Louisiana’s contribution to the state employee retirement system could increase if a provision in a retiree cost-of-living revamp legislation isn’t changed, a pension system actuary said Friday.
The measure puts new hurdles in place that must be scaled before pension check boosts can be granted for retired state employees, teachers, school employees and State Police. One of them steers some excess investment earnings away from the raises and into reducing the more than $19 billion in long-term liabilities of Louisiana’s four statewide pension systems.
But the additional dollars are not being amortized under the current version of House Bill 1225.
“Not amortirizing and just applying (dollars) to the unfunded accrued liability, you are not reducing the payment,” pension systems’ actuary Charles Hall told the Louisiana State Employees Retirement System board. “You are reducing the length of time the payments have to be made, but your gains are not reducing the employer contribution rate.”
The goal of paying off the debt sooner may inadvertently ratchet up the amount state agencies contribute to their employees’ pensions, Hall said, adding that “it could be disastrous down the road.”
State government has a constitutional deadline to pay off old pension debts by 2029. It makes extra pension system payments, which are increasing annually, putting more and more of a drain on the state budget.
State Rep. Joel Robideaux, R-Lafayette, proposed HB1225 to try to reduce the pension system liabilities faster. LASERS and the Teachers’ Retirement System of Louisiana have the largest of the unfunded accrued liabilities, $7.1 billion and $10.9 billion, respectively.
On Thursday, Teachers’ Retirement System of Louisiana Executive Director Maureen Westgard warned the House Retirement Committee about the potential financial ramifications of not recalculating the debt repayment plan taking into account the new dollars. She said school boards are already financially struggling and the Robideaux bill would add to their costs.
Jim Malonem, the chief financial officer for St. Charles Parish schools, said school systems could face $174 million in potential extra payments over the next five years.
A legislative actuary’s analysis did not indicate that an increase would occur.
Hall’s analysis came as the LASERS board got an update on legislation impacting its operations. Most of the time was spent discussing the Robideaux bill.
LASERS Executive Director Cindy Rougeou said the legislation is a work in progress.
Another area of concern with the bill involves a provision that would require LASERS, Teachers’ Retirement System of Louisiana, Louisiana School Employees’ Retirement System and State Police Retirement System to develop a single policy on how the changes could be implemented based on the law ultimately passed. It would have to be submitted for approval to the Legislature’s retirement committees by Sept. 2.
Rougeou said LASERS does not mind presenting the legislative panels with any report they want, but the proposal goes too far.
“This really violates the authority, usurps the authority of the board,” she said.
Rougeou also said the pension systems are different and development of a single policy would be problematic.