Scuttlebiz: State pension plans can’t afford your retirement
Both states plans, but especially
Think of a miniature version of the impending
Most people -- especially current or retired state employees (and their dependents) -- don't want to think about the issue. They don't want anyone meddling with the astronomically generous benefits they receive or expect to receive, regardless of whether the plans go insolvent.
And without some reform, they will go insolvent, leaving taxpayers on the hook for the costs and diverting state funding away from other services to pay retiree benefits.
Delivering bountiful benefits while pushing the costs (and political liability) down the road has left public pension plans all over the nation owing billions more than they have in assets.
At a national level, plans are about 74 percent funded, creating an unfunded liability of about
The Georgia State Employee Plan and the Georgia Teachers Plan have unfunded liabilities of "only"
Like nearly all public pensions, these are "defined benefit" plans, meaning that as long as public servants contribute a portion of their taxpayer-funded salaries to the plan, they are guaranteed pre-defined payments on retirement for the rest of their lives based on an average of their top earning years.
Note the "guaranteed" and "rest of their lives" parts -- that's where the unsustainable part comes in. Especially when you factor in OPEB, or "other post-employment benefits," which includes health care insurance.
State OPEBs are not trust funds but "pay-as-you-go" systems, meaning expenses are paid when they come due. Last year, the costs were
I'm no accountant, but that just doesn't seem sustainable.
This is why private industries (those not controlled by labor unions) did away with traditional pensions years ago; they realized they couldn't pay a lifetime of benefits to 50-year-olds without breaking the bank or robbing Peter to pay Paul.
State and local governments, obviously, have had no such qualms.
No one should begrudge a comfortable retirement to our teachers, highway patrolmen and prison guards, but their windfall shouldn't come at the expense of private-sector workers who -- federal statistics show -- earn less, have less job security and are responsible for funding their own retirements through "defined contribution" plans such as 401(k)s.
Unlike the state, the private-sector can't soak taxpayers or raid the public treasury to make up for their pension managers' poor stock, bond and real estate investments.
Earlier this year, voters in
The Palmetto State has made modest reforms, but its South Carolina Retirement System still has unfunded liabilities ranging from
This "optional retirement plan," called the ORP, was what I chose when I was hired by the
I chose it because it was most like the 401(k)'s I had been accustomed to in the private sector; my money was my money, and I didn't want to wait 10 years to get "vested" in the system.
The perverse part of state retirement plans is that it actually counts on employees leaving the system before getting vested so it can keep their contributions. In
My ORP choice, in retrospect, turned out to be a wise one considering I resigned after just four years in the communications and marketing department.
All I'm able to say about my early departure is that my final year was spent in the Ricardo Azziz administration working under a former vice provost whose staff nickname was "Adonis." You might have seen his real name in the news lately; he's currently facing two counts of felony theft stemming from alleged malfeasances that occurred in my former department.
So I'll just leave it at that.
I know what you're thinking: This guy has an ax to grind with state employees because he's still chapped over quitting his job.
The truth is, had Adonis and I never crossed paths, there's a good chance I'd still be at the university, earning a healthy salary and enjoying the opportunity to promote an institution in the midst of an unprecedented expansion.
Here's the thing: I thought the state benefits plan was out of whack even when I was a state employee. I recall a conversation from those years that I had with a colleague, a three-decade employee looking forward to post-retirement benefits that I found jaw-dropping. This was an amount that exceeded the average Augusta metro area household income by at least 25 percent.
And this was one employee. In one division. In one department. There were literally hundreds just like her on campus and thousands statewide.
That's when it hit me: How on Earth are we going to pay for all this?
It's a question that, 15 years from now, policy-makers in
Just wait until they leave.
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