On Retirement, State Employee Screaming Against Change Continues

From today’s Alexandria Town Talk:

PINEVILLE — Major changes to benefits for retired state employees would be a “disaster,” a top official with the Retired State Employees Association said Thursday.

“It will be a disaster for our retirement system,” said Allen Reynolds, executive director of RSEA, at a meeting of the Alexandria chapter at the Main Street Community Center in Pineville. “We have to fight this as an organization, because there is a lot of support for it in the Legislature.”

Reynolds was speaking of the possible change from a defined benefit to a defined contribution system for state employees.
Under the current, defined benefit system, state employees are given regular, guaranteed benefits after retirement, based on their years of service.

Under a defined contribution system, employees would pay into a retirement account, similar to the way many people pay into a 401(k). They would be responsible for planning and managing their account, and would be guaranteed benefits after retirement only until their account balance runs out.

“It’s, ‘you get to invest your own money, good luck,'” Reynolds said. “If we go to a defined contribution plan, you are totally on your own. You’re rolling the dice. You don’t have a safety net any more.”

There is more:

“What we’re doing is working,” said Cindy Rougeou, executive director of Louisiana State Employees’ Retirement System. “Frankly, it isn’t broken and doesn’t need fixing.”

And:

Supporters say moving to a defined contribution plan will save the state money. Under the current system, the state accrues liability if benefits paid out exceed funding.

Reynolds and Rougeou point out the state still is responsible for the current unfunded accrued liability, regardless of whether it changes retirement plans, though moving to a defined contribution system would protect the state from accruing more.

“It’s bad for retirees, and I don’t think it’s a good idea for the state of Louisiana,” Reynolds said. “Many believe it will save the state money in the long run, but I just don’t see that being the case. It will hurt the state’s ability to recruit and retain talent. All in all, I just don’t see the benefit.”

So far, it doesn’t appear that a bill to move state employees out of a pension system and into an individual retirement plan has been filed, so it’s difficult to address this concern with specificity. It is clear, however, that something will likely be proposed. According to Louisiana House Speaker Jim Tucker, who spoke on the issue at a Louisiana Association of Business and Industry conference back in January, a restructuring of the pension system has to happen. The state has liabilities of some $2.8 billion for its employees’ retirements and only $2.3 billion in reserves to meet those obligations; leaving a $500 million unfunded liability which Tucker characterized as a gun aimed at taxpayers’ heads.

“Louisiana will be a retirement system that does state services on the side,” Tucker said. “This is a major problem.”

Getting anything changed, of course, is going to be like fighting a land war in Asia – regardless of what the actual bill might look like when it’s filed. As we’ve seen just recently with teacher pay and working conditions, elementary and secondary school funding, budget changes at the state’s universities and even pay raises for state employees in the midst of recessionary budget cuts, the minute the news is anything but rosy with respect to public-sector workers you’d think the world was coming to an end.

State employees have a valid point in that they’re not part of the Social Security system with the retirement program they’re currently on – so switching to something that looks like a 401(k) would in theory remove the lifetime income portion of their benefits. And so it’s not a lie on their part to argue that they’re being screwed to some extent if the pension system changes.

Here’s the problem, though – taxpayers don’t exist to provide state employees with pensions. State employees exist to provide taxpayers with government services. This is a fact which seems to get lost every time these fiscal-policy discussions come up. So if the taxpayers can’t afford to pony up for lifetime pensions for state employees, then it’s time for Louisiana to come up with the best solution the taxpayers CAN afford.

And that’s what Tucker is saying. You can scream about the legislative pay raise thing two years ago, in which Tucker was admittedly complicit (and Rep. John Schroder, who is absolutely correct in questioning yesterday why it’s even being discussed to give out pay raises to state employees when the overall budget is being cut, was complicit in that debacle as well). And if you want you can blame Tucker for the fact that Louisiana’s government used to have more cash on hand than it does now – his detractors will say that the only reason all these budget cuts have to happen is that he and his allies “stupidly” repealed the Stelly plan; such statements give off a strong whiff of a mentality in which the primacy of government funding is unquestioned. But the fact is the current regime in charge of Louisiana’s government is not going to raise taxes on the people of the state. Period. And since taxes aren’t going up, and federal funding for the state government isn’t going up, and the overall national economy doesn’t show many signs of producing a lot more tax revenue any time soon, the only answer is that spending has to come down.

Is it perhaps the best idea to convert state employees to a 401(k) type program? Well, that’s what private companies do in most cases and it seems to work out well. Can state employees manage their own retirements better than the pension-fund managers at LASERS can? Maybe not, but there doesn’t seem to be a particular reason why LASERS can’t operate as something like a mutual fund for its current clients and therefore continue to manage funds on more of a voluntary basis; not to mention the fact that it seems either an insult or an outrage to make the argument that the folks in charge of the nuts-and-bolts operation on Louisiana’s government are less capable than private-sector workers to handle their own finances – either they’re being unnecessarily babied or we’ve got idiots operating our state agencies. I don’t accept either of those arguments.

I also don’t accept the argument that a pension plan is necessary to recruit quality people into state agencies. Such an argument depends on the old assumption that when someone takes a job they stay in it until retirement. But outside of state employees almost nobody does that anymore; people change jobs and even careers every few years now, and someone coming out of college can be expected to easily have a half-dozen employers before retirement. Given that, a more valid mindset would be to have state employee retirement plans mirror those everywhere else so that someone who takes a job in state government could do it for 5-10 years and move back out into the private sector without having to sweat the dire consequences of losing retirement benefits and so on. The current system largely traps those employees with cushy benefits when the more talented of them might actually serve the people of the state better by applying their skills in job-creating activities like starting businesses.

This whole discussion is of a piece with the glaring need to change the mentality of government in general. The stultified, negative idea of the public-sector employee sees the private sector as a milkcow, his job a life sentence and burden to be thanklessly borne for a pauper’s nickel as compensation – and change as something to be feared. It’s that mentality which demands three-to-five percent budget increases every year or else a political fight to the death, and it’s that mentality which refuses any alteration whatsoever to how things are done.

Tell a state or even local government employee who complains about his or her job and how awful it is that maybe he ought to consider quitting and doing something else, and I’ll lay 8-to-5 odds that either you’ll start a fight or earn yourself a look not dissimilar to what you’d get if you suddenly stripped naked and did somersaults. The same conversation with a private sector employee much more often involves a “yeah, you’re right” and a discussion of other opportunities. And until there is more parity of mentality between the two sides, we’re going to have increasing amounts of howling and nasty political battles over the fact that we as a society in dire fiscal straits simply cannot afford to lavish ever-mounting salaries and benefits on public employees.

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