House committee approves Senate COLA bills

Jim Beam

American Press

Three Senate bills tied together with a cost-of-living increase for members of four state retirement systems were approved Thursday by the House Retirement Committee.

Sen. Barrow Peacock, R-Bossier City, is sponsor of Senate Bills 2, 5 and 18. All three were approved unanimously by the full Senate and move to the full House.

Rep. Sam Jones, D-Franklin, has House Bill 32, which is similar to Peacock’s. However, his isn’t linked to the other two measures.

The House approved Jones’ bill unanimously, and it is awaiting action in the Senate Retirement Committee.

The four systems in both bills are the Louisiana State Employees’ Retirement System, or LASERS; the Teachers’ Retirement System of Louisiana; the Louisiana School Employees’ Retirement System; and the State Police Retirement System.

The increase would only be paid on the first $60,000 of a retiree or beneficiary’s benefit. The maximum amount would be 1.5 percent of the benefit for LASERS and the TRSL and 2 percent for LSERS and the SPRS.

The two COLA bills override current law for one year and provide a larger increase than what recipients would have otherwise received on July 1. Under current law, retirees on July 1 would have received only a 0.124 percent COLA.

The increase is linked to passage of S.B. 5, which would require the retirement systems to timely pay administrative costs rather than rolling them over. S.B. 18 would reduce the time for paying off retirement debt from 30 to 20 years.

Each state system board of directors would grant the COLA provided for under S.B. 2 on July 1 of this year. Funds would come from the systems’ experience accounts.

If the balances in the experience accounts on June 30 are less than the cost of the COLAs, the percentage increase would be reduced accordingly. LSERS is the only one affected. It has $23 million in its experience account, and its increase will cost $25.1 million.

Eligible under current law for the COLA are any regular retiree who has received a benefit for at least one year and who has attained at least age 60; any beneficiary of a regular retiree, beneficiary or both combined who has received a benefit for at least one year and if the deceased member would have attained age 60; and any disability retiree or any beneficiary who receives benefits based on the death of a disability retiree if benefits have been received by the retiree, beneficiary or both combined for at least a year.

LASERS has 33,575 regular retirees, 5,834 survivors and beneficiaries, and 2,457 disabled retirees. Total cost of its COLA would be $123.1 million. The TRSL has 58,751 retirees, 6,771 survivors and beneficiaries, and 4,121 disabled retirees. Total coast of its increase would be $224.7 million.

LSERS has 10,146 retirees, 1,662 survivors and beneficiaries, and 331 disabled retirees. Total cost of its increase would be $25.1 million. The SPRS has 696 regular retirees, 335 survivors and beneficiaries, and 62 disabled retirees. The cost of its increase would be $6.8 million.

Original article here. 

Pension hikes for Louisiana retirees clear first legislative hurdle

The Advocate

Mark Ballard

A cost-of-living increase for retired state workers cleared its first hurdle Monday, but only after a Louisiana Senate committee tied the raise in monthly pension checks to two other bills that would revamp aspects of the state retirement systems.

Senate Retirement Committee Chairman Barrow Peacock, R-Shreveport, said all three bills would have to pass the Legislature and be signed by the governor in order for retirees to see 1.5 percent to 2 percent more in their monthly pension checks. But he didn’t see that as a problem.

“Right now, everybody’s in favor,” Peacock said in an interview after the hearing.

Peacock amended his Senate Bill 2, which awards retirees cost-of-living adjustments, called COLAs, to the passage of Senate Bill 5, which would require the retirement systems to timely pay administrative costs rather than roll those charges into the 30-year debt; and of Senate Bill 18, which would reduce the amortization period — paying off debt on a fixed schedule — from 30 years to 20 years.

“It ensures that we get the proper funding mechanisms in place,” Peacock said.

In awarding the COLAs, Peacock acknowledged that the inflationary trigger had not been met under state law. The other criterion that allows lawmakers to increase the monthly pension checks have, he said.

“It’s true, in the last 12 months there has been virtually no inflation,” Peacock said. But during the previous 24 months, inflation was enough to allow the COLA, and the chairman says he chooses to interpret the law that way.

The Consumer Price Index for All Urban Consumers, or CPI-U, is the federal calculation for the prices paid for goods and services paid by consumers. Though the cost of food, clothing, shelter and medical care grew during the past 12 months, the index was offset by dramatic reductions in the costs for fuel.

Frank L. Jobert Jr., the legislative and governmental affairs director for the Retired State Employees Association of Louisiana, argued that the CPI-U was misleading and shouldn’t be included in the law that allows for cost-of-living increases for retirees. Health care costs, for instance, have gone up considerably and this is a cost important to the elderly.

“I’m not sure the CPI-U is a true measure,” he said.

Steven Procopio, policy director at the Public Affairs Research Council of Louisiana, said he understood the needs for COLAs and the reason for granting them this year. But, the law, which specified inflation for the previous 12 months, was put in place two years to provide some order and fiscal responsibility in granting the increases.

Circumventing the criteria was not prudent, he said. “It basically undoes what the law does,” Procopio testified.

If SB2 — and the other two measures — are ultimately approved, nearly 125,000 pensioners over the age of 60, who have been retired for at least a year, would receive a bump in their monthly checks. Based on calculation of how well funded each of the state systems are, retired state workers and retired public school teachers would receive a 1.5 percent increase; retired school workers would get 1.9 percent; and retired State Police troopers and staff would receive at least 2 percent more.

The average monthly increase would be about $30, but could vary based on the circumstances of individual retirees.

The money comes from an account where excess investment earnings were deposited and the $380 million ultimate cost would not come from the state budget, which is $750 million in the red.

The Senate Retirement Committee, without objection, reported SB2 and SB18 favorably to the full Senate.

SB5 already has been approved by the Senate and has been assigned to the House Retirement Committee for consideration.

Original article here.

Louisiana legislators want to increase monthly pension checks for state retirees

The Advocate

Mark Ballard

Even as lawmakers struggle with the possibility of deep cuts to state services, the road to a bump in the monthly pension checks for nearly 125,000 state retirees and their survivors — living mostly in the Baton Rouge and New Orleans areas — begins Monday when a Louisiana Senate panel is scheduled to take up a cost of living adjustment bill.

“They’ll get a COLA because there’s enough money, but the funding mechanism means different amounts,” said Senate Retirement Committee Chairman Barrow Peacock, R-Shreveport.

In Peacock’s Senate Bill 2, pensioners over the age of 60, who have been retired for at least a year and are drawing checks from one of the four state systems, would receive, starting July 1, a 1.5 percent increase for state workers and teachers; 1.8 percent bump for public school employees; and 2 percent more for State Police. It calculates out to an average increase of about $30 per month for retirees, but the exact amounts are difficult to determine and depend on many variables.

If approved, it would be the first increase in two years.

The money initially won’t be coming from the state general fund, which pays the costs of government agencies, but out of a fund called the “Experience Account” that collects excess investment dollars. That money can’t legally be used to pay anything but COLAs, though part of it goes to paying down the $20 billion debt of the retirement systems.

There’s no reason to think the legislation will not win approval, as the money already is in the experience accounts and the current situation fits the recently enacted legal criteria for awarding a cost of living adjustment, Peacock said.

Franklin Democratic Rep. Sam Jones, who has his own COLA bill, agreed.

“I thought it was going to be a little bit of a fight but it appears that everyone is on board with it, and you’ve got a governor who’ll sign it,” Jones said.

The head of the House Retirement Committee, Slidell Republican Rep. Kevin Pearson, was out of the country last week and unavailable for an interview. However, he texted that he was “probably OK on a COLA,” but wanted to see additional revamps made.

The increased benefits will cost an estimated $380 million over time, according to fiscal estimates. Those costs will be picked up by the retirement systems, which receives its dollars from the contributions of employees and state agencies plus any gains made from the investment of those monies.

Retirement costs state government about $2 billion a year, but is not a line item in the $25 billion budget. Rather, each agency pays its portion out of its appropriation.

“The most prominent thing going on with pensions in this session, last session, and the next session is the cost of living increases,” said Robert Scott, who heads the Baton Rouge-based government policy research group called the Public Affairs Research Council.

“There will be money (in the experience accounts) and the timing of it might be OK, in terms of every other year. But we don’t have enough inflation to justify it, probably,” Scott said.

Part of the $20 billion debt issue involving the retirement accounts is that COLAs were granted pell-mell over the years. Generally, the additional dollars were tacked onto the debt, which state government didn’t adequately fund. All of this contributed to the unfunded accrued liabilities, or UAL, which is the money needed to fulfill the commitments made to retirees and current members of the retirement systems.

The system was revamped in 2014 to ensure COLAs would continue, but at a pace that was sustainable for state government. It also allowed for some of the monies to go toward helping to pay down the UAL.

Act 399 set criteria that allowed cost of living adjustments every other year, provided enough money was in the experience account and the systems hit predetermined levels of funding.

“The other critical piece you also need is inflation. That’s the whole rationale for a COLA in the first place is that you have an inflationary environment and people need an adjustment to keep up with the extra cost of living,” Scott said.

The Act 399 revamp calculates COLAs, provided the criteria is met, at 2 percent times the retiree’s current benefit or the increase in the CPI-U for the prior calendar year times the benefit — whichever is less.

The Consumer Price Index for All Urban Consumers is the federal calculation for the prices paid for goods and services paid by consumers. Over the past 12 months, the CPI-U increased 1 percent before seasonal adjustment, according to the U.S. Bureau of Labor Statistics in a February report. 

Though the cost of food, clothing, shelter and medical care grew, the index was offset by dramatic reductions in the costs for fuel.

Peacock’s SB2 would grant the COLA in accordance to the funding percentages of the various systems “without regard to the consumer price index.”

Jones’ House Bill 33, which has not been scheduled for hearing, would postpone the application of the consumer price index until 2028.

“The TRSL Board is committed to working with legislators to find a balance between the responsible funding of the retirement system and protecting the purchasing power of retiree pension dollars,” said Maureen Westgard, the head of the Teachers’ Retirement System of Louisiana.

The average retired teacher receives about $2,149 per month, so the average COLA increase would be $29.50.

“The average benefit for our rank-and-file members is very modest; and our Board of Trustees supports SB2, which will provide a much-needed COLA. The funds to pay for this COLA are already set aside from excess system investment returns,” said Cindy Rougeou, the executive director of LASERS, the Louisiana State Employees’ Retirement System.

The average LASERS rank-and-file benefit is $24,660 annually. If a 1.5 percent COLA is approved, the average increase per month would be about $27.

But an average increase is a little misleading, said Irwin Felps Jr., who heads the Louisiana State Police Retirement System.

The State Police is set up for retirees over the age of 60 to receive a 2 percent increase and those over the age of 65 to receive 4 percent.

The increase LSPRS retirees see depends a lot on their age, the work they did, how long they’ve been retired and at what benefit. It could range anywhere from about $30, maybe less, to about $100, maybe a little more, Phelps said.

“What we’re talking about is another half-trip to the grocery store,” Rep. Jones said, adding that he understands the need to keep the system sustainable so that it avoids a catastrophic fiscal collapse that could endanger future benefits.

“But this problem was caused by state government, yet 95 percent of the reforms are being paid by the retirees,” Jones said.

Original article here.

COLA for retired state employees, teachers up OK’d

Some 130,000 retired state employees and teachers could get a bump in their pension checks in July after all.

The only stumbling block could be a veto by Gov. Bobby Jindal.

In a last minute move, the Legislature reversed course and agreed to the 1.5 percent cost-of-living adjustment this year instead of next.

The reason: state Rep. Jack Montoucet.

The Crowley Democrat refused to bring up legislation he sponsored that would generate $100 million to help fill the state budget hole, holding out for reconsideration of the COLA vote.

“Jack said ‘I’m not leaving you without a COLA for those retirees,” state Rep. Sam Jones, sponsor of House Bill 42 which would provide an average $30 increase in retiree pension checks.

With budget pressure, House and Senate leaders agreed to let their members rescind an earlier vote on HB42 which would have delayed the COLA until 2016.

Montoucet proceeded with his revenue-raising measure.

Earlier in the afternoon, Jones had begrudgingly accepted the Senate rewrite of legislation in the face of Senate opposition and a potential Jindal veto. And the House agreed to go along.

The Senate version of the bill also added provisions aimed at shorting up the finances of the state’s four pension systems - state employees, teachers, school employees and State Police.

“It’s not the one I want. It is what it is,” the Franklin Democrat said, in regard to the COLA delay. He said other Senate changes are good for the pension systems.

“It’s the best we could do,” Jones said.

Money to cover the average $30 a month COLA is special accounts set up for the purpose in all four retirement systems.

Jones said the retirees are struggling with escalating costs of state health insurance.

COLA for retired state employees, teachers up in air

Capitol News Bureau
The Advocate

A dispute between the Louisiana House and Senate continued Thursday over a cost-of-living raise for some 130,000 retired state employees and teachers.

Earlier, the House voted to grant a 1.5 percent pension check boost effective July 1. But the Senate version of House Bill 42 would delay the average $30 a month bump until July 1, 2016.

Bill sponsor state Rep. Sam Jones asked the House to reject the Senate change and his colleagues complied on a 77-10 vote.

The action sends the cost-of-living adjustment issue to a House-Senate conference committee with only hours left in the 2015 legislative session.

If the raise is not granted this year, Jones argues that legal constraints in state law would prohibit one next year and potentially for the next three years.

The Franklin Democrat said the retirees are struggling with escalating costs of state health insurance.

The money to fund the COLAs is in special pension system accounts set aside for the purpose.


A COLA is not supposed to be granted until next year because of a 2014 state law aimed at improving pension system finances.

Gov. Bobby Jindal challenged on retiree cost-of-living increase

Marsha Shuler
The Advocate

Louisiana Rep. Sam Jones called on Gov. Bobby Jindal Tuesday to reconsider his threat to veto a cost-of-living raise this year for 130,000 retired state employees and teachers.

Jones said it is particularly important for retirees to get a 1.5 percent bump in their pension checks now because it could be the last chance for a while.

“If we don’t give one this year almost certainly we will not give one next year,” Jones said. “We are looking at the possibility of maybe three years.”

The money to provide the average $30 monthly increase is in special accounts set up for the cost-of-living-adjustments, or COLAs, at the four statewide retirement systems: State Employee, Teachers, School Employees and State Police. But a consumer price index benchmark must be met too, Jones said.

“We will meet it this year and probably not next year. Do we likely skip three years or try to do something more immediate to address the problems of 130,000 retirees?” Jones asked.

The Franklin Democrat told his House colleagues he wanted to talk to Jindal about the situation.

Earlier in the session, the Louisiana House approved 80-20 Jones’ House Bill 42 ,which would grant the COLA effective July 1. The House forced its Retirement Committee to release the bill for action.

Jones said retirees are facing escalating state health insurance costs and have had one 1.5 percent COLA in the last eight years.

The measure ran into problems in the Senate where its Finance Committee moved the COLA date to July 1, 2016. Absent the change, administration officials said the governor would veto the measure.

Jones postponed until Wednesday a House vote on whether to send the Senate version to a conference committee to try to restore the COLA this year.

Jones told the House the administration worried that granting the COLA now would hurt Louisiana’s bond rating as it broke faith with a law designed to improve pension system finances.

“I don’t necessarily agree with that,” Jones said.

The retirees got a COLA last year and were not supposed to receive one this year under a new law.

Under the 2014 law, more of the retirement systems’ excess investment earnings will go toward reduction of long-term debts before dollars are put into the special COLA accounts.

The changes limited both the frequency and amount of future retiree benefit hikes until systems hit certain unfunded accrued liability levels.


“I think it’s a shame we are taking that kind of position with our retirees,” said state Rep. Ed Price, D-Gonzales.

Pension hike for state employees, teachers, school workers, State Police get Louisiana House endorsement; measure now moves on to Senate for debate

Marsha Shuler

The Advocate

The Louisiana House on Tuesday endorsed a cost-of-living increase in the pension checks of about 100,000 retired state employees, teachers, school workers and State Police troopers.

The House voted 80-20 for the measure, which now heads to the Senate for debate.

The bill would grant a 1.5 percent permanent benefit adjustment to retirees of the state’s four pension systems. The average increase would be under $30 a month.

Rep. Sam Jones said the pension plans have the money in special accounts set up for retiree cost-of-living adjustments, or COLAs. “It has a zero impact on the state general fund,” he said.

Jones said retirees are suffering now because of increased state health insurance program costs, with some premiums going up $58 a month and copays added. Retirees need the help now, instead of next year when they are scheduled to receive one.

“Reach way down and think about that 91-year-old retired teacher who doesn’t have $2,500 to contribute, no lobbyist, no association,” Jones said. “You and me are her lobbyist.”

Opposition came from House Retirement Committee chairman Kevin Pearson, R-Slidell, who said granting the COLA now would increase the state retirement systems long-term debt and lead to increased contributions from the state and local school districts toward pension costs.

“The systems are only about 60 percent funded. We have taken steps to get that on the right trajectory. House Bill 42 will undo that,” Pearson said.

Pearson said the COLA would alter the debt reduction plan approved last year and would send a bad signal to bond rating agencies. The law was aimed at strengthening the finances of the retirement plans.

Under that law, more of the retirement systems’ excess investment earnings will go toward reduction of long-term debts before dollars are put into the special accounts from which COLAs are granted. The changes limited both the frequency and amount of future retiree benefit hikes until systems hit certain unfunded accrued liability levels. Retired state employees, teachers, school employees and State Police got a cost-of-living increase last year, but under the new law were not to get one in the coming year.

The COLA accounts of the pension systems have the $350 million in them necessary to cover the pension check raise. The money would have to be replenished before another COLA could be granted.

“We’re only talking about $30 more a month. $30 is not a lot of money,” said Rep. James Armes, D-Leesville. He warned his House colleagues that the funds could be robbed if left sitting — like others have been as the state struggles with budget problems.

“These people need a break today,” said Rep. Kenny Cox, D-Mansfield.

But Rep. Barry Ivey, R-Central, said the state pension system’s unfunded liabilities keep rising because “we don’t stick to a plan for improvement.”

“We are never going to get anywhere,” Ivey said. “We are headed in the wrong direction.”

State employee, teacher retirees COLA heading to House vote

Marsha Shuler
The Advocate

The fate of a cost-of-living increase in some 100,000 retired state employees and teachers pension checks is now in the hands of the Louisiana House.

The House Retirement Committee on Thursday complied with a directive to release legislation it had bottled up on a 6-6 tie vote.

The full House voted 64-25 last week to order the committee to advance the bill which would grant a 1.5 percent cost-of-living adjustment, or COLA, to retirees in the four statewide pension systems: state employees, teachers, school employees and State Police. The average increase would be under $30 a month. Funds would come from special accounts set up in each system for the purpose of COLA granting.

The committee sent House Bill 42 sponsored by state Rep. Sam Jones, D-Franklin, to the House floor with an unfavorable report.

The parliamentary maneuver means that Jones will have to seek House approval to keep it alive and move it on to the agenda for later debate.

Jones has 73 House cosponsors of the COLA bill.

Reminder: COLA Bill on Agenda for House Retirement Committee Meeting

The House Retirement Committee is scheduled to meet tomorrow, May 14, and two bills will be considered that would impact LASERS if passed: 

HB 42, sponsored by Representative Sam Jones, is known as the COLA bill. On May 6 the House of Representatives voted to have the Retirement Committee report the bill to the House for consideration. The committee previously deadlocked, with a 6-6 vote on a motion to report HB 42 to the full House. This bill is supported by the LASERS Board of Trustees and if passed, would authorize a Cost-of-Living Adjustment (COLA) of up to 1.5 percent for eligible LASERS retirees and beneficiaries. Because testimony was previously heard on the bill, additional testimony is not expected to be taken at this meeting. 

SB 16, sponsored by Senator Elbert Guillory, passed on the Senate Floor with a vote of 33-1. SB 16 clarifies provisions created in Act 399 of 2014 regarding excess investment earnings, employer contributions, and COLAs. It is supported by the LASERS Board of Trustees.

Retirement Bill Updates: 

HB 33, sponsored by Representative Berthelot, passed unanimously on the House Floor and was reported favorably by the Senate Environmental Quality Committee. This bill would increase littering fines and distribute 50 percent of the fines to the retirement system of the law enforcement agency issuing the citation. The LASERS Board supports HB 33, insofar as it reduces debt.

HB 46, sponsored by Representative Reynolds, passed unanimously on the House Floor. This bill provides for survivor benefits for children of wildlife agents in the enforcement division of the Department of Wildlife and Fisheries. The LASERS Board is neutral on this legislation.

Meeting schedules are subject to change. Check the LASERS website daily for updates and for detailed information about proposed retirement legislation that may impact LASERS if passed.

View Senate and House Retirement Committee meetings here.

State Employee, Teachers Retiree COLAs Alive

Marsha Shuler

The Advocate

The Louisiana House has kept alive the potential of a cost-of-living increase in the pension checks of more than 100,000 retired state employees and teachers.

The House voted 64-25 to direct its Retirement Committee to send legislation granting a 1.5 percent increase to the full House for debate. The 1.5 percent amounts to less than an average $30 a month for the retirees.

The measure, sponsored by state Rep. Sam Jones, has 73 House cosponsors. But House Bill 42 could not get the majority vote to get it out of the retirement committee. The panel deadlocked 6-6.

Jones asked the House to force the committee to report the bill by Thursday and his colleagues complied.

“Everyone here deserves to hear the full debate,” the Franklin Democrat said.

Jones encountered opposition from some Retirement Committee members who argued that the cost-of-living adjustment, or COLA, runs counter to a law passed in 2014 designed to strengthen the finances of the retirement plans.

Under the law more of the retirement systems’ excess investment earnings will go toward reduction of long-term debts before dollars are put into the special accounts from which COLAs are granted. The changes limited both the frequency and amount of future retiree benefit hikes until systems hit certain unfunded accrued liability levels. Retired state employees, teachers, school employees and State Police got a cost-of-living increase last year but under the new law were not to get one in the coming year.*

The COLA accounts of the pension systems have the $350 million in them necessary to cover the pension check raise over the years.

Jones said the financial condition of retirees - many already living on limited fixed incomes - has changed for the worse because of increased health insurance premiums and copays. “They can’t pay for medicine,” he said.

He noted double digit increases in retirees state Group Benefits insurance plans caused by administration “mismanagement.”

Retirement Committee chairman Kevin Pearson said the teachers retirement system and the state employees system are far short of having the dollars to cover their long-term liabilities. Teachers is 57 percent funded and state employees, 59 percent, the Slidell Republican said. He also said the systems’ investment earnings are down for the current fiscal year.

“We are on target, have a trajectory” to improve those numbers, Pearson said, as he urged the House reject Jones’ motion.

“We have to think about the full pension payment for our future retirees,” said state Rep. Greg Miller, R-Norco.

*Note: Only eligible retired state employees received a cost-of-living adjustment last year. 

Retirement cost-of-living increases clear House committee

By Marsha Shuler

The Advocate

A cost-of-living raise for retirees of Louisiana’s four statewide pension systems is nearing its final hurdle as legislation providing for the increase headed to the full House of Representatives for consideration.

The House Retirement Committee advanced Thursday the package of bills, which include the raises as well as tying future increases to financial health of the systems.

The bills’ legislative fates are tied together. If one fails, all of them tumble.

Headed to the House floor for debate are four Senate-passed measures that would provide a 1.5 percent cost-of-living increase for some 100,000 retired state employees, teachers, school employees and State Police. The boost in pension checks would be the first in five to six years for all of them.

Also on its way is a revamp of the system through which cost-of-living-adjustments are granted.

The changes, proposed in House Bill 1225, would limit both the frequency and amount of future benefit hikes so that more dollars can go toward reducing the $19 billion long-term retirement systems’ debt.

The COLAs are funded through investment earnings above a certain amount.

With pension debts so high, some legislators question the diversion of the funds to COLA accounts, particularly when the state and school boards are paying escalating employer contributions to pay down that debt.

The COLA revamp sponsor, state Rep. Joel Robideaux, said it became clear to him that the 1.5 percent benefit increase had to be tied to “some reform” in order to get the two-thirds vote required for legislative passage.

Robideaux’s proposal would divert more of the investment earnings to meeting pension liabilities, while still providing for COLA potential. As each system becomes better funded, COLAs could move above 1.5 percent to a maximum of 3 percent. In addition, the increase would apply only on the first $60,000 of annual benefits.

“We are in a difficult situation trying to figure out a way to satisfy a lot of folk,” said Robideaux, R-Lafayette.

His revamp is “an attempt to make the system a little more sound going forward, help create systems that are better funded ultimately,” Robideaux said.

Officials of the Louisiana State Employees Retirement System, the Teachers’ Retirement System of Louisiana, the Louisiana School Employees Retirement System and the State Police Retirement System said their boards remain neutral on the Robideaux’s proposed revamp.

However, Teachers Executive Director Maureen Westgard and St. Charles Parish schools Chief Financial Officer Jim Malone said they were concerned that a provision would result in school board contributions rising because of the basis of the debt calculations.

“The schools are really hurting now,” said Westgard.

“There are concerns that school districts have about the up-front cost of the bill,” Malone said.

Over the first five years, Malone said the extra cost could hit $174 million. He asked proponents to consider making “tweaks” to the bill.

Legislative actuary Paul Richmond’s analysis showed no difference in cost.

No committee member objected to sending Robideaux’s bill to the House floor.

Retirees eye debate over COLA’s link to pensions

By: Marsha Shuler

The Advocate

More than 100,000 retired state employees, teachers, school employees and State Police find themselves in the middle of a political squeeze play.

A 1.5 percent increase in their pension checks — the first in six years for most — got tied to a revamp of the system that grants cost-of-living adjustments.

The changes being proposed would limit both the frequency and amount of future COLA increases.

Lawmakers have made it plain: Either accept the COLA system change, or there will be no 1.5 percent bump, the equivalent of an average $29 a month increase for most.

It’s not as if the legislative debate over COLAs, and how they are funded, was not anticipated.

In fact, the leaders of the largest agencies handling government retirees — Louisiana State Employees Retirement System and the Teachers Retirement System of Louisiana — had long predicted COLAs would be the big retirement topic of the year.

COLAs are funded through special “experience accounts” into which are deposited pension system investment gains above a certain specified amount.

The trigger is different, depending on which of the four statewide retirement systems is involved. The Legislature established the accounts not so long ago.

But pension system debts exceed $19 billion, and some legislators want to change the rules.

The liability is largely because of past administrations and Legislatures providing pension benefits without adequately funding them and escalating interest on that debt.

State Rep. Joel Robideaux, R-Lafayette, and other legislators familiar with retirement plans are pushing legislation that would require more of the systems’ investment earnings to go into reduction of their unfunded accrued liability, the money needed to meet pension commitments over time.

The legislation also would link the maximum cost-of-living adjustment that could be awarded to the financial health of each of the government retirement systems.

As each becomes better funded, the potential for COLAs above 1.5 percent increases to a maximum of 3 percent. A system would have to be at least 85 percent funded to get the highest amount. In addition, the age eligibility for COLAs would rise from 60 to 62.

As the push is occurring, the Public Affairs Research Council of Louisiana issued a report encouraging the Legislature to take the opportunity “to make larger and needed changes” in the process.

“The Experience Account takes funds that otherwise would be used to reduce the debt of the retirement system and applies them toward permanent benefit increases,” wrote PAR’s Stephen Procopia. “This method is particularly troublesome for Louisiana’s systems that have only about 60 percent of the funds needed to meet their liabilities, one of the most severe liability shortfalls in the nation.”

PAR reurged a 2005 recommendation: Abolish the experience accounts. It further stated, “Planned COLAs for existing retirees should be funded through employer contributions, while planned COLAs for active employees should be funded by both employer and employee contributions.”

So far, the state employee and teachers retirement systems have not taken positions on the proposed changes. The retirement systems were not blindsided by the Robideaux bill. Officials of each were involved in negotiations over provisions in advance of the bill filing and got some concessions. They are hoping for more concessions.

Meanwhile, state employee and teacher retiree groups’ top priority is the COLA for their members whose only income is their pension checks.

Legislators have not wanted to appropriate funds for cost-of-living increases so, instead, they tapped some “excess” investment earnings.

That decision, as PAR noted, runs counter to efforts to improve the systems’ debt — a debt in large part from past Legislatures and administrations’s failing to properly fund the benefits they approved.

Now, legislators want to modify the plan so more dollars go toward debt reduction and cost-of-living increases become harder to come by.

And the retirees are caught in the middle wishing and hoping for what PAR called “a realistic, affordable, predictable and carefully defined COLA policy.”

Original article here.

Retirement systems seek cost-of-living increase

By Marsha Shuler, The Advocate

[original article here]

For the first time in at least five years, many retired teachers, state workers and school system employees are in line for an increase in their pension checks.

Louisiana’s four statewide retirement system boards are preparing to seek legislative approval of a general cost-of-living adjustment — likely between 1.5 percent and 2 percent — for tens of thousands of retirees over age 60.

In addition, some older retirees who have the smallest pension checks could be in for a further boost.

The flurry of activity comes as all four statewide systems have registered better-than-expected investment earnings that exceeded benchmarks. The positive earnings picture allowed some money to be put into “employee experience accounts” — savings accounts from which retiree raises are funded.

The cost-of-living adjustments, better known as COLAs, increase the regular benefits checks and must be approved by a two-thirds vote of the Legislature. The next legislative session opens March 10.

