Saturday, February 20, 2010

While you were distracted

So while you were getting all hot and bothered by some legislator's attempt to place a gun rights holiday on Martin Luther King Jr. Day (a guy who was assassinated by a gun), or cutting 12th grade, or eliminating school buses, the legislature crafted a major reform of state pensions.

Why should you care about state employees' retirements? Because these are our judges, our highway patrolmen, our firefighters, and even our teachers. Many county employees join into the state system. Public employees make less generally than employees of private companies. And in exchange, to get good workers, employees are offered better hours, and used to have a pretty good retirement package. Pensions used to be available for private employees as well, but most folks are placed into 401Ks and if you have been paying attension lately, you would know that these funds lost lots of money in the last couple of years.

Here's what the reform would do:
Senate Bill 63 would replace the defined-benefit pension plan for public employees hired after July 1, 2011, with a scaled-down option.

The bill from Sen. Dan Liljenquist, R-Bountiful, would provide a choice between a hybrid retirement plan with reduced benefits or a 401(k) plan that allows workers to contribute 8 percent of their salaries.

Under the hybrid plan, public safety employees like firefighters and police officers could retire after 25 years instead of the 35 years originally proposed.
The other bill would bar Utahns who retire and are rehired after July 1, 2010, from collecting a pension and a paycheck at the same time, a practice known as ''double-dipping.'' The Senate didn't have time to vote on Liljenquist's third proposal, Senate Bill 94, which would relieve employers of the requirement to add 1.5 percent of a state or school employee's salary into their defined-contribution plans.

The two measures passed Friday now go to the House for consideration.

The economic meltdown in 2008 left many pension funds shortchanged. The crisis stripped Utah of $6.5 billion, and returns in 2009 did little to recover losses.
The reason why the rest of the country's press is covering this is not because they care about Utah, it is because every state's pension is woefully underfunded and their budgets are in deep red. Most of the gap-filling last year and this year was from the Recovery Act. Yet the local press likes to cover the message bills instead.

Here's a rare exception:
State Sen. Jon Greiner, the Ogden police chief who draws a public-employee pension, was notably absent from a pair of long and contentious hearings last week on historic changes to the state's retirement system.
Had Greiner voted against any of the measures, the dramatic changes to Utah's retirement system would have stalled in committee on a tie vote.
"I'm not happy with two out of three of the bills," Greiner said. That includes the reform effort's centerpiece, which would replace the current pension system with a 401(k)-style plan for future hires.
Greiner, R-Ogden, said he had committed to Sen. Dan Liljenquist, sponsor of the reform effort and chairman of the Senate retirement committee, that he would not vote in committee to defeat the bills.
"He's not happy with some of them, but he would have voted them through anyway," said Liljenquist, R-Bountiful. "He understands that the rest of the body needs a chance to debate them."
Numerous law enforcement representatives turned out Wednesday and Friday to speak against the bills, including proposals to add 15 years to the time police officers must
serve before they are eligible to retire by raising the service requirement from 20 years to 35 years.
Greiner acknowledges the issue puts him in a difficult spot, with an inherent conflict on the issue no matter how he votes.
He is not only a recipient of a law enforcement pension and Ogden's police chief, but he also is a so-called double dipper. Greiner retired from Ogden's force and was rehired. He now receives a pension in addition to his $107,000 salary. The bills would not end double dipping for workers such as Greiner, but for future employees.
Liljenquist said the argument that law enforcement and firefighters should have an earlier retirement deadline has merit because of their jobs' physical demands, and he plans to find ways to change his legislation to let them step down earlier.
That will likely cost more money, which could raise the amount employees are expected to contribute.
Don't get me wrong: double dipping is wrong and I think the practice should be prevented...but there are downsides to ending it. If you want an experienced former chief from one city/town to be your chief, you can't hire him because he would rather take is pension and work for a private company or just be retired rather than give up his pension for the job you are offering.

There is likely waste in the system that can be rooted out like double dipping. There are probably employees who should not be retained but are kept on so they can reach the magic number of years in order to get their pensions. But this change will mean that a slew of experienced state employees will retire in droves just before the effective date if they have passed that magic number. Why stay on six more months or whatever and lose your pension when you could get a guaranteed discounted portion rather than play the Russian Roulette known as the stock market?

This proposed change is indeed massive and massively important. Will attorneys in private practice think twice about applying to open seats on the bench if it means that not only will their income be slashed dramatically, but they will not get pension benefit? I bet they will. Just like how Congress is filled with the characters we have due to our campaign finance system (who wants to constantly be dialing for dollars, knowing that some outside group and blind side you and knock you out of office?) Will some folks opt for other professions when they learn that the benefits of being a police officer, a firefighter, a teacher, etc. will much worse than they were even last year? Probably.

Will this reform make us safer, our children smarter? That's the big question that no one knows the answer to. But what we do know is that these three bills are a hell of a lot more important that whatever crap bills Buttars scrawls with his crayons. There is a reason why the Ogden Police Chief was told to either vote for the bill or make up an excuse not to be there for the committee vote: the leadership wants this to pass...while you are distracted about school buses or abortion or gay rights. When asked, Utahns weren't that favorable to the idea, hence, the distractions.

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