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Public pension reforms in state are designed to shore up funds

Published: Tue, September 18, 2012 @ 12:00 a.m.

In an rare act of bipartisanship, Re- publicans and Democrats in the Ohio General Assembly have approved a package of bills that should improve the financial health of the five public pension funds and keep them solvent.

While most Ohioans will not be affected by what the legislators did last week, they can take comfort in the fact that no taxpayer dollars will be used to prop up the funds. The insolvency of public pension systems has become a national epidemic, and in many states lawmakers have opted to deal with the crisis by tapping into their operating funds.

In Ohio, Republican legislators, who took control of the House and retained control of the Senate in the 2010 election, made it clear no taxpayer dollars would be used to plug the holes. The conservative think tank, The Buckeye Institute for Public Policy Solutions, issued a report that