Tuesday, January 27, 2009

Retirement System Officials tout benefit of paying down debt

Cindy Rougeou, Executive Director of the Louisiana State Employees' Retirement System says applying a portion of the current surplus to pay down nearly 11 billion in debt accrued from 1936-1988 would put more state dollars to work for taxpayers and that’s good fiscal responsibility.

“We recognize that there’s going to be a critical time coming up very soon where those payments on the debt will be very large, and we have an opportunity to make them more manageable,” says Maureen Westgard, director of the Teachers’ Retirement System of Louisiana.

Rougeou, executive director of the Louisiana State Employees’ Retirement System, says the annual payment is fast approaching $1 billion a year. “We know there will be demands upon lawmakers to use the surplus money for other purposes,” Rougeou says. “However, we believe paying down the IUAL would be a fiscally responsible move and give our state its best return on the dollar.”

With the surplus possibly being the last one during the recession, Gregory Albrecht, the Legislature’s chief economist, says it can become tough to get those dollars when things become tight.

Surplus, or one-time, funds can’t be used to fix “an operating hole” but can be used for capital outlay, building needs and debt. Albrecht says paying down the retirement debt would be fiscally prudent, particularly when every dollar paid would save $4. The allocation is possible, but he says the Legislature and administration have historically applied surpluses to capital outlay.

Based on the current schedule, debt payments will not be enough to cover the 8.25% interest until 2012, so the principal is growing. And Rougeou says addressing the debt would be consistent with Gov. Bobby Jindal’s position of “getting your debt house in order.”

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