion. Similar to a mortgage that is paid over time, longer payment terms mean more interest paid.

Proponents argue that it is fi scally irresponsible to increase the state’s UAL with new benefi ts that are not tied to funding sufficient to retire the corresponding UAL within 10 years. Long-term implications could be that the state would have to cut future budgets in essential areas, such as education and health care, in order to retire the debt as provided by the Constitution.

Opponents argue that shortening the payoff time to 10 years may create new problems. Although interest will be saved, short-term payments will be higher. Additionally, there is fear that this requirement will reduce the Legislature’s willingness to grant benefits in the future due to legislative concerns about the 10-year payoff requirement.
Publications expressing support for Amendment 3 include:

The Baton Rouge Advocate

"The Louisiana Constitution today mandates that the state pay down by 2029 existing state retirement system obligations. For political reasons, these payments get a lot higher the closer to the deadline we get. It’s at least a requirement that retirement system obligations be met, as they weren’t for many years.

The new amendment would make it more difficult for the Legislature to increase benefits without providing for the money to pay them. Funding for retirement benefit increases would be identified in the legislation, and the cost of the benefit would be funded within 10 years, not 25 years as current law.

The amendment would apply to the four major retirement systems for state employees, State Police and school employees. It would not apply to the retirement systems for local government, particularly elected officials. Fiscal responsibility is unfortunately ladled out in small doses in the State Capitol.

Still, this amendment provides a reality check on retirement benefit increases. We urge voters to approve it."

The Lake Charles American Press

"If the amendment is approved, state lawmakers would have to identify new or additional funding from the state general fund or elsewhere for benefits to be increased or added.

Additionally, the funding for those benefits would have to be adequate enough to retire the unfunded accrued liability within 10 years.


For that reason, we recommend approval of Amendment 3."

The Monroe News-Star

"If voters must amend the Constitution, they should do so on the side of fiscal responsibility. As a state, we've promised a bundle of money in retirement to state employees. Right now, the tab stands at some $12 billion, for many current mandates for state retirement pay were not accompanied by the means to fund those benefits. This amendment require that future benefits must be paired with a funding source and that any debt for increased benefits must be paid in 10 years, not the 30 years in which current debt is being paid. A perfect solution? No. But more prudent than in the past? Yes."

The Baton Rouge Business Report

"This would forbid adding future benefits for public employees in retirement systems unless funding was identified to pay the cost in 10 years. The unfunded liability is already outrageous. Enough."

The Shreveport Times

"Amendment 3 — FOR

Ballot will read: "To provide that no benefit provision for members of any state retirement system having an actuarial cost shall be approved by the Legislature unless a funding source providing new or additional funds sufficient to pay all such actuarial cost within 10 years of the effective date of the benefit provision is identified in such enactment."

This amendment speaks to the actuarial soundness of the state retirement systems relative to retirement and survivors' benefits, seeking to limit additional unfunded liabilities. To current provisions, this amendment would specify that no benefit that has an actuarial cost could be approved unless a funding source is identified to cover that cost within 10 years.

Times' position: It's the fiscally responsible thing to do to require legislators to actually provide the funding sources for the benefits that they approve for our already overburdened state retirement systems. Currently, the tab is around $12 billion for promised benefits and generally the debt is being paid back over a 30-year period. From this point forward, if the amendment is approved, additional benefits will require a funding source and a

10-year payback. We like that idea."

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