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Why state pension plans matter to us all
Rep. Barbara Bailey
Discussions of our state budget usually focus on anticipated levels of
state tax revenues and government spending. Less common is discussion of
our steadily growing public employee pension liability and the dramatic
consequences for employees and Washington’s taxpayers if the legislature
continues to ignore it.
Fifteen state plans promise retirement
benefits for thousands and thousands of state and local employees. Sixty
percent of our current employees are expected to retire within the next
six years. Pensions are a contractual obligation of the state, backed by
its full faith and credit. This means we as taxpayers are held
responsible.
For a number of years the governor and the
legislature have repeatedly reduced or suspended its payment
contributions to the pension trust fund as a method of balancing the
budget. Combined with recent lower returns on trust fund investments we
now face an $8 billion dollar unfunded liability that threatens to
compromise employees’ retirements in the future.
State pension
plans are funded by member payments, investment returns and employer
contributions, which are all pooled in a trust fund. This financing
structure includes the important components of unfunded future liability
and unfunded past liability. I am concerned this growing financial
obligation will eventually fall hard on taxpayers.
When will
these payments be made? Will they require tax increases? Will they be at
the expense of state government services? These unanswered questions are
magnified by the fact our state continues to face serious budget
problems.
Moving forward, our state should follow common-sense
guidelines for its pension policy:
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Fully fund liabilities each year, following the schedule and method
set in law. We cannot continue to duck our responsibilities and push
forward our funding obligations, as we have done in the past.
-
Be
very careful about expanding pension benefits beyond what we are
already obligated to provide to members by law, and require proposed
benefit increases to be accompanied by sound calculations of
long-term affordability.
-
Support “hybrid” plans, which combine a set level of benefits
guaranteed to members with defined member contributions that can be
invested among a choice of options.
The bottom
line is our state pension plans are facing unprecedented challenges and
the status quo is unsustainable. My goal is to ensure our state is
financially responsible with employer contributions, keeps it promises
to all members and all pension plans are financially sound for the
future.
I hope I have conveyed why state pension plans matter to
us all. Please stay tuned. I encourage you to contact me if you ever
have any questions, comments or solutions.
Representative
Barbara Bailey, R-Oak Harbor, serves the 10th Legislative District. She
is the ranking Republican on the House Financial Institutions and
Insurance Committee, and a member of Select Committee on Pension Policy.
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