Negotiators working on compromise language in legislation to reduce costs in the state-level public pension systems say are still aiming for approval before the end of the legislative session.
“All four caucuses and the governor’s office are working on it,” said State Rep. Glen Grell, R-Cumberland, one of the sponsors of a pension reform bill approved by the House. “It’s tight but there’s still a possibility we can get it done before the end of session.”
The House and Senate have only a handful of session days scheduled before the November 2 General Elections. The Senate has announced it won’t be in session after the elections. The 2009-10 session ends on November 30.
The House approved the pension reform measure, HB 2497, in June, 2010. On the bill’s arrival to the Senate, leaders there said the bill didn’t go far enough to cut costs, which are staggering
The unfunded liabilities of both systems will explode in two years. The retirement system for state workers, SERS, for example, will have an unfunded liability of $10.6 billion in 2011, which means for fiscal year 2012/13 the state's costs under the current laws would increase from $489 million to $1.68 billion, or more than 245 percent.
The exploding unfunded liabilities have two causes: the state could afford to reduce its contribution rates to the systems in the 1990s due to robust returns from the financial markets. Those returns have disappeared; in 2001, the General Assembly made the pension systems more lucrative, and so more expensive. Some of the changes enacted in 2001 are erased for new hires under the House bill.
HB 2497 defers future pension obligation for the state and school districts, and reduces future costs through changes in the pension laws covering new hires.
In one change in the House bill, a multiplier used in calculating a state employee’s pension will drop from 2.5 to 2.0. The multiplier for lawmakers will drop from 3.0 to 2.0. In another change, state employees will be vested after ten years not five. The bill also ends the practice of allowing retirees to take all their contribution money out upon retirement.
Grell said the compromise language will change numerous provisions in the bill. One possible change: employee contributions would fluctuate just as the employer (state) contributions do now. “It makes sense to have the employee risk changes in the market just as the state does now,” Grell said. “Once you’re in the system under the current law, the employee rate never changes.”