A bill soon to be before the state House will pit one group of state retirees against another, such that, when one group gets a cost-of-living raise or permanent benefit increase, their increase will make it all the harder for the other group to ever get a permanent benefit increase. That bill is Senate Bill 740. Under SB740, retirees in the Louisiana State Employees’ Retirement System will be divided into two subaccounts: hazardous duty and rank-and-file; those in the Teachers’ Retirement System of Louisiana will be divided into K-12 teachers and postsecondary education.
The key difference between the two groups in each system is that hazardous duty and K-12 will be able to get permanent benefit increases even if the systems are less than 80 percent funded as long as the system’s actuarial return on assets is 8 percent, while the rank-and-file and postsecondary retirees will have to wait until 80 percent funding is achieved. Currently, the funding for both systems is 60 percent. An adviser for the governor said it could be 10 to 15 years before funding could reach 80 percent. Some at TRSL say it might be 20 or more years.
Here is how one group is pitted against another. Every time hazardous duty or K-12 gets a permanent benefit increase, that increases the system’s liability and thereby causes the total funding of the system to decrease, thus increasing the time it will take to reach 80 percent for rank-and-file and postsecondary retirees.
Paul Richmond, a legislative actuary, stated in his fiscal note on the bill:
“Under SB740, LASERS will not be able to grant PBIs to members associated with the Rank and File Subaccount for the foreseeable future. And because, in the interim, PBIs will be granted to members of LASERS associated with the Hazardous Duty Subaccount, the funded ratio of LASERS will be diminished each time a PBI is granted; the liability associated with the Hazardous Duty Subaccount will grow more rapidly; as a result, Rank and File Subaccount members may never become eligible for a PBI. Similar conclusions may be drawn relative to PBIs for members associated with the Postsecondary Education Subaccount.”
Inflation has not gone away. This year Social Security gave its recipients a 3.6 percent increase. But public retirees don’t get Social Security. Ten or 20 years is a long time for rank-and-file and postsecondary retirees to go without a PBI. In the previous 20 years, inflation has increased 64 percent. What $10,000 would buy in 1992 now costs $16,350.
All retirees in each system have contributed equally. They should be treated equally. One group should not benefit at the expense of another.