Gov. Bobby Jindal today urged a sweeping overhaul of state retirement systems, warning that Louisiana is on an “unsustainable path” for dealing with escalating benefit costs. In a speech to the Rotary Club of Baton Rouge, the governor unveiled a detailed plan he says would both ease taxpayer burden and ensure that workers will receive promised benefits.
Jindal says the state’s unfunded accrued liability—the amount it owes on promised benefits but does not have on hand—has tripled to $18.5 billion over the past two decades, three times the current total payroll. Despite recent efforts to pay down the UAL, Jindal says, it remains a huge liability, with taxpayers having to pick up nearly $2 billion this year.
“We have a lot more work to do, because costs continue to grow,” he says. “The state could see another $3 billion added to the UAL by the end of the decade.” The state constitution requires the UAL to be paid down by 2029. However, he says, “We weren’t elected to kick the can down the road.”
For new hires, Jindal favors a switch from a defined-benefit plan to a cash-balance plan. Whereas defined-benefit plans promise a set amount made up by taxpayers if costs rise, Jindal says, cash-balance plans rely on investing the worker’s contribution.
“We are not promising a benefit greater than we can get in the market,” he says. “It’s a responsible plan … which will provide a retirement benefit that is at least as generous as Social Security’s when market conditions are bad, and will provide a benefit that is far better when market conditions are good.”
For current employee obligations, Jindal wants to calculate benefits using a five-year employee salary average rather than three-year; align the state retirement age with the Social Security age of 67; and grant cost-of-living adjustments only when assets exist to pay promised benefits. He also proposes a 3% hike in the employee contribution rate.
“We need to rebalance our contribution rates so the bill doesn’t keep running up on taxpayers,” he says.
Jindal is also calling for greater efficiency and unification between the state’s four pension systems. He seeks to add the commissioner of administration to state pension boards and merge LSERS into TRSL. He expects his proposals to save taxpayers $450 million in the first year and $1.5 billion over the next five years.
“Everything we are proposing is about improving Louisiana for generations to come,” Jindal says.
You can read the full transcript of Jindal’s address at the governor’s website here.
Editor’s note: This story has been changed since its original publication.
