Governors across the country are developing pension reform proposals to deal with mounting fiscal problems.
Among the latest to have publicly endorsed pension reforms, including in their State of the State addresses to legislators this month, are the governors of New Jersey, California, Washington, Virginia and Massachusetts.
It's also become a big issue in New York City, where Mayor Michael Bloomberg is promoting his own plan to cut pension costs.
And Keith Brainard, research director of the National Association of State Retirement Administrators, Georgetown, Texas, said potential public pension plan reforms are in the works in Arizona, Alabama and Florida, though details haven't been announced.
New Jersey Gov. Chris Christie targeted pension costs in his address to the state General Assembly Jan. 11, proposing to require increased employee pension contributions while reinstating state contributions that have been withheld. Mr. Christie has killed a $3.1 billion pension contribution for the current fiscal year, saying he wouldn't put money into a “broken” system.
He said the unfunded liability of the $71 billion New Jersey Division of Investment, Trenton, which oversees the state's seven pension plans, would grow to a “staggering” $183 billion from the current $54 billion within 30 years.
“If we cannot make the promises of your pension system more realistic, there will be no pensions for those who have earned them,” Mr. Christie said in his address.
In her own Jan. 11 State of the State speech, Washington Gov. Christine Gregoire proposed repealing a 1995 law that gave automatic benefit increases to some retirees covered by the Washington Public Employees' Retirement System and Teachers' Retirement System, both overseen by the $76.7 billion Washington State Investment Board, Olympia.
Both plans were closed to new members in 1977 and are the only two of the state's 15 public pension plans that are underfunded, according to Dawn Gothro, spokeswoman for the Washington State Department of Retirement Systems. The plans have a combined unfunded liability approaching $7 billion, Ms. Gothro said in an e-mailed response to questions.
“The (1995) pension law was well intended but it carries a staggering price tag and we simply cannot afford to continue it,” Ms. Gregoire said in her speech. “Pension reform will save $2 billion over the next four years and more than $11 billion during the next 25 years.”
Also on Jan. 11 in his state of the Commonwealth address, Virginia Gov. Robert McDonnell proposed that state employees contribute 5% of pay to the $51.9 billion Virginia Retirement System, Richmond. As part of his proposal, state employees would get a one-time 3% salary increase and the state would increase its contribution rate to the system to 6.08% for state workers from 2.08%, and to 7.16% for teachers from 5.16%, said Jeanne Chenault, a spokeswoman for the $52.3 billion pension fund. The increase would start July 1.
Virginia state employees have made no pension contribution since 1983, when the state agreed to cover employee costs in lieu of pay hikes. “With a net 2% contribution from Virginia employees, and an additional 2% from the state ... we will provide $311 million a year, or $4.2 billion over 10 years, in new funding for the system,” Mr. McDonnell said to the Virginia General Assembly.