Amendment Steers State Surplus Money Towards Looming Retirement Debts

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Rep. Pearson receives bipartisan support in effort to reduce state’s retirement liabilities

BATON ROUGE, La. – Rep. Kevin Pearson’s (R-Slidell) agenda to attack the state’s retirement debt faced a setback with the defeat of his HB 530 this week. However, another bill he authored, HB 384, which allocates future surplus money towards paying off state retirement debt, received final legislative approval Wednesday.

Like HB 530, Pearson’s bill targets the state’s growing unfunded accrued liability (UAL). A UAL is the money over and above collected contributions required to pay off all benefits if the retirement systems were to shut down today. Louisiana has four retirement systems: teachers, school employees, state employees, and state police, and all are in debt to the tune of $18 billion. In addition, Louisiana’s other post-employment benefits – retiree health care and life insurance – have a UAL of $11.5 billion dollars.

HB 384 would be a constitutional amendment to allocate 5 percent of all surpluses towards the UAL beginning July 1, 2015. This amount would increase to 10 percent with the beginning of the 2016 fiscal year.

Due to a scheduled larger share of offshore oil and gas revenues from the federal government, some lawmakers anticipate future surpluses. Under Louisiana law, UAL is paid off through non-recurring dollars, such as surplus money. Pearson’s bill establishes a minimum percentage of non-recurring revenues to go towards the UAL.

Pearson’s legislation has received broad bipartisan support, passing through the Senate by a vote of 34-2. Sen. Butch Gautreaux (D-Morgan City), who wrote the concurrent Senate Resolution, has been a notable advocate.

“We have never addressed that debt properly,” he said. “It makes sense to pay off that debt until we bring in any more.”

However, Sen. Norby Chabert (R-Lafourche), voted against the bill, claiming that the amendment has no sunset provision and would deprive other areas of need of funding. Chabert argues “the bill doesn’t say when we stop paying the UAL down or stop putting money into it.”

Now that HB 384 has cleared both chambers, voters will determine its fate when it appears on the Oct. 22 ballot.

Jamison Beuerman is a contributing writer and policy analyst at the Pelican Institute for Public Policy. He can be contacted via email at jbeuerman@pelicaninstitute.org or followed on twitter @jbeuerman.

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