Pension limits gain Senate support
A major overhaul of Utah's public employee retirement system now appears to be a lock to pass the Senate after a lopsided preliminary vote Thursday and opponents are focusing their efforts on stopping the bills in the House.
Sen. Dan Liljenquist, R-Bountiful, said his proposals, which would do away with the state's decades-old pension system in favor of a 401(k) model, is his attempt to make sure the state can honor its commitments to retirees.
"The number one goal, and I want to make this absolutely clear ... is to ensure the state can meet 100 percent of the pension obligations it has made to current employees," said Liljenquist. "There is only one thing that could bankrupt this state, and that is an unfunded liability that comes from our pension program."
The Utah system serves more than 180,000 current and former public employees, including state workers, schoolteachers, municipal employees, police and firefighters.
But Utah's system -- like every pension system in the country -- suffered mightily in 2008, as investment funds across the nation took a beating and left more than $1 trillion in unfunded pension liabilities nationwide, according to a report released Thursday by the Pew Center on the States.
The authors note that the $1 trillion figure probably understates the total liabilities, because the figures are a snapshot taken in 2008 and don't reflect the full damage done to state retirement investments. Moreover, states structure systems to take losses over a number of years and have built in overly optimistic rates of return for the future.
The authors rated Utah as one of 16 "solid performers" in the country, because the state has funded more than 80 percent of its retirement obligations.
"In the midst of a severe budget crisis ... state policy makers may be tempted to ignore this challenge. But they would do so at their own peril," wrote Susan Urahn, director of the center. "In many states, the bill for public sector retirement benefits already threatens strained budgets. It will continue to rise significantly if states do not bring down costs or set aside enough money to pay for them."
Liljenquist's proposals seek to control costs, since he argues the $400 million a year it would cost to fully fund the retirement system is untenable and would mean 8,000 teachers never see a classroom.
It also shifts the risk of a future economic downturn to employees rather than the state, since it would be employees' personal retirement accounts that would suffer.
Sen. Gene Davis, D-Salt Lake City, said the discussion had focused too much on the state's liability "and we're not willing to address the assets we have in our teachers, the assets we have in our public employees."
"This isn't something about dollars and cents only. The retirement system has a face on it. It's a face that's important to everyone," he said.
Liljenquist's proposals also would raise the eligibility for retirement from 30 years to 35 years of service and from 20 years to 25 years for police and firefighters. He seeks to end the state's match to existing 401(k) plans and end so-called double dipping by suspending the pension for future retirees who are rehired.
Legislators would be exempt from the double-dipping ban.
Sen. Jon Greiner, the Ogden police chief who draws both a pension and a salary, mounted a vigorous opposition to the reforms, arguing the market appears to be recovering and it is premature to make drastic changes without more research.
Greiner voted against two of Liljenquist's three bills, but did not attend the committee hearing on the measures, where his vote could have blocked their passage.
In the end, Greiner was the only Republican to vote against the measures on the floor, as the Senate gave preliminary approval to all three measures by wide margins. They could be given final passage as early as Friday.
Kory Holdaway, a former legislator and current director of government relations for the Utah Education Association, said the report shows that retirement systems around the country are struggling.
"At the same time, it shows we're one of the best as far as our pension management," he said. "We're one of the best managed in the country, so it begs the question of why we're trying to rewrite something that seems to be working pretty well."
Holdaway said he fully expects the retirement bills to sail through the Senate and public employee groups have focused their efforts on persuading House members to defeat them.