The state Senate Finance Committee on Monday adopted substantive changes aimed at making Gov. Bobby Jindal’s state employee retirement system revamp more palatable to legislators and employees.
But opposition remained strong to legislation that would affect, in some way, about 58,000 state employees, including those in higher education .
The panel voted on amendments to:
- Exempt about 6,000 more state employees from a bill that would raise the retirement age.
- Reduce from 3 percent to 2 percent an increase in the employees’ contribution and implement it over time.
- Phase in a change in how benefits are calculated.
None of the changes would occur until July 1, 2013.
Meanwhile, opponents continued to argue that the pension system changes are unconstitutional, discriminatory and likely won’t produce the savings anticipated.
In addition, the resulting reduction in employee benefits could result in Louisiana being forced to enroll its employees into Social Security, Cindy Rougeou, Louisiana State Employees Retirement System executive director, told the committee. Rougeou said that would be an expensive proposition for the state.
As he proposed the initiative, Jindal said the major long-term liabilities of Louisiana’s four statewide pension systems are putting a strain on the state budget and threatening the viability of the system for employees. The proposals target one of the systems that has about one-third of the liabilities. The remainder largely go untouched.
“We are at a situation where we have to do something,” state Sen. Elbert Guillory, Jindal’s Senate leader on retirement, told the finance panel Monday. “The cost of the pension system is too close to the cliff.”
Guillory, D-Opelousas, said the savings from the changes would all go to reducing the unfunded accrued liability of the retirement systems under the revised legislation.
Critics respond that much of the liability was created by state government, which underfunded the systems and then delayed debt payments, not state employees who have been paying their share. The changes illegally break the contracts state government employers made with their public employees, critics contend.
The legislative actuary put the cost of expected lawsuits challenging the changes at between $750,000 and $3 million.
“It comes down to priorities, promises and worse of all precedent, the precedent that these bills are setting, that nobody again can trust that the benefits we think we are going to get aren’t going to be changed somewhere down the road,” said Neil Carpenter, an employee with the Louisiana Workforce Commission, who testified against the legislation. “That’s the single scariest thing about this legislation. It’s changing the rules.
Behind-the-scenes discussions resulted in significant changes to Jindal’s original proposals, including a delay in implementation, a backing away from an age 67 retirement age for most employees, and dollars saved going to the pension systems’ long-term liabilities instead of into the state budget as Jindal originally planned.
The Guillory-sponsored pension bills that the Finance Committee shipped to the Senate floor for debate include:
- Senate Bill 47 would change the calculation of benefits to five-year average final compensation from the current three years. The change would be phased in one month at a time and be completed by July 2015.
- Senate Bill 52 would increase state employees’ retirement contribution by 2 percent over a four-year period. Rank and file employees currently contribute 7.5 percent or 8 percent depending on when they were hired.
- Senate Bill 749 would change the retirement eligibility, setting different ages based on years of employment. Exempted would be those age 55 or who have 20 years of employment as of June 30, 2013, and current employees hired before July 1, 2006, with 30 years at any age. Employees hired after that date would be able to retire with 30 years at age 60. Other employees’ retirement age would be 15 to 20 years at age 55; 10 to 15 years at age 57; at least five but fewer than 10 years, age 60; and fewer than five years, age 65.