The percentage allowed will be exactly the same for all four systems because of requirements set out in state law.

Under a state law, the percentage raise is limited to the lesser of 3 percent or the increase in the Consumer Price Index’s U.S. city average for all urban consumers.

Called the CPI-U, the statistic doesn’t come out until January, but the systems are eyeing the numbers and expecting no more than a 2 percent boost. The same law requires the retiree to have reached age 60 and to have received benefits for at least a year by July 1, 2014, when the increase would go into effect.

“This should be controversial,” said Kevin Kane, director of the Pelican Institute, a conservative New Orleans government policy research group.

Not accounting for how cost-of-living increases would be paid over time, along with other decisions that recur year after year, is part of the reason why the state’s retirement systems are carrying a long-term debt of about $19 billion, he said.

Unless the cost-of-living adjustments are offset, possibly with increased contributions or investment returns, Kane said, the consequences could add to the retirement systems’ “unfunded accrued liability,” the gap in funds the systems have in hand to pay benefits in the future.

That shouldn’t be an issue, says Maris LeBlanc, deputy director of the Louisiana State Employees Retirement System, because the cost-of-living increase is coming from the “experience account.” The Legislature set up the “experience account” to receive the excess when returns on investments come in higher than anticipated. The money specifically goes to paying COLAs after a portion is set aside to help pay down the unfunded accrued liability, LeBlanc said.

“We currently have about $195 million in the experience account, which would be sufficient to grant up to a 2.7 percent COLA,” LASERS Director Cindy Rougeou said.

More than 44,000 state employees retire with an average pension benefit of $22,236, but not all would be eligible for the cost-of-living increase.

The pension system’s last across-the-board adjustment was a 3 percent bump in 2008 for about 33,000 eligible retirees, Rougeou said.

A minimum benefit increase was granted in 2009 for retirees, beneficiaries and survivors receiving less than $1,200 a month. The benefits were increased by $300 a month, or the difference between the retiree’s current benefit and $1,200, whichever was less. Eligibility was limited based on years of service and the years the individual had been retired.

The board for the Teachers Retirement System of Louisiana is discussing a 1.5 percent pension boost for those among its 60,714 retirees who are eligible. “There are still moving pieces of this,” said Executive Director Maureen Westgard. Besides getting the consumer price index number, a special retirement oversight panel must sign off on the numbers used in developing the experience account.

System actuary Shelley Johnson said there is $219.7 million in the account to pay the additional benefit — not enough for a 3 percent boost, which would cost $406 million over time. The recommended 1.5 percent raise would cost $203 million.

Graig Luscombe, executive director of the Louisiana Retired Teachers Association, said the group will also be pushing for a minimum benefit to help retirees whose pension checks are on the low end. One proposal would provide a $300 monthly increase for those getting $1,200 a month, bringing them up to $1,500, he said. Another would provide a $1 bonus for each year of service credit and each year the person has been retired.

Luscombe said there are 1,547 teacher retirees who are between 90 and 99 and who receive annual benefits of $15,880.

“It could be limited to a lesser amount depending on the CPI-U,” Johnson said, referring to the consumer price index.

She said the cost of granting a cost-of-living adjustment has increased in recent years because there are more eligible retirees and they are living longer.

“It’s the best thing I can remember in a long time,” said Louisiana State Police Retirement System Executive Director Irwin L. Felps Jr. The system’s finances are good enough that $10 million to $13 million is available for raises for many of the system’s 1,234 retirees, he said. It would be the first general raise since 2007. The system’s average benefit is $2,700 a month, Felps said, but the median “is a good bit less.”

“You work really hard for a long time for COLAs and have nothing to show for it. Now you feel so much better,” Felps said. “We think there will be a 1.5 percent or 2 percent COLA.”

In addition, Felps said, the State Police pension board is proposing an extra 2 percent for retirees over age 65.

Louisiana School Employees Retirement System Pension Director Charles Bujol said some of the system’s 13,369 retirees have not had a raise in about 10 years. The average retirement benefit is $940 a month.

“Last year we were able to give to the lower-paid in our system a little — about 35 percent of the lower-paid,” said Bujol. “This year we want to try to give something to the rest.”

Bujol said the system has about $30 million that can be accessed. “Right now we are looking at about 1.5 percent,” he said.