Sweeping reforms to the way the state government pays its retired employees were withdrawn Thursday when the sponsor for the four-bill package said he saw the writing on the wall.
Central state Rep. Barry Ivey, who sponsored the four bills that would have worked in concert, said the central point is to change state government retirement from a traditional system that pays retirees a monthly benefit for the rest of their lives to a hybrid model that would include both a pension and a 401(k)-type program, in which the retiree gets only the money invested over time plus any earnings.
Ivey, a Republican, said his plan would put the retirements of state employees more in line with what is offered in the private sector. At the same time, Ivey argued that the hybrid plan would cost taxpayers less and chip away at the near $20 billion difference between the promises made to retirees by the state and the amount of money available to pay those debts, which is called unfunded accrued liability.
Critics, and there were many attending the hearing, disagreed, saying the revamp would cost new state employees more while lowering their benefits in retirement.
State Rep. Sam Jones, D-Franklin, questioned whether fixing the unfunded accrued liability debt should fall solely on retirees. The debt grew largely as a result of Legislatures going back 40 years refusing to fully fund the retirement system. “All of the UAL was caused by the state. All of it,” Jones said, adding that changes in recent years is earnestly reducing that debt now.
Ivey agreed. “I blame the Legislature,” he said. But fixing fault didn’t make the debt problem any better.
Under the state constitution, taxpayers are responsible for paying the retirement benefits. That means before schools, before roads, “before we pay the light bill in this building,” the fast-growing retirement benefits must be paid, Ivey said.
Interest paid last year on the unfunded accrued liability cost state government about $1.5 billion — money that could have covered most of the budget deficit lawmakers are grappling with, Ivey said.
Most workers in the private sector depend on Social Security plus a 401(k) plan. “This would put our employees on the same footing as those in the private sector,” Ivey said.
Committee staffers brought in extra chairs and opened an overflow room for the almost totally gray-haired audience.
But it was still standing room only as Ivey presented a plan that was championed by the Reason Foundation, a self-styled libertarian government policy study group that is at least partially funded by one of the billionaire Koch brothers, who are known for funding conservative causes and candidates.
Retirement Chairman Kevin Pearson, R-Slidell, picked up a couple inch-thick stack of red cards, which people fill out to show their opposition to a bill as he prepared to read the names into the official record. “All these cards, geez-um, this is going to take all of our time,” he said.
Ivey asked the staff if there had ever been so many red cards turned in before. “If it’s a record, I’d like a plaque or something,” he quipped.
Ivey voluntarily deferred the four bills in order to address some of the criticisms raised by opponents. He said he’d try to revisit the issue later in the session, which ends June 6.
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