Newspapers are full of articles about how legislatures across the country have spent 2011 revamping pension plans to help state governments juggle budget problems.
Because of the growing cost of retirement plans for public-sector employees, coupled with decreasing taxpayer revenues, about half of the nation’s 50 states moved to force government employees to contribute more to their pension plans, according to the National Conference of State Legislatures, a Denver-based association that provides information to state legislators.
A near equal number of state lawmakers want to change eligibility requirements, either by raising the age of retirement or increasing the number of years of service needed.
Louisiana’s lawmakers made similar attempts during the 2011 regular Legislative session, which ended June 23. Legislators considered 152 bills and resolutions that dealt with government retirement plans in one way or another.
Most of the 35 retirement-related bills that were approved and sent to the governor made minor technical changes for individual systems.
The only major legislation to pass both chambers dealt with retirement systems’ ongoing funding gap.
“Roads are sexy. Coastal restoration, that’s attractive,” said Republican state Rep. Kevin Pearson, of Slidell and chairman of the House Retirement Committee. But pension plans are complex and the details of someone else’s retirement finances ultimately are pretty boring.
“But you can’t forget, or at least you shouldn’t forget, that every taxpayer in this state is on the hook for retirement costs of government, public-sector employees,” Pearson said in an interview on the last day of the session.
The four main systems for state employees and teachers, by their own count, have about 160,000 active members.
Employees contribute part of their salaries to help fund the promised retirement, Pearson said. The amount depends on the work of the employee, which dictates the system to which they belong. The economic pressures caused by keeping public-sector retirement programs healthy are forcing governments to increase the amount that is paid, he said.
“We’re not far from a time where half of some municipality’s budget goes to pay wages and the other half goes to fund the employees’ retirement plans,” Pearson said.
“We didn’t have good retirement legislation this year at all. It didn’t turn out to be big,” said state Rep. Joel Robideaux, No Party-Lafayette.
Part of the reason was that Louisiana had done much revamping last year. For instance, he sponsored legislation that became law in 2010 that increased contributions by some employees, while changing definitions and calculations to lower benefits for some future employees.
Legislative efforts during 2011 to further increase contributions of some public-sector employees ran into a lot of opposition, both Robideaux and Pearson say.
The main issue for opponents, Pearson said, was that the money generated by House Bill 479, written by Republican state Rep. Kirk Talbot, of River Ridge, would have offset other budget spending, rather than go to pay down retirement system debt.
Pearson’s House Bill 530, which would calculate a retiree’s benefits from the average pay of the employee’s last five years — instead of the current three years — failed.
Pearson said he changed the measure to ensure that the $300 million or so generated would have gone to pay down debt, instead of offsetting other spending in the state budget. But the measure could not generate enough support, Pearson said.
“In the end, they just weren’t pushing it very hard,” Robideaux said. “The constitutional amendment was about the only significant reform.”
House Bill 384 asks voters to change the state constitution to require legislators, starting on July 1, 2013, to use 5 percent of any surplus dollars to pay down the state retirement plans’ “unfunded accrued liability.” For the fiscal year that begins in July 2015, those amounts would increase to 10 percent.
HB384 is sponsored by Pearson and state Sen. Butch Gautreaux, D-Morgan City and chairman of the Senate Retirement committee.
Louisiana’s unfunded accrued liability is about $18 billion, Pearson and Gautreaux said. The UAL is, generally, the present value of benefits earned-to-date that are not covered by the retirement plans’ assets. Basically, UAL is the additional money taxpayers would owe, if they had to pay it now.
“We have 13 retirement systems in this state,” including those for local government employees, Gautreaux said. “I predict, no, I can promise you, that some of those systems are going to go bankrupt.”
Louisiana is not alone. All 50 states combined have a $1.2 trillion funding gap for government retirement plans, according to an April report by the Pew Center on the States, based in Washington, D.C. The group, which provides analysis of state issues, is funded by a trust from the family that owned Sun Oil Company.
Louisiana is required to pay off the UAL by 2029. But successive governors have used the available money for other state projects and delayed paying down the debt.
Pearson likened the state’s plan to a homeowner postponing paying a 30-year home mortgage until the last year.
The Louisiana State Employees’ Retirement System, known as LASERS, is responsible for $6.2 billion — or about one-third — of the UAL for the state’s four retirement systems.
LASERS Executive Director Cindy Rougeou said Pearson and Gautreaux’s HB384 was the only measure adopted during the 2011 legislative session to help erase the UAL.
The steps taken won’t fix the UAL overnight, but the efforts will help, she said.
Marsha Shuler of the Capitol news bureau contributed to this report.