This attack is precipitated, in my judgment, by a movement in other states to rein in what is perceived to be a pay/benefit package for public employees that is fiscally unsustainable and really better than what these employees/retirees deserve. Interestingly, these efforts are trying to control benefit levels through requiring employee contributions to increase. But in every case I can see -- most notably Wisconsin -- government employees in our state already contribute more to their health and retirement plans than the amount the governor of Wisconsin is suggesting his employees should pay. But never mind. Facts don't seem to count for much here -- it's the ideological principle of the thing that seems to be driving this.
Some say our retirement system has an unmanageable unfunded liability. We, like many systems across the nation, do have a significant unfunded liability. Some modest adjustments in contributions and benefits may be necessary to deal with that unfunded liability. But our system is actuarially sound and there is no crisis. We have time to deal with any changes that need to be made and they should be made in a deliberate manner with professional assistance. The system is not broken so we need to be careful when we try to "fix" it. Unfortunately there does NOT seem to be the inclination to want to solve the problem in this manner.
Two bills have been introduced (S531 and H3568) which mandate doing away with our current retirement system (a defined benefit plan) and replace it with a defined contribution plan which creates individual accounts for each employee, provides for employer matching funds up to a certain amount, and to be managed, in terms of investment of the funds, by the employee him/herself. After retirement, the state has no further obligation to you. You either live on your investment or you don't but the State doesn't care -- no further retirement benefits would be available.
Another set of bills (S134, S238 S261 and H3066) has been introduced regarding the creation of a Department of Administration. These bills do away with many of the functions of the Budget and Control Board by placing them under the oversight of a Department of Administration which would answer directly to the Governor. At this point, it is somewhat unclear what would happen to oversight of the Retirement System though it appears our health insurance system would be headed to the new Department of Administration under these bills.
We need to be very concerned about the ultimate location of these two critical functions.
Two critical subcommittees have been appointed in the Senate. One, headed jointly by Senator Alexander (Oconee) and Senator Ryberg (Aiken) is called the Retirement and Employee Benefits Subcommittee. Senator Hugh Leatherman appointed this subcommittee to examine the system and come up with a permanent long term solution. The second subcommittee is headed by Senator Larry Martin (Pickens) which is examining what should be done with restructuring with the Department of Administration. These are important committees and we will keep you up-dated on their actions and when you need to be there.
The Retirement System and the Health Insurance System currently answer administratively to the Executive Director of the Budget and Control Board. With the election of Governor Haley, one of her first actions was to seek the resignation of the then Executive Director, Frank Fusco. She achieved this. Frank was replaced with Eleanor Kitzman.
On Friday, Ms. Kitzman removed Peggy Boykin, Director of the Retirement System, from her post. A new director is to replace her. In my judgment, Peggy was a very competent professional who kept the interests of her constituency -- that is you and me -- in the forefront.
So now you have an idea of the environment in which we are playing. Significant bills have been introduced to dramatically change the Retirement System and administrative/personnel changes have been taken in preparation for implementation. It appears to me that our retirement system is under direct attack as it has never been before. The system that we and so many who came before us have used to preserve and maintain our financial lives in retirement and which those who come after us have been counting on is in jeopardy. And it appears to me that this attack is a political decision, not a business decision substantiated by professional advice. It is trying to create a crisis where none exists and provide an immediate solution for a problem that cries for more deliberation.
The direct impact on those already retired will be mitigated by the fact that the courts have maintained you cannot go back and apply changes retroactively. But your cost of living adjustment (COLA) does not fall into that protected category; nor does your health insurance. And we have long maintained that our goal is not just the protection of our own benefits but protection of the benefits for those who come after us. This is not just a self-serving activity.
There is only one way to address this. We must use politics just as they are. Our advantage is that we are everywhere. And that old Tip O'Neill adage is true: "All politics is local politics."
YOU MUST CONTACT YOUR LOCAL LEGISLATORS. Right now!
Your Senator is especially important.
Tell them you do not want to see the retirement system changed to a "defined contribution" system. You want it maintained basically as it is now with cost of living adjustments and a retirement benefit from the state--not some individually managed account.
Tell them that certain changes in benefits and contributions can be made but the basic structure must remain the same. IF WE DON'T GET PRESSURE FROM THE GRASS ROOTS ON THESE POLITICIANS THEY WILL GO THE ROUTE OF LEAST RESISTANCE.
IF WE DON'T GET THIS STOPPED, WE WILL HAVE ONLY OUR OWN INACTION TO BLAME. AND REMEMBER, SMALL CHANGES NOW GROW INTO BIG IMPACTS OVER THE YEARS. THIS WILL AFFECT YOU PERSONALLY FOR THE REST OF YOUR LIFE. IT IS WORTH A FEW MINUTES TO WRITE YOUR SENATOR AND REPRESENTATIVE AND LET THEM KNOW HOW THEY CAN BEST REPRESENT YOU.
This won't get done without you. Only you can make this happen.
Dear Senator ...:
There appears to be several initiatives this year designed to change our retirement system and the oversight of our health insurance system (S531, H3568 and H3066). These two systems have served government employees at all levels of government quite well for many many years. These systems are not broken, we do not have a crisis and any needed changes should be deliberately made with the aid of competent professional assistance. Frankly, I am fed up with politicians who seek to sidestep the real issues and scapegoat public employees and their benefits as the problem.
State employees and retirees highly value our current defined benefit retirement plan. Especially important to us are cost of living adjustments which make the difference between living a retirement with dignity and living one in poverty. Shifting to a defined contribution plan would be a great disservice to government employees who have never pretended to be investment specialists.
We know that some changes to benefits and contributions must be made from time to time to maintain a strong system. We are prepared for that. But that does not mean throwing the baby out with the bathwater. Given the current unrest, ask yourself, “what competent young person would come to work for government in this environment?” In this, as in all things, you get what you pay for.
I ask that you please safeguard our interests in our retirement and health plans and resist the temptation to change them so much that we will all regret the outcome. Several other states that have done this are now trying to go back. Look at the West Virginia experience. We must learn from the errors of others.
Thank you for your kind attention to these matters.