In a January 21, 2011, opinion piece, U.S. News and World Report publisher Mortimer B. Zuckerman joins the rush to judgment by critics of public pension systems. The article, “Public Employee Union Benefits Are a Fiscal Disaster”, contains a number of misconceptions about government retirement plans and the financial burden some believe they place on state budgets.
Mr. Zuckerman, however, is right on his first point. Many state governments are suffering financial problems. The economy and the financial markets have been buffeted in the last two years by strong currents that have substantially cut revenue, causing state and local governments to struggle to maintain needed services. While the State of Louisiana, like most others, is still feeling the effects of the “great recession”, we would like to remind taxpayers of the facts about our system as it is today, and changes we have made proactively to manage pension costs.
First, I must note that the Louisiana State Employees’ Retirement System (LASERS) is not a union. In fact, according to the National Association of State Retirement System Administrators (NASRA), only 35% of all public employees belong to a union. Second, the numbers show that less than 3% of funds for state and local governments are spent on pensions. Critics, like Mr. Zuckerman, who complain “that years of buying off service unions with generous pensions” have created a problem, do not take into consideration that the true rank-and file average for public employees nationally is actually $22,000 a year.
As the national economy has begun to right itself, the financial markets have responded. In the fiscal year ending June 30, 2010, LASERS investments returned 16.1%. In the last six months, that number has risen to 17.4% bringing our total assets to about $9 billion. It is important to note that in a two year period, from December 2008 through December 2010, LASERS added $2.3 billion to our fund. Also, as a percent of the current general appropriations bill, the State employer contributions to LASERS, (UAL plus normal cost), is 2.2%. State employer contributions to LASERS (UAL plus normal cost) as percent of the total budget (includes capital outlay, judicial, ancillary, etc) is 1.9%. Among our peers (public pension plans over $1 billion), LASERS ranks in the top 5% nationally.
In recent years, LASERS has implemented legislation putting in place significant reforms for new rank and file members. The first, in 2005, reduced pensions, increased employee contributions and minimum retirement age, and implemented a five year average compensation calculation. During the 2010 Regular Legislative Session, Act 992 enacted sweeping reforms for rank and file members as well as our hazardous duty services members.
A recent Pew Report, titled, “Promises with a Price, Public Sector Retirement Benefits,” recognized Louisiana as one of the ten leading states for paying the required annual pension bill.
Our retirement system is a tremendous economic driver for Louisiana; having paid out over $800 million last year, with 91% of that amount staying in Louisiana. The benefits themselves are guaranteed. Our state constitution recognizes that membership in our retirement system is a contractual relationship between employer and employee.
Thank you for the opportunity to provide accurate information in response to the often overheated misinformed assertions about public retirement systems. Our retirees have dedicated a career of public service to our state. It is important that the positive contribution of our members and our retirement system not be overlooked.
Louisiana State Employees’
Retirement System (LASERS)