The Advocate, Baton Rouge, Louisiana, on real savings
The Advocate, Baton Rouge, Louisiana, on real savings:
While it can be an arcane area of government, retirement policy is one where the 2014 Legislature can be said to have made a positive difference.
Gov. Bobby Jindal signed into law proposals pushed by Rep. Joel Robideaux, R-Lafayette, and Sen. Elbert Guillory, R-Opelousas.
The eventual Act 399 is something of a package deal, changing the way cost-of-living adjustments are made for retirees. It was accompanied by the first cost-of-living increase, at 1.5 percent, for retirees since 2009.
State retirees do not receive Social Security, so the increases are justifiable, but the fact is that the large state systems have substantial debts — unfunded accrued liabilities, or UAL. The new law will allow COLAs in the future on a schedule based on the systems reducing the UAL debt.
Retirement debt is a long-term obligation, so the savings to the retirement debts of the state will be substantial over the next generation.
It was, of course, a political matter and thus a compromise, as the Public Affairs Research Council pointed out.
“This reform is not as advantageous as PAR’s long-standing recommendation to replace the (retirement system’s) experience accounts with a pre-funded system that collects money during the working life of the employee to pay for future COLAs. But the Robideaux-Guillory reform, which was endorsed by the governor, is a significant step forward and may be the biggest long-term cost-saving measure of the session.”
In a session marked by short-term budget-balancing, the compromise on retirement debts marks a welcome case of long-term fiscal prudence.