The appeal of an election-year increase in retirement checks for thousands of former state workers was too much for the Louisiana Legislature, which breached the terms of the 2014 reforms intended to make pension systems more financially sound.
We applaud Gov. Bobby Jindal for his veto of House Bill 42. His action helps protect the long-term viability of state pensions. Some retired state employees are promoting a legislative session to override the governor’s veto. We hope lawmakers reject that idea.
It’s easy to forget that the state’s huge obligations to retirement payments for its current and former employees are one of its largest costs.
Last year, the Legislature acted responsibly by passing a bill that limited cost-of-living adjustments. The law provided for increasing COLAs as the retirement systems become less debt-ridden, a step that is reasonable given that many have long-term obligations far higher than their assets.
One provision of the new law was to limit COLAs to every other year until retirement systems became at least 80 percent funded; many are far below that today. That and other provisions of the law were estimated to save $30 billion in costs over the coming 30 years.
You have to think long-term when it comes to pension reforms, but the Legislature could not hold itself in: This year, HB 42 by Rep. Sam Jones, D-Franklin, violated the two-year rule by giving a COLA early.
The bill was dressed up with some amendments that the Public Affairs Research Council said would be positive, and senators for a time resisted the abandonment of the 2014 rule on COLAs, but ultimately the House’s will prevailed.
The governor’s veto means that a COLA cannot be granted until next year, and we hope with PAR that the new governor and Legislature will look at the Senate amendments for improvements in pension law.
But the main thing is to insist on long-term financial responsibility, something that this Legislature had difficulty with this year. The governor noted the concern of the bond rating agencies for the state’s retirement debts; the agencies liked the 2014 law for its commitment to responsibility.
The English saying is that if you take care of the pennies, the pounds will take care of themselves.
We do not criticize the desire to help poorer retirees who would benefit from a COLA right now, but what is the long-term impact? The pounds being spent, instead of saved, makes a huge difference over a 30-year span.
“These types of decisions seeking short-term gratification have helped put the retirement systems $20 billion in the hole,” PAR commented. We agree. The governor is right to insist that the terms of the 2014 law be respected.