Revenue plans proposed

Panel discusses cost-of-living increases for state retirees discussed

The chairman of the state Senate’s retirement panel on Tuesday floated ways to fund cost-of-living increases for 110,000 state employee and teachers pension systems retirees as well as those who follow them.

The multipronged proposal by state Sen. Elbert Guillory, D-Opelousas, would also earmark dollars toward reducing the long-term debts of the Louisiana State Employees Retirement System, and Teachers Retirement System of Louisiana.

Potential revenue raising options mentioned by Guillory include dedicating a fraction of state legal settlements, such as those from the BP disaster; interest earnings off unclaimed property; and the increase in all taxes and fees above a base year.

Three-fourths of the funds generated would go toward reducing the systems’ unfunded accrued liabilities, while one-fourth would help pay to guaranteed retiree cost-of-living adjustments, he said.

The two systems have UALs totaling $18 billion, $10.9 billion of which is in TRSL. The unfunded accrued liabilities calculates how much the systems need to cover promised long-term benefits.

State taxpayers are constitutionally required to pay off by 2029 a good part of the debt run up by past administrations, which approved benefits without funding them. The repayment plan is backloaded so more and more state revenues are required each year.

Guillory discussed the ideas as the state Senate Retirement Committee met to review draft legislation considering alternatives for paying cost-of-living adjustments. One proposal would be funded with a 3 percent increase in contributions from state employees and teachers. An estimated 136,865 active pension system members would be impacted — 84,513 in TRSL and 52,352 from LASERS.

Approval of new funding sources “would reduce or eliminate the extra employee contribution and simultaneously pay down the UAL,” said Guillory, explaining how the two approaches fit together.

The state would pay an extra 1 percent toward obligations to retirees.

The proposal would also delay an individual’s initial eligibility for receiving a COLA benefit and gradually move to calculating pension checks based on the final five years instead of three years of compensation for current employees.

The state employees and teachers pension systems have argued that the latter change violated the state constitution by changing terms of employment contracts.

Guillory said he is gearing up to submit legislation using both approaches for consideration by the 2013 Legislature.

“I think guaranteed COLAs are something we need to do. Every year, we have retirees coming on hand and knee, coming to the Legislature begging for something they earned for a lifetime of service,” said Guillory. “We have to take some responsible step.”

More than 34,000 retired teachers and state employees have annual pension benefits below the federal poverty level. They do not have the “safety net” of Social Security in retirement years.

The retirement systems count 67,657 Teacher’s retirees and 42,722 LASERS retirees.

The Senate panel spent most of the meeting discussing the ins and outs of the draft legislation.

“My concern is I don’t want to make a promise especially to these workers who have given so much and then find out it cannot be sustained,” said state Sen. Gerald Long, R-Winnfield. “Is there any way we can begin looking at this from a predictable revenue stream?”

TRSL Executive Director Maureen Westgard and LASERS Executive Director Cindy Rougeou thanked legislators for their interest in funding COLAs. But they said it was premature to comment on Guillory’s proposal, which they had received for review Monday evening.

“We need to know what does it cost,” said Westgard.

At a 3 percent increase in employee contributions, Westgard said, “Employees would be paying more than what they are getting in return.”

Frank Jobert, director of the State Employees Retirement Association of Louisiana, said the question is whether employees can afford to pay an additional 3 percent when they have not had a pay raise in several years.

“I just don’t know whether we can expect the employees to do anything more at this point,” Jobert said.