Pension reform revamped
Anyone who can count knows the state retirement system is drowning in debt. And anyone who can count votes knows that the governor’s original plan to address the problem was drowning in the steady drip, drip, drip of criticism that his proposals are unfair, unconstitutional and—worst of all—impolitic.
While his attention publicly was focused on passing his landmark education bills, Gov. Bobby Jindal was hearing from legislators, his canaries in the coal mine, that constituent complaints about his retirement overhaul bills far surpassed the flak over teacher tenure and private-school vouchers.
So on the day after the education legislation passed, before even basking in the bill-signing, Team Jindal acknowledged the obvious: that the plan to overhaul the retirement system needed an overhaul itself before its first legislative hearing.
Jindal’s revised proposal still increases state employees’ retirement contributions from 8% to 11%, but has been changed to apply the 3% bump to the pension system’s debt, instead of, as originally planned, to help balance the budget.
That addresses one constitutional objection: that the increased contribution for employees, if not used to retire debt, was actually a payroll tax, which could not be considered in this even-numbered year.
It still leaves the question of whether the higher contribution violates employees’ contractual rights, as courts in other states have found and the legislative auditor warns of in his recent report. The governor and legislative leaders see no legal defect.
The administration also tweaked its proposal to raise the retirement age to 67 for those who have not yet turned 55. The fundamental unfairness to a 54-year-old career employee was killing the proposal, so it’s been changed, going forward, to preserve benefits earned so far, but to reduce future-earned benefits for employees who retire before 67. That still won’t satisfy state workers, but it would sit better with the general public, especially those who don’t have a retirement plan where they work.
Taken together, the changes will quiet some legislative criticism but will also blow a $60 million to $70 million hole in the budget that is shakily balanced as it is.
Besides policy concerns, the revision also serves as political damage control from recent press reports that, as filed, the bills would cause the governor and other top elected officials to sacrifice less, if at all, compared to the worker bees.
Two newspapers reported that the bill to increase state employee retirement contributions excludes elected state officials in their current terms. That was followed by a news report that the bill to increase the retirement age also would not apply to the governor, lieutenant governor, treasurer and a handful of former legislators. They fall under a different plan that allows retirement at age 55 after 12 years of service.
That would count for Jindal should he seek and serve a third term, after sitting one out, as his political consultant and close friend Timmy Teepell has publicly predicted.
The governor’s office found itself responding to new criticisms of its plan almost daily. It initially said the payroll contributions of elected officials, now at 11.5%, could not be raised right away because it was unconstitutional to reduce an official’s compensation during that term.
Then, last week, it said it would support a constitutional amendment to allow that increase. Another statement said that the administration would ask to amend the retirement age bill to apply to the initially unaffected officials, and that the governor would contribute 3% of his salary to LSU.
By week’s end, the administration released the complete set of changes, led by the switch to using the increased retirement contributions to pay down the pension system’s debt.
It was a bit messy getting there, and employee opposition will persist and constitutional questions linger. But the new game plan does provide Jindal with a stronger case to make to lawmakers and the public.
If the bills pass with those amendments, agencies and universities will face deeper cuts. The governor and elected officials, like state employees, will have more taken from their paychecks.
And Jindal, if he serves a third term, will have to wait until 2038 to get his first retirement check, instead of 2026. Yet, without those changes, the governor stood to lose more in political capital, the true coin of his realm.
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