Re-Engineering Public Retirement
Employer contributions for public pensions cost Louisiana taxpayers $1.78 billion last year, which is primarily from the state general fund. This number is projected to grow annually in accordance with a legally-binding payment schedule in order to fund more than $18 billion in system debts.
The outstanding debt for retirement is a result of commitments made decades ago, promised benefits that continue to be relatively generous in certain systems, and investment losses. On an annual basis for years to come, retirement costs will require a larger percentage of a shrinking state budget. Taxpayers can expect more dollars to fund the retirement of public employees, leaving less for higher education, health care, and other state priorities.
Louisiana has instituted a number of policies to attempt a fiscally responsible payment schedule for retirement debt. In 1987, the Louisiana Constitution was amended to require full funding of state retirement systems, including the complete pay-off of the Unfunded Accrued Liability (UAL) at that time by 2029. In recent years, lawmakers have increased the retirement age, raised employee contribution rates for new workers and boosted UAL payments.
The Blueprint for Action
— The state should reform, or end, the current defined benefits plan for new employees.
— Louisiana should immediately offer a defined contributions option for public employees, including state workers and teachers.
— Review and revise the benefits offered in the four state retirement systems, including the contribution rate, retirement age, and other components.
— Require retirement systems to lower the percentage of anticipated investment returns to a more realistic figure.
— Begin to consolidate the management and governance of retirement systems.
— Change the membership of retirement boards so that beneficiaries are not the sole decision-makers and overseers of the system.
— Prohibit convicted felons from receiving the state share of their pensions.
— Reform the health benefits plan for state retirees.
Source: Blueprint Louisiana