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House votes to end gain sharing despite Bailey's
alternative
New pension bill will cost more than gain-sharing,
says Oak Harbor lawmaker
Lawmakers in the House of
Representatives have voted to end the "gain-sharing" benefit from public
employee pension plans and replace it with a new, broader benefit
package that could cost taxpayers even more, says
Rep.
Barbara Bailey, R-Oak Harbor.
Gain sharing was approved
by the Legislature in 1998 at a time when the stock market was booming.
Under that plan, if invested pension fund market returns average 10
percent or more over the prior four years, half of the excess returns
are shared with Plan 1 and Plan 3 enrollees in a gain-sharing benefit.
The other half would go to pay down the state's unfunded pension
liability.
The new proposal, approved
Saturday by the House, 52-45, eliminates gain sharing on January 1, 2008
for retirement Plans 1 and 3 and creates a new benefit, allowing members
in Plans 2 and 3 with 30 years of service to retire without reduced
benefits at age 62. It was amended to the Fromhold bill,
House Bill 2391.
"Gain sharing is an issue
that goes across Plans 1 and 3. Yet this bill extends early retirement
into Plan 2. Those members never had gain sharing. Plan 2 should not
even be a part of this discussion," said Bailey, a member of the
Select
Committee on Pension Policy. "Not only will we have a very rich
benefit package from this proposal, it will likely be more costly than
retaining gain sharing in the future."
When gain sharing was
originally approved, lawmakers were mistakenly told it would cost the
state nothing. It's now expected gain sharing could cost the state $3
billion over the next 25 years.
Several bills were
proposed this year to eliminate gain sharing. However, Bailey proposed a
measure that would have reduced the costs of gain sharing while also
getting the state caught up on payments to the Plan 1 unfunded liability
that were skipped in 2002 through 2004. Her plan,
House Bill 2116, was the only proposal to retain gain sharing by
increasing the threshold from 10 percent to 14 percent. The state
actuary says that under Bailey's bill, the gain-sharing trigger would
still be hit, but not as often.
"My bill would have solved
the problem on gain sharing. We could have kept gain sharing and made it
responsible. We could have made it work for the retirees of the state,"
said Bailey. "That would have taken us out of what I think may be a
potential lawsuit coming forward. If that lawsuit is successful, we may
have gain sharing back again, along with this new benefit package. That
will be very costly to the taxpayers of the state."
In addition to the early
retirement option, the House-approved measure would provide a 20-cent
cost-of-living increase for Plan 1 members on July 1, 2009. Bailey said
that her bill would have saved taxpayers $4.3 billion over the next 25
years, far more than the $1.1 billion savings contained in House Bill
2391. She noted that instead of using the savings from the
House-approved bill to pay down the pension system's unfunded liability,
the money is unwisely spent for other new, costly programs.
"That's not a smart way to
use our tax-payers' money. My bill would have been the most responsible
way to address the gain sharing problem and it would have put the
savings toward the unfunded liability, ultimately saving taxpayers
billions of dollars," said Bailey. "What we will now have is a very rich
benefit across all plans that will cost the taxpayers more money in the
long run than had we kept gain sharing in the modified way I had
proposed."
The
House-approved measure, House Bill 2391, passed the Senate today,
26-21, and was sent to the governor.
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For more information, contact:
John
Sattgast, Public Information Officer: (360) 786-7257
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