Pension Executives: Pay down retirement debt now

State leaders should consider using more than two-thirds of the budget surplus to help pay off Louisiana’s $10 billion retirement debt, leaders of two retirement groups said Monday.

Cindy Rougeou, executive director of the Louisiana State Employees Retirement System and Maureen Westgard, her TRSL counterpart, told the Baton Rouge Press Club on Monday that lawmakers should direct as much money as possible to the two systems when they divide an estimated $865 million surplus left over from the fiscal year that ended June 30. They did not offer a specific amount.

The surplus will be recognized officially no earlier than this month's meeting of the Revenue Estimating Conference, which sets the state's revenue forecast. The money would be appropriated no earlier than a possible winter special session and possibly not until the regular session that begins in late April.

Westgard and Rougeou acknowledged the inherent political difficulty of their wishes, as lawmakers often are much more excited about financing road and bridge projects -- easily seen by their constituents -- than about paying down long-term obligations for systems that are not close to being threatened with insolvency.

LASERS currently has $8.4 billion in investment assets, with annual benefits of $750 million paid out to 37,575 retirees. The portfolio's market investments dropped 3.8 percent in value over fiscal 2008 but it has a five-year yield of 10.8 percent, with an actuarial yield of 8.5 percent. The Teachers' Retirement System has an investment
portfolio of $15 billion. More than 61,000 employees draw combined annual benefits of $1.38 billion. The investments lost 5.14 percent in market value, with a five-year yield of 11.35 percent and a 5.15 percent actuarial rate of return.

Westgard and Rougeou agreed the numbers suggest that neither system is in danger of falling short on annual benefit obligations, even as more baby boomers retire in coming years. But lawmakers, they said, must protect that solvency and avoid saddling future legislatures with untenable budget constraints as 2029 approaches.