Monday, February 15, 2010

Standard-Examiner Editorial: Retirement Reforms Needed

An invitation to our board "experts" to "edumacate us" on these matters

This morning's Standard-Examiner again carries another strong editorial, this time applauding State Sen. Dan Liljenquist, R-Bountiful, for "his efforts in the Legislature to shore up Utah's state retirement system, which took a $6.5 billion hit from the recent recession":
OUR VIEW: Retirement reforms needed
Senator Liljenquist has introduced two remedial public employee retirement bills in the State Senate, SB43 and SB63; and we believe the Standard this morning does a pretty good job of boiling it all down to the basics:
SB43 ends the odious, budget-busting practice of double-dipping, where a state employee covered by the retirement system collects both a paycheck and a pension. That is costing our state about $900 million over 10 years. It must end. [...]
SB63 moves employees hired after July 1, 2011 to a retirement system that de-emphasizes pension benefits and instead shifts the future risks of retirement from the state to the individual.
We've railed against the "odoriferous" double-dipping practice endlessly on Weber County Forum of course; so for what it's worth, we'll naturally join with the SE foursquare in strongly urging the passage of SB43. This one certainly seems to be a no-brainer... at least to us.

As for SB63, which would, as we understand it, essentially substitute a defined contribution plan in place of the current budget-busting defined benefit retirement system for all "new hires," we're still sitting on the fence, but strongly leaning in the direction of supporting this latter bill too.

In that connection, we believe the SE makes a pretty persuasive point with this:
[SB63]... transfers an economic reality to public employees that most private-sector employees have been dealing with for years -- that it's up to us to have a secure retirement. The days of a pension taking care of us are nearing the end.
So what about it WCF readers? Is it time for our state public retirement system to fall into place with the economic realities of the private sector? Or are there hidden nuances that operate in favor of taking a little more time studying this... or in even perhaps preserving the current system?

And we already know current public employees are already
making lots of noise about this; but we're wondering what all the shouting is about, since these above Liljenquist-sponsored revisions would only ostensibly effect "new hires." We don't lay claim to having any particular expertise in matters concerning public employee retirement however, so we invite our board "experts" to edumacate us on these matters.

All WCF readers are invited to chime in, of course; but we'd particularly like to elicit come commentary from readers in the Utah public employment sphere.

Have at it, O Gentle Ones. The world-wide blogosphere eagerly awaits your ever-savvy comments.

Update 2/15/10 1:36 p.m.: Well, Lo and Behold, and in response to our reader invitation, we already have some extended commentary available (submitted via email) from retired Ogden Firefighter and former City Council Candidate Dirk Youngberg, who suggests that Sen. Liljenquist's SB63 needs a little more thought, and isn't quite ready for prime-time:
Knee Jerk Reaction to the Market?
We'd hoped to provoke a robust response to this afternoon's WCF write-up, and indeed that seems to be exactly what we're getting!

Who will be the next to chime in on this topic and further contribute to our online enlightenment?

9 comments:

OgdenLover said...

Would the double-dipping end for those currently receiving retirement while being employed in government, or would that too apply only to new hires?

If the latter, at least stopping the practice for new hires might pave the way for additional changes later. Sometimes a slippery slope is a good thing.

retiree said...

They could continue to double dip. But the money that they are recieving for a 401k instead of the employer making contributions to the retirement system would stop. The employer would then have to resume paying that amount to the system. These would be the grandfathered.

retiree said...

If you return to a public sector job after July 2011, your retirement benefit would top, and you would base retirement benefit from the new job.

retiree said...

So if I retire from a Police postion making 50k per year, and return to a parks maintenance postion making 28k per year, my new retirement benefit would be based on the 28k job when I terminate employment for the second time.

Curmudgeon said...

Double dipping has to stop. That seems to me undeniable. Other states have stopped it without mass exodus from public service jobs.

As for other elements of the pension reforms [if you like them], or mangling [if you don't]: I'm worried by the "hurry hurry we have to do this right now immediately quickly" approach the legislative sponsors seem to have adopted with respect to fundamental changes in the pension system. [Let's call it the Godfrey Strategy elevated to the state level.] There may well be substantial changes that should be made, but we need to look into the matter with some care, to not base conclusions solely on economic conditions deep in a historic recession, we need to consider carefully any unintended consequences of the changes, and look at several alternatives that might restore actuarial soundness to the public pension system rather than just one.

For example, what would this change do by way of making the system financially sound: change the pension system so that you are vested in it after twenty years [i.e. you are entitled to draw a pension], but you don't get to draw it until you reach the age at which you can first draw Social Security [currently 62]. These are pensions for retirement, after all, and were not intended to provide second career lifetime incomes.

Would that change significantly reduce the actuarial underfunding? I'd like to see the numbers on that, before tanking the entire existing system. Are there other reforms short of whole sale tanking the system that would achieve the same result? I don't know. But the legislatures should ask and look before making a hasty decision.

There are advantages to the defined contribution system [essentially, employers making contributions to your 401K in lieu of pension fund contributions]. Some are significant: e.g. it's fully portable. No matter what job you move to, your fund goes with you, etc.

So changes beyond the double dipping ban may be necessary, and advisable: but I'd like to see a range of alternatives looked at, and costed out, instead of the rush to judgment currently under way.

Service vs Profit said...

How is either of these bills going to encourage individuals to enter the already depleted ranks of the public safety/education field? One just needs to look at the educational system in Utah to see that it can’t take a big hit in the teacher area or it will truly fold. This affects Ogden more so than others because of the poor way the city has kept up with wages and benefits with their police and fire employees. A fact that leaves both the police and fire departments short on manpower and experience.

Government’s priority is to provide certain services to the citizens where the private sector’s priority is to make a profit. It seems some individuals forget that fact and keep comparing the two.

Senator Liljenquist’s bills are heavily supported by the Godfrey Administration and Mark Johnson in particular. If this doesn’t raise any red flags nothing would.

what will it cost us said...

Just like private corps that have lowered or terminated retirees benefits, just stopping the double diping seems reasonable. Give them a choice, retire and keep the benefits or keep the job and stop the retirememnt pay. Easy solution seems to me.

The city says it is like a corporation so act like one and be responeable to the taxpayers just like stock holders.

My cousin lost 75% of his retirement when Delta Airlines went thru re-structing, as a x-pilot he still has a nice income. Another good friend lost his pension when US Airways went bankraupt.

I don't feel any hurt especially from those with health benefits and over $100K in pay. If they were truly concerned about future generations of Utah workers in civil service they would step aside.

Curmudgeon said...

What it will Cost us:

Part of the reason all those pensions were terminated is that corporations have been under-contributing to their own pension plans for a long time, and in some cases have looted the pension funds to keep corporate returns looking healthier than they were in down times. Mismanagement of private pension funds [including in some cases union-managed pension funds] has been a problem for a long time.

Merely noting this to suggest that the problems, their causes, and their solutions, are not nearly so black-and-white clear as some legislators and others are suggesting.

just a cop said...

Did General George Washington not fight for a better life of his men?

You bet he did and Congress wouldn’t go for a Pension System until years later.

At least General George Washington fought the fight... Unlike Senator and Police Chief Greiner!

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