State agencies to receive more of the employee retirement costs

State employee and teachers’ retirement systems are losing active members and their pension contributions, which will lead to the shifting of more costs to state government and local school districts, a state panel heard Thursday.

Retirement system actuaries touched on the development during a meeting of the Public Retirement Systems Actuarial Committee which increased the percent contribution the employers will pay for the fiscal year beginning July 1.

The bump is associated with a variety of factors, including a decision that reduced how much funding is projected to come from investment earnings and higher required payments toward eradication of system unfunded accrued liabilities — money needed to pay promised benefits for system members.

The UAL for Louisiana’s four statewide retirement systems jumped from $18.5 billion to $19.3 billion during the last fiscal year — most of it attributed to state employees and teachers’ systems.

The panel sets new employer contribution rates each year.

The employer contribution to the Louisiana State Employees Retirement System jumped from 30.6 percent to 31.7 percent of payroll and Teachers Retirement System of Louisiana from 24.5 percent to a projected 27.1 percent of payroll.

The number of active LASERS members dropped from 54,930 to 52,342 state employees in the last fiscal year and TRSL actives dropped from 86,742 to 84,513.

“The decline in the number of state workers is not figured into our evaluation report,” Legislative Actuary Paul Richmond said. “It’s factored in after it occurs ... but certainly it does have a significant impact.”

Richmond specifically mentioned the upcoming major loss in state employees as private hospitals take over management and operation of LSU public hospitals.

The number of state employees, including those in higher education, and public school teachers has declined in recent years with Jindal administration continued budget cutting; initiatives moving traditional state jobs to the private sector particularly in the health care field; and education system revamps.

Last year, Gov. Bobby Jindal also tried to change state employee pension system laws to require current employees to contribute more while working longer for less benefit.

The Legislature rejected the changes that Jindal said were needed because the current retirement system was too costly for the state and “unsustainable.”

A large portion of LASERS’ and TRSL’s unfunded accrued liability is due to the legislature and prior administrations not putting in the money needed to pay for benefits they granted.

The constitution requires the state to pay off that initial “legacy” debt by 2029. The schedule of debt payoff is backloaded with increasing state payments.

LASERS actuary Shelley Johnson said a turning point has been reached because for the first time the payment has surpassed the interest on the debt.

“Going forward we expect that to continue,” she said.

The number of active employees in Louisiana’s two other smaller statewide systems — School Employees and State Police — also declined.

“We continue to experience active trooper declines having the effect of increasing employer contribution rates because of declining payroll,” system actuary Charles Hall said.

In addition, the new retirees coming on board are paid more than the older retirees so their pension checks are more, Hall said.

Comments

1) Comment by agagent - 09/03/2013

This problem has been building for years. It is an issue that is easy to demagogue in order to blame Jindal or to obstruct any reform. Reforming the retirement systems now is easier than when they become hopelessly bankrupt like in the case of some states, such as California.

2) Comment by agagent - 09/03/2013

A 2010 report said Louisiana retirement systems had funds for 70% of it obligations, which indicated a system with serious concerns.

3) Comment by agagent - 09/03/2013

Retirement systems are in trouble because they ignore what their own actuaries say, the cost of living increases are given without regard to the long term costs, and because of the rising costs of health care for retirees. In 2008 only 4 states were able to fully funded their retirements and forty states had not set aside enough assets to meet their retirements.

4) Comment by agagent - 09/03/2013

Louisiana is no alone. Across the country state retirement systems are promising much more than they can deliver. In 2010 research report (Pew), based on 2008 data, estimated a trillion dollars gap between what states promised and assets available to deliver them. The problem has worsen since.

5) Comment by RODEO CLOWN - 08/03/2013

The Unfunded Accrued Liability(UAL) may not necessarily be a “bad” thing, however, it is definitely not a good thing. Jedleland, I appreciate the analogy between the UAL and a home mortgage. And, just as a homeowner's credit rate “takes a hit” when the mortgage payment is late or missed, the state's credit rating “takes a hit” from failing to pay on the UAL. Why? Because the UAL is an unfunded, outstanding liability, a huge 20 billion dollar “fuggly” liability, that adversely effects the state's credit worthiness when examined by the big three credit companies, ie. Standard & Poor's, Fitch, and Moody's. The UAL's effectively lower's Louisiana's credit rating conversely increasing the interest rate Louisiana must allow when selling state bonds. The state must aggressively tackle this debt with a confirmed, realistic payment schedule. Thousands of state employees have worked long and hard for years and are depending on the solvency of this program. In spite of what people like Jindal and Sadow believe, the vast majority of state employees are hardworking, honest, dedicated employees. They deserve nothing less and the state owes it to them.

6) Comment by Warp7 - 08/03/2013

You can put the blame for the increase in retirement numbers to our so called boy genius called Jindal. His negative attitude towards state employees and teachers in general, plus his negative policies is forcing people to think twice about staying on the job longer, out of fear that things will get worst or they will loose their benefits if they stay. Normally, folks stayed 35 to 40 years, not any more under faux genius Jindal. It is the good employees that are leaving, not the weak employees.

