Louisiana Spotlight for Feb. 13, 2012
By MELINDA DESLATTE
February 13, 2012
Louisiana’s retirement debt has reached an eye-popping $18.5 billion, and state employees are often derided as part of the problem, for getting generous retirement benefits. But until recently, the state’s elected officials caused much of the gap between what the state retirement systems need to pay all the benefits owed.
How to shrink the debt without bankrupting the state will be a key flashpoint of the legislative session. At issue is just what is fair to employees promised retirement benefits when they were hired and what is reasonable for the state to afford.
State officials set up retirement systems years ago without fully funding them at the start, letting people get benefits immediately. Then, lawmakers and governors over the decades routinely approved increased pension plans for the politically-connected without earmarking the money to cover the costs.
Until the last eight years, lawmakers in both the House and Senate typically zoomed through retirement bills with few questions, little understanding of the merits of the bills and probably even less knowledge of the possible costs to the state down the line.
Adding new people to the systems and expanding or speeding up retirement benefits were common proposals that won easy points for lawmakers with other politicians or constituents. But they often tacked on new costs years down the line.
The debt, called the systems’ “unfunded accrued liability,” is an accounting of what the state will owe employees after they retire but does not have the money to pay right now.
Legislative delays in paying off the initial retirement systems’ debt continued to worsen it. A multiyear investment slump and repeated cost-of-living raises paid to retirees bumped the gap further, according to a review by the legislative auditor’s office.
Now, the retirement systems are awash in red ink, and pension costs are eating more and more into the state’s budget, taking away dollars that could pay for health-care services for the poor, highway construction and educational programs.
As the retirement debt continues to grow, budgets continue to decline and agency leaders continue to feel the pinch of growing retirement costs, retirement has become a financial focus at the state capitol.
Gov. Bobby Jindal has proposed a package of pension changes to boost retirement costs for thousands of rank-and-file state employees, shrink some benefits and push back the age they can collect pensions. New employees would get a cheaper, 401(k)-type of account.
Leaders of the Louisiana State Employees’ Retirement System called the governor’s proposals unconstitutional, saying they would result in “protracted litigation,” rather than getting the retirement systems better-funded.
Jindal said he’s trying to keep the promise of a retirement benefit to workers, while protecting critical services in state government.
Jindal’s plan is unequal, targeting only the rank-and-file workers. Teachers and employees at public K-12 schools, state troopers, prison guards and other law enforcement officers would be exempt from the changes.
That leaves only about one-third of state employees having to pay more and retire later to get their full benefits under Jindal’s proposals.
“How’d you decide some state workers were in pension reform and some were not?” asked Rep. John Schroder, R-Covington.
The governor’s top budget adviser, Commissioner of Administration Paul Rainwater, told lawmakers that hazardous duty workers were left out of the proposed changes because “those people perform very critical services. They risk their lives.” He said public school employees were exempted because the governor already is focusing on a massive education revamp — though that has nothing to do with retirement.
The explanation is a bit sketchy and likely to run into trouble with lawmakers.
Meanwhile, the debt is mounting.
Melinda Deslatte covers the Louisiana
Capitol for The Associated Press.