A Louisiana Senate panel endorsed a revamp Tuesday of the system used to provide benefit increases for about 100,000 state pension system retirees.
House Bill 1225 will reduce the debts of Louisiana’s four statewide pension systems. It ties future cost-of-living increases to the systems’ financial health.
The committee action leaves the measure one step away from final legislative passage by the full Senate.
Passage of HB1225 guarantees a 1.5 percent cost-of-living adjustment to retired state employees, teachers, school employees and State Police.
COLA bills for each group contain language that ties the raises to passage of the revamp. Those Senate-passed measures gained final legislative passage late Tuesday in the Louisiana House.
The Jindal administration has said it supports the COLA package.
“It’s one of the biggest cost-saving bills around here,” said Public Affairs Research Council president Robert Travis Scott. Scott called it a “level-headed approach.”
Louisiana State Employees Retirement System executive director Cindy Rougeou said Robideaux and others had “come up with a product that will save billions.”
The legislation, sponsored by state Rep. Joel Robideaux, would steer more excess investment earnings into reduction of the systems unfunded accrued liability.
Today, there is a $19 billion-plus liability.
The extra excess earnings would be steered away from special accounts that fund cost-of-living adjustments, making it more difficult to provide them for the foreseeable future. Some excess investment earnings would still flow into the COLA accounts but the hurdle would be higher before they did.
In addition, the amount of future COLA would be tied to the funding status of the system.
If a system was 55 to 65 percent funded, the COLA would be limited to 1.5 percent. As the systems’ funded status improved the amount of potential COLA would rise to a maximum 3 percent when 85 percent funding is achieved.
Robideaux said he became concerned with COLAs being proposed in the current session.
“We don’t have the dollars in the system to make the benefits we are currently obligated to make,” said Robideaux, R-Lafayette.
But he said he recognized the need for retirees to get a benefits increase which had not been granted in six years.
“This bill does put us on the path of where we need to be with consistent, predictable COLAs (while) at the same time not jeopardizing the funding ratio of the system,” Robideaux said.