7) Comment by crazycajun - 08/03/2013

Remember when motorcycle labeled him "boy genius". Foster thought the drive thru at McDonald"s was a miracle too, probably. How much of a genius he is now fat boy?

8) Comment by jedleland - 08/03/2013

by the way a UAL is not in and of itself a bad thing, any more than a mortgage is. THe debt figured presumes that every retiree or state employee active today will start drawing benefits all at once. Not too likely. Your mortgage outstanding (i bet Jeff has one) is a UAL until you pay it off. if you had the funds to pay it off sitting in an account, you wouldnt need a mortgage. LASERS is doing quite well, even in the current economy, and is more than liquid. its a ginned up crisis, and waylon-smithers bootlicks in shreveport should (and do) know better.

9) Comment by jedleland - 08/03/2013

go easy on jeff, he's nursing a broken heart. bobby has yet to call, and it looks like he never will! how about that duplication of effort? LSU Shreveport has 7 asistant or associate professors in its history and social sciences section. Not real professors, just associates and assistants. its has some real professors too. are you telling me with declining state support (thanks to Bobby) with too many colleges in the state (wasnt Bobby president of the UL system for a few weeks once?) and with a UAL growing by the day, that we really need 7 assistants or associates? I reckon we could get by with 6. Its not like its the real LSU campus, just a backwater, right jeff? I bet they could even get by with 4 or 5. Its not like professors (real or Associate) work that hard. THey dont even have to shave or wash. Its a pretty easy gig. Unnecessary, deadwood, duplicative? I say let the students decide. After all, Bobby fully supports grading of services and proividers (like, say schools) and letting consumers decide whats best (like, say, paying students). Lets take a look at Jeffs reviews from his students. Oh, i forgot, someone did last year, Those reviews werent too great were they? deadwood you say? we agree.

10) Comment by RODEO CLOWN - 08/03/2013

RESPONSE TO JEFFSADOW: And by what measure have you, or anyone else, determined which employees are “unnecessary, deadwood, duplicative(is that even a word?), and inefficient employees because it's too expensive to lay them off, and the taxpayer must continue to foot their salaries because it's cheaper?” Are you even aware of what the UAL is? Are you cognizant of the fact that what you've determined and described as “deadwood...inefficient employees” had nothing to do with the UAL's creation or it's existence. These people simply applied for a job with the state, were hired and worked the prerequisite period of time to qualify for what ever benefits are provided. The UAL would exist in spite of their employment with the state-not because of their working for the state. Furthermore, the UAL is not going anywhere. “Bobby Jingle” can propose all of the “snake oil” proposals he wants, the UAL is part of Louisiana's obligation to the PAST AND PRESENT employees of the state. It will not evaporate simply because “academics” like yourself and Jindal “wish” it away. The “Bobby in Wonderland” approach to government is just that, a fairy tale. Unless one is on the “receiving end” of this approach, then it-the approach-turns into a “nightmare”. Either way, in this fairy tale, Louisiana will definitely not "live happily ever after”. Louisiana will continue to suffer long after Jindal is out of office.

11) Comment by bigfatman - 08/03/2013

As usual the state doesn't keep their word. Let's play catch up and make the employer pay more. The state is killing the local school board budgets. I hate to see what it will be like in 5 or 10 years. I hope we get to have our full retirement before we die.

12) Comment by RODEO CLOWN - 08/03/2013

The unfunded accrued liability(UAL) is a nightmare that has been in the making for over 70 years. “The legislation that created the teachers’ system in 1936 was unfunded, meaning the system never really had the cash needed to support retirement payments. But who needs money? Payments were made nonetheless, creating an instant UAL” This “approach” continued for the next 52 years. For the next 52 years, 1988, the state contributed ZERO to the various retirement programs relying solely on participant contributions with the “difference” in payments paid from general fund. 'When the Louisiana Legislative Auditor’s Office investigated the UAL last spring(2011), the total price tag weighed in at $18.2 billion. 'To put that figure into perspective, every man, woman and child in Louisiana would need to pony up somewhere in the neighborhood of $4,090 to retire the state’s entire pension-related UAL.” (PELICAN POST, J. ALFRED, JAN. 12, 2012) Even an attempt on the part of the 1988 legislature failed short in closing or reducing the UAL. The legislative effort and subsequently approved constitutional amendment required the UAL be paid off over a 40 year period ending in 2029. However, the amendment simply mandated a 40 year “pay off period”. The amendment failed to provide an amortization schedule, ie, the specific level of payments that were required to satisfy the payoff and failed to mandate yearly payments toward the UAL. This “loophole” left the “contribution” amount on the state's part open to legislative digression. As a result, their have been years when little if any contribution has been paid toward the UAL payment. Except for Jindal's attempt to “privatize” LASERS, as though the$18 billion dollar UAL will somehow just evaporate, Jindal has provided zero suggestions, proposed zero financing, in effect treating this problem like an unwanted relative that just want go away. This is a headache, a big, fuggly, finance draining headache that will not and cannot go away. If anything, Bobby's “head in the sand” attitude has just made matters worse. The laying off of thousands of state employees will produce a “net” fund drain LASER'S can ill afford and actuarials will find devastatingly destructive. Perhaps, just perhaps, Jindal may wake up to the fact that there are some problems that can't be solved through privatization. That putting a huge “FOR SALE” sign at the state boundaries will not reduce the cost of government. That productive government requires more than handing out pink slips, decimating health care and education, and handing out billions in business incentives-which he has done and continues to do-will not have the desired effect imagined.

13) Comment by jedleland - 08/03/2013

'unrequired'? I meant 'unrequited' of course. do they make jindal door posters? I guess you can always paste his face over a Justin Bieber poster. they sell em at walmart. even in shreveport.

14) Comment by jedleland - 08/03/2013

Come on sadow, have some self respect. your wierd infatuation with jindal has gotten you nowhere and youre still stuck in shreveport. no calls to head up any adminstration task forces, no cushy LSU job in BR, not vicechancellorship. and worst of all, your reputation battered as it is for all waylon-smithers type uber-bootlicks. self respect man.

15) Comment by jedleland - 08/03/2013

jeff sadow painting himself into a crner with his bizzarre jindal infatuation. i bet hes the only guy in shreveport who brings a bobby jindal lunchbox to school each day. he claims bloated state govt includes a 'gravy train of compensation' while, as anyone who actually bothers to investigate knows, state employees are routinely paid less than the private sector in almost every sphere. example? how about public sector assistant professors (who let us not forget are on the 'gravy train', draw all their pay from taxpayer sources, and are looking forward to state-funded retirement). Besides all that, one of those employees might make, i dont know less than $50,000 a year. not all that great even afer years of experience. and yet a comparable job a tulane might make, lets say, over $80,000. A private job NOT on the gravy train. Two possible deductions from this. 1. ms sadow's bizarre jindal infatuation has, like many an unrequired love, caused him to misstate a few thing, misspeak even, or just plain lie. or 2. that pay discrepancy is performance related, and some poli sci assistant professors are just not very good and have to work in public colleges in the north of the state, while those that actually know what they are doing, and have marketable skills, can go to Tulane and clean up with a much higher salary.

16) Comment by jeffsadow - 08/03/2013

So as I understand it according to other commenters, the state must keep on unnecessary, deadwood, duplicative, and inefficient employees because it's too expensive to lay them off, and the taxpayer must continue to foot their salaries because it's cheaper? It's exactly that illogical attitude which has swelled the UAL through a bloated state government that gives a gravy train of compensation (compared to private sector workers doing similar tasks). Curing the disease brings short-term pain, and this is the first step. But in the long run you are made healthy, and as the cash balance plan takes in a larger portion of state employees, the state will begin to heal, for which the overburdened taxpayer will be grateful.

17) Comment by Grannee - 08/03/2013

There's nothing like being brought to a public shame with everything lie you've told. Can't wait until he attempts his run for president....

18) Comment by geauxtee - 08/03/2013

The Jindal administration was told all of this would happen. The emplloyees of this State were willing to work to make positive change, but instead, they have been bullied, villified, and treated like dogs. Everything this administration rammed through last year has failed in court. A lot of time and tax payer money has been wasted. Many good employees have simply decided to move on. Good luck recruiting employees to provide needed services. This administration need to be run out of town!

19) Comment by bettergovt - 08/03/2013

Wait until next year when the LSU hospital system staff reductions are put in. There will be less actives paying in and more retirees drawing out. They passed the cash balance plan for new hires who can draw their money out at any time after 5 years which will destabilize the system further. Until the administration and the legislators stop ignoring what people tell them, they will continue to make the situation worse. Whenever they do anything that makes an employee stop paying in and start drawing out whether its scaring them into retirement or "privatizing" their job, it puts the tax payer on the hook for more and more. Its like a group insurance plan. The larger the group, the lower the rates. Stop believing the ***** put out by the administration. There is a reason the consulting firm that backed their plan was sued by another state. The savings they projected from penison changes did not pan out. The more state employees you lay off, the higher the pension contribution is for the state. You dont get out of it because it relates to prior retirees not current employees.

20) Comment by Grannee - 08/03/2013

Fire, fire everywhere there's a fire in Jindal's brew (budget). He puts one fire out only to start a bigger one somewhere else. Smokies (legislators) what ya'll gonna do before Jindal burns Louisiana down?

21) Comment by Grannee - 08/03/2013

Oh what a tangled web Bobby is weaving, beginning with his name. How long will the legislature allow this man child to continue destroying this state before someone stops him and his goonie friends? Remember legislators, we are watching each of you. If you don't stand for something, you will fall for everything! STAND UP NOW AND STOP THIS MAN CHILD FROM DESTROYING LOUISIANA AND HER CITIZENS! IF YOU DON'T, IT WILL COST YOU YOUR JOBS TOO!!!!