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Lawmakers must ensure state pension sustainability

Post by TNT Editorial Board / The News Tribune on March 20, 2012 at 6:11 pm with 3 Comments »
March 20, 2012 5:13 pm

This editorial will appear in Wednesday’s print edition.

All over the country, pension systems for public workers are in trouble. Many are woefully underfunded. Nationally the deficit was $1 trillion at the end of 2008, and it’s been widening since as baby boom workers retired in growing numbers and the recession battered investment funds.

Washington is in better shape than most states. As of 2008, according to the Pew Center on the States, it was one of only four states whose pension systems were fully funded.

But, according to Pew, “Washington needs to improve how it manages its long-term liabilities for both pensions and retiree health care and other benefits. The state has failed to meet its actuarially required contributions since 2001.”

Translated, that means the state needs to make changes to its pension system if it’s to be sustainable in the long term.

A proposal by Republican lawmakers is a good starting point – not “class warfare,” as one state labor-union leader called it. As part of the GOP budget proposal, the state would skip a $143 million payment to reduce liability in two state pension plans, but repay it by cutting benefits to future state employees.

Yes, it’s unfortunate that future workers wouldn’t get the same generous benefits current workers enjoy. But many states have gone down that road. Between 2009 and 2011, 43 states made major changes to retirement plans for state employees. Just last week, for instance, New York lawmakers voted to cut retirement benefits for future public employees in order to avoid tax hikes and layoffs.

In the private sector, many companies have completely dumped traditional pensions and gone to a defined contribution plan, similar to a 401(k). Other workers in the private sector have no pension benefits at all.

The GOP plan would also eliminate an early-retirement benefit for state workers hired after July 1 – something Gov. Chris Gregoire proposed last year.  Savings from that would go toward paying off the state’s Plan 1 unfunded liability more quickly than under current law.

Some Democrats have criticized the GOP proposal to skip a payment into the PERS1/TERS1 pension system, but lawmakers should remember that it wouldn’t be something new. Pension payments have been skipped or pushed out six times since 2001 – every time but one when the Legislature was under Democratic control. So crying foul now seems a little hypocritical.

Current state employees would not be affected by these changes – except for the fact that their pension funds would be in better shape. That’s a result worth supporting.

Leave a comment Comments → 3
  1. commoncents says:

    Wait – let me see of I have this right? Actuaries have determined a minimum contribution amount in order to maintain an appropriate funding status. This contribution amount is based upon a conservative interest rate assumption which is similar to thousands of pension plans across the country that have maintained fully funded status and aren’t overwhelming the employer. However, the legislature which is charged with executing the advice of the professional fails to heed that advice and has done this for over a decade…And you say changes need to be made to the SYSTEM? The only flaw in this system is that the legislature has failed to do THEIR JOB!

    It’s like failing to put gas in a car and saying the car is broken when it runs out of gas. Yes, let’s blame the vehicle instead of the operator.

  2. olympicmtn says:

    Eliminate all pension plans before we bleed to death. And those that have 401K earnings will soon have Dems asking you to pay added capital gains tax.

    “And now Obama’s new 2013 budget extended his reach further to include the exclusion allowed now for 401(k) contributions.”

    Read more:

  3. commoncents says:

    olympic – clearly you have no idea what you are talking about. Obama’s budget talks about limiting the exclusion of employer deductions to 28% of income down from 36%…which means if your employer adds up all of the employee and employer contributions that he/she makes then they can only deduct from their taxes 28% of that total. It has ZERO to do with your account on an employee level. Additionally, it has absolutely NOTHING to do with 401k earnings or capital gains. But, you are welcome to go on hating Obama…I have no problem with that.

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