Louisiana Gov. Bobby Jindal proposed pension reforms on Wednesday that would create a cash-balance plan for new state employees and merge two of the state's pension plans.
In a speech posted on the governor's website, Mr. Jindal cited the state pension plans' $18.5 billion in unfunded actuarial liabilities and the cost to taxpayers of “nearly $2 billion” in 2011 as reasons for the reform.
“If costs continue on the current path, the state could see an addition $3 billion or more added to the (unfunded actuarial liabilities) by the end of the decade,” Mr. Jindal said in the speech, which was given Wednesday to the Rotary Club of Baton Rouge.
Among his proposals: creating a new cash-balance plan for all new state employees and merging the $12.8 billion Louisiana Teachers' Retirement System and the $1.4 billion Louisiana School Employees' Retirement System, both of Baton Rouge, “to streamline administrative and overhead costs while taking advantage of economies of scale” because both systems cater to school employees.
Other proposals include:
- the addition of the state's Commission of Administration to the boards of the state pension funds, which the governor stated would “ensure that our pension boards understand the fiscal realities we are facing”;
- calculating retirement benefits using employee salary averaged over five years rather than three years; and
- changing the retirement age to 67.
Cindy Rougeou, executive director of the $9.3 billion Louisiana State Employees' Retirement System, Baton Rouge, said in a statement: “Singling out rank-and-file members, as is being proposed, raises serious questions of fairness and focuses the proposal on only a small portion of the (unfunded actuarial liability). Promises to current employees must be kept. Changing the rules in the middle of the game for midcareer employees is not a promise kept.”
Kyle Plotkin, spokesman for Mr. Jindal, would not provide further information on whether the new cash-balance plan would mean the state's four pension funds would close to new employees.
