Tuesday, May 15, 2012

Pension Bills Rewritten

By Marsha Shuler
Capitol news bureau

May 15, 2012

The state Senate put conditions Monday on Gov. Bobby Jindal’s plan to increase state employee contributions to their retirement, including that the employees would have to get a pay raise first.

There has been no general state employee pay raise for two years and some employees have gone three years without a raise.

The Senate-passed legislation would also stop the increase in the amount of money employees contribute to their own pensions until court challenges over the measure’s constitutionality are finished, which could take years.

Another change would stop the increase when the pension system liabilities are declining.

The rework of Senate Bill 52 differs from Jindal’s original plan to impose an immediate 3 percent employee contribution increase beginning July 1. The employee’s contribution would have offset the state’s contribution to pension system and that money would have gone to help balance the budget.

As it cleared the Senate, the legislation would allow a 2 percent contribution increase, which would be phased in one-half percent a year beginning July 1, 2013, for more than 50,000 employees. Then, its imposition would be subject to the Senate-approved hurdles. The money would go toward the pension systems’ long-term liabilities.

Bill sponsor state Sen. Elbert Guillory, D-Opelousas, did not object to any of the changes. “The step we take today is as responsible and gentle as a step could be,” he said.

The Senate approved the bill on a 24-12 vote, shipping it to the House for debate.

There was no discussion on the pros or cons of the legislation. The limited questions concerned impact on employees who have had no pay raises and could be facing furloughs.

State Sen. Francis Thompson, D-Delhi, asked whether the increased contribution called for would have employees contributing more than they would benefit.

“No sir, I’m not aware of any possibility along those lines,” Guillory said.

The Louisiana State Employees’ Retirement System, called LASERS, fiscal actuary reported last week that a majority of employees would be subsidizing other people’s benefits. That poses a constitutional problem as well as means that the increased contribution amounts to a payroll tax, LASERS Executive Director Cindy Rougeou said.

State Sen. Rick Ward III, D-Port Allen, sponsored the amendment to forestall any increase until a general 4 percent raise is granted employees. There’s no money for one in Jindal’s proposed budget for the fiscal year beginning July 1.

Kristy Nichols, Jindal’s deputy chief of staff, said in a prepared statement that the bill as passed “continues to meet the same goals we have had since day one ...”

Jindal has said the changes are needed to reduce state government pension costs, which have been escalating and taking money away from health care and education.

The contribution increase was part of Jindal’s pension package that would require employees to contribute more while working longer for decreased benefits.

Another part of the package would move new state employees to a different retirement plan similar to a 401(k) but without employees being subject to investment losses. Employees would contribute 8 percent, the state 4 percent and employees get the benefit of LASERS investment earnings.

Earlier Monday, the Senate Retirement Committee advanced the House-passed measure, HB61 sponsored by state Rep. Kevin Pearson, R-Slidell.

The panel revamped the measure to strengthen disability and survivor’s benefits and close the door on current employee participation in the new “cash balance” plan.

State employees today have a “defined benefit” plan with guaranteed lifetime benefits based on years of service and compensation. Jindal has contended that is too expensive for the state.

The Legislature’s actuary has concluded that the new plan would cost more while potentially leaving some retired state employees destitute as their lump sum benefits run out.

The administration’s contract actuary — Buck Consulting — claims there would be savings and the state’s exposure to escalating pension liabilities would be more limited.

LASERS actuary Shelley Johnson said the savings in the Buck analysis comes as the risk is transferred to employees.

The package of bills involved members of LASERS, hazardous-duty employees and judges exempted, and the higher-education members of the Teachers Retirement System of Louisiana, or TRSL.

LASERS and TRSL oppose the bills affecting current employee benefits, claiming they unconstitutionally break employee contracts. In addition, they argued that the pension system liabilities are the fault of past administrations approving but not funding benefits, not employees.

Voting FOR increasing state employee contributions under certain conditions (24): President Alario and state Sens. Adley, Allain, Amedee, Appel, Broome, Brown, Crowe, Donahue, Erdey, Guillory, Heitmeier, Johns, Kostelka, Martiny, Morrell, Morrish, Nevers, Peacock, Perry, J. Smith, Walsworth, Ward and White.

Voting AGAINST SB52 (12): State Sens. Buffington, Claitor, Cortez, Dorsey-Colomb, Gallot, Mills, Murray, Peterson, Riser, G. Smith, Tarver and Thompson.

Not Voting (3): State Sens. Chabert, LaFleur and Long.

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