Some 52,000 state employees can breathe a collective sigh of relief after a state Senate panel Sunday rejected legislation that would have reduced their potential pension benefits.

The Senate Retirement Committee voted 4-2 to involuntarily defer the House-passed legislation that would have changed how retirement benefits are calculated.

By taking the action the panel effectively killed House Bill 530, which would have computed employee benefits using their final average compensation over five years instead of the current three when pay is usually highest.

The change would have resulted in lower pension checks.

Bill sponsor state Rep. Kevin Pearson, R-Slidell, said the change would generate $59 million annually which would go to paying off the Louisiana State Employees Retirement System debt related to recent investment losses.

“This is not easy,” Pearson said “It is easy to just kick the can down the road.”

Pearson said he is trying to “make a difference” in making the state employee retirement system more financially sound.

“This is maybe a few drops in the bucket,” said Pearson, noting that the state’s four pension systems have a collective $18.2 billion unfunded accrued liability.

But state Sen. Elbert Guillory, D-Opelousas, said Pearson’s plan would be violating the terms of the legal contract the state has with its employees.

“It changes the retirement benefits of someone in service,” Guillory said.

LASERS executive director Cindy Rougeou said Pearson’s legislation will bring about court challenges because it tries to unconstitutionally impact state employee retirement.

“Accrued benefits should not be impaired,” Rougeou said.

Rougeou also said Pearson’s legislation would result in less money being available for investment and therefore less money coming in to pay for future benefits.

Rougeou questioned why Pearson’s legislation only effected the LASERS system and higher education employees of the Louisiana Teachers Retirement System.

Exempted are the State Police, Teachers and School Employee retirement systems which are responsible for two-thirds of the pension system liabilities.

Pearson had watered down HB530 in the House to eliminate a 3 percent increase in state employee retirement contributions, which had encountered a firestorm of opposition. After he did that, the House passed the measure.

Pearson had earmarked the 3 percent to help pay off LASERS pension debt from investment losses.

As the Senate panel met, Pearson agreed to an amendment that would have phased-in the change from the three to five years of final average compensation in small increments until 2014. It would not have impacted anyone retiring before Jan. 1, 2012.

“It kind of softens the blow,” said committee chairman state Sen. Butch Gautreaux, D-Morgan City, who sponsored the change.

Pearson said the state has had to continually increase its contributions to pay off pension debts resulting from the state earlier not paying sufficient funds into the system and then more recently system investment losses.

He said that money could be spent on employee pay raises instead.

State Sen. Ben Nevers, D-Bogalusa, asked Pearson if the pay raises were a guarantee with passage of the bill.

Pearson said no.

VOTING FOR INVOLUNTARILY DEFERRING HB530 (4): state Sens. Elbert Guillory, D-Opelousas, Ben Nevers, D-Bogalusa, Fred Mills, R-St. Martinville, and Jonathan Perry, R-Abbeville.

VOTING AGAINST DEFERRAL (2): state Sens. Conrad Appel, R-Metairie, and A.G. Crowe, R-Slidell.