Monday, March 19, 2012

An Open Letter - Louisiana State Retirement Changes

Re: An average guy’s perspective on state retirement changes

Dear Louisiana Citizen:

This coming week the Louisiana Legislature will debate changes to state retirement. Mark Twain was right: “No man’s life, liberty or property is safe while the Legislature is in session.”

Often times the voices of common people are drowned out by politicians and the so-called “experts.” I am neither an expert nor a politician. But I am a librarian, a rank-and-file state worker, and I have tried my best to stay informed. I am writing on a matter of public concern.

Below, I have listed some issues to consider as you think through the debate. These are not anyone’s political talking points. Instead, they are my reflections on the proposed changes.

Why I am personally against the proposed retirement changes?

1.) Unconstitutional - Changing the retirement benefits for current employees appears unconstitutional: The 1974 Louisiana Constitution states, “Membership in such a retirement system shall be a contractual relationship between employee and employer, and the state shall guarantee benefits payable to a member or retiree or to his lawful beneficiary upon his death.”  (See report from the LouIsiana Legislative Auditor.)

Huey Long said, “I am the constitution around here now.” Isn’t having one Huey Long in Louisiana history enough? We should follow the constitution.

2.) Massive Tax Increases on Select State Workers - Placing a massive payroll tax increase on state employees is not simply increasing “contributions.” Especially in a time when raises have been withheld for the fourth year in a row, the plan is a crushing tax burden on workers. In many cases, the tax increase will be 37.5 % or more.

(Some people are very confused about the basic mathematics here. See the bills related to this provision. The Advocate got it right on Apr. 4, 2012, "Jindal, other elected officials excluded in pension plan": "The 3 percent translates into a near 40 percent increase for rank-and-file members of LASERS. But not for the governor and other elected officials — their contribution rates would not increase.")

3.) Does Not Include All Pensions - To divide one group of employees against another does not solve the Unfunded Accrued Liability (UAL) issue. On the contrary, it is just a convenient strategy to divide and conquer workers for political gain.

4.) UAL May Actually Increase - The governor’s plan may cause the UAL to increase by forcing huge numbers of current employees to leave the state or retire while not having new employees as contributors paying into the state retirement systems. In other words, we may witness a run on the bank this fall if the plan passes. Right now, the Louisiana pensions are solvent. But they will not stay solvent under the Jindal proposal.

5.) “The Cat Food Retirement Plan” - A defined contribution plan for new hires without including Social Security benefits is cruel and unwise. I like to call this “The Cat Food Retirement Plan.” Cat food is what future retired state workers will be forced to eat if they live past the ripe old age of 75. There’s nothing morally right about this.

Many Louisiana citizens do not understand the negative impact that not paying into Social Security has on state employees. I know a woman who is a retired teacher. When her husband died, she lost all of his Social Security benefits. Now she teaches as a substitute several days a week in order to survive. She is close to eighty years old.

6.) General Fund - Putting the state retirement match into the General Fund is a disingenuous shell game and will not help the UAL in the least. This is just a short-term fix for this year’s budget woes.

7.) Hurts the Louisiana Workforce - Recruiting future state workers will be very difficult without Social Security and without a defined benefit plan. Likewise, the mass exodus of current employees will drain the state of skilled workers. Thus, good employees will be lost to outmigration and early departure from the Louisiana workforce.

8.) Breaks Promises - It breaks previous promises made to employees. It makes working for state agencies precariously unreliable places to be employed. In my case, it adds another 18 years to my promised retirement date.

9.) Devastating to Employees - The plan is harsh and unfair to current employees by raising taxes and changing the retirement age while reducing promised benefits.

10.) Harms Current Retirees - The plan will potentially jeopardize the overall solvency of Louisiana retirement systems, and it will hurt 300,000 already retired workers who depend on the benefits. This could cost the state dearly in the long-term.

It is unfair to snipe at plans related to a problem without proposing a set of remedies for the problem. What can we do about the UAL and the state retirement systems?

1.) Follow the constitution and keep promises made to current employees. Do not renege on retirement promises, and do not pass massive tax increases.

2.) Stop allowing state agencies to fail to contribute the appropriate amount toward employee pensions. This is why we are in trouble now.

3.) Adjust the benefits for future employees, but do not go to a defined contribution plan. Without Social Security, low and moderately paid state workers will starve in their retirement years. That is, if there are any state workers left after the plans go through.

For example, I signed on with an understanding that I could work at least 20 years for a retirement benefit equaling 40% of my salary, and I won’t get a dollar’s worth of Social Security as it now stands, even though I paid in 7 years prior to working for the state. I cannot imagine having neither Social Security nor a state pension.

4.) Put a cap on retirement benefits for the fat cats, typically unclassified employees. Make a rule that says no new employee, no not one, can make over $100,000 per year in retirement benefits.

5.) Keep in mind that the UAL will not be nearly as bad in the future as it seems to be right now. With a strong stock market and without a mass exodus of current state workers, things will become more solid with the debt. The market is stronger and appears to be continuing to expand. Furthermore, the UAL is already scheduled to be remedied over time, like a mortgage.

6.) Designate more state surplus dollars to go toward the UAL. We are facing problems now because the state did not pay what it was supposed to pay in the past.

7.) Quit playing partisan politics with rank-and-file workers’ retirement programs. It is bad for morale, bad for the Louisiana workforce, and bad for recruiting. It obscures the real problems with retirement and other issues in the state budget.

8.) Don’t divide workers. Deal with all of them as one group according to constitutional requirements.

9.) If necessary, raise the payroll contributions of new employees to 10 % and average the retirement benefits over the highest five years.

10.) The debt is slated to be paid off by 2029. Why not push this to 2039 with put in place even more "triggers" to make sure future budget surpluses go toward the UAL?

11.) Never put pension contributions, either the state match or employee contributions, in the General Fund. The General Fund is where Louisiana politicians go to steal.

Categorically, I am for fixing the UAL, but so far the proposals resemble mere political games rather than actual solutions. When Gov. Jindal took office, he had a 1.1 billion dollar surplus and the UAL was around 10.5 billion dollars. However, the surplus was squandered and now the UAL is 18.5 billion dollars. I cannot help but think the problem is with our governor and not with rank-and-file state employees.

I hope you will listen to voices that are often overlooked in the spin. Thanks for reading. I vote often, and I will not forget how elected officials voted on this important issue.


Dayne Sherman
Contact information for Louisiana Senators:

Contact information for Louisiana State Representatives (House):

The most important people are your 2 legislators and the members of the House and Senate Retirement Committees.

Senate Retirement Committee:

House Retirement Committee:
“Who are your state Senators and Representatives?” - Go to the bottom of the webpage. Click on the question and type in your address.

Contact information for the Louisiana Governor:
Gov. Bobby Jindal
PO Box 94004
Baton Rouge, LA 70804-9004
Phone: 225-342-7015 / 1 866-366-1121 (Toll Free)
Fax: 225-342-7099
E-mail form: