Cost of living adjustments expected for first time in five years
The battles of past legislative sessions associated with the Jindal administration’s failed push to overhaul the state employee pension system won’t be fought again this year when the session opens Monday.
Gov. Bobby Jindal has abandoned attempts to make state employees work longer for reduced benefits and to move to a 401(k)-style pension system, which the state Supreme Court ruled had not been legally approved.
“Right now, the most pressing issue facing our state is ensuring that we can develop a skilled workforce to meet the demands of the booming job market,” Jindal said in a statement released by his press office. “That is why we will focus this session on workforce development and investments in higher education. ... ” He did not respond to interview requests.
The leaders of Louisiana’s two largest statewide retirement systems are predicting a legislative session in which employee benefits and pension eligibility battles give way to granting 1.5 percent cost of living adjustments to retirees and discussion of ways to get more money directed to paying off pension systems’ long-term debt requirements.
It would mark the first time in at least five years for some of the 100,000 retiree members of the four statewide systems to get a boost in their pension checks. Many are living on poverty wages, according to system records.
Louisiana’s four statewide retirement systems have an unfunded accrued liability in excess of $19 billion. That’s how much it would cost to fund all promised pension benefits over time.
The systems are the Louisiana State Employees Retirement System, the Teachers Retirement System of Louisiana, the School Employees Retirement System and the State Police Retirement System.
The liability is largely due to past administrations and Legislatures providing pension benefits without adequately funding them and escalating interest on that debt. Louisiana voters adopted a constitutional amendment requiring payoff of the oldest debt by 2029.
“I think the focus will be on reducing debt and paying COLAs,” said Cindy Rougeou, LASERS executive director.
“Each year, there’s kind of a theme. I think this year will be the COLA year,” Teachers Executive Director Maureen Westgard said. “I think it’s going to be COLA, COLA, COLAs.”
Each of the statewide systems is seeking the 1.5 percent boost, which is being paid for through what are known as “employee experience accounts.”
All four systems have registered better-than-expected investment earnings that exceeded benchmarks. The positive earnings picture allowed some money to be put into the savings accounts from which retiree raises are funded. COLA beneficiaries must be at least age 60 and have been retired at least a year.
Several bills also have been filed that would grant supplemental COLAs, too, which a legislative leader in the pension field said, “go beyond the responsible COLA.”
“I think the responsible ones will pass without any difficulty. Those that go beyond that will not have a snowball’s chance,” said Sen. Elbert Guillory, R-Opelousas, who is sponsoring COLA legislation for the systems.
In a statement, Jindal said: “We appreciate the service that retirees have made to the state and we will work with the Legislature on any proposed changes.”
Westgard said she expects a “big policy discussion” over COLAs because the funding system diverts investment earnings away from paying of systems’ debts.
One bill would direct more excess investment earnings to payment of long-term liabilities, reducing the dollars flowing into the employee experience account.
Another bill sponsored by House Retirement Committee Chairman Kevin Pearson, R-Slidell, has introduced legislation that would take money left over in the experience accounts after the 1.5 percent COLA is paid and use it toward payments on the unfunded accrued liability.
Prior to 1992, and before the development of experience accounts, COLAs were done “ad hoc” and the Legislature had to find the funding for them.
“It’s the push and pull that exists,” Westgard said. “We are always willing to talk about other sources of funding for COLAs.”
Rougeou said there needs to be “a reasonable balance between payment of COLAs and paying debt.”
Guillory, who chairs the Senate Retirement Committee, has filed legislation to get more dollars into the retirement systems for both debt reduction and the retiree cost-of-living increases. Both sources have some hurdles to overcome.
“If Louisiana at any time in the future legalizes marijuana in any way — recreational, medical or for any other purpose — it shall be taxed and half go to fund the UAL,” Guillory said, referring to the unfunded accrued liability.
Guillory said he also would like to impose a user fee on video gambling machines. But, he said, he is looking at other options for taxation in the gambling industry.
“We are not coming out in support of marijuana or gambling,” Rougeou said. “But we are always in favor of reducing the UAL.”
Pearson is sponsoring legislation that would change retirement eligibility from five years of service at age 60 to five years at age 62 for employees hired after July 1 in the state employee, teachers and school employee systems.
Hazardous duty employees would be exempt.
The LASERS board has gone on record opposing a series of bills that Rougeou said are “special interest and cost the system money.”
Among them are:
- Making certain employees of the Eastern Louisiana Mental Health System eligible for membership in a more lucrative hazardous duty plan.
- Providing for additional and retroactive retirement benefits for adult probation and parole officers employed on or before Dec. 31, 2001, without them contributing to costs.
- Allowing certain judges to transfer service credit from the District Attorneys Retirement System to LASERS without paying the cost to do so.
“Any bill that is going to increase the cost of that liability is going to receive the absolute closest of scrutiny,” Guillory said. “If a bill has a cost and it’s not self-funded, it’s going to be in for some difficulty.”
LASERS also opposes legislation by state Rep. Greg Miller, R-Norco, that would place greater limitations on how the system can invest.
“We think it would result in a tremendous cost to our system,” Rougeou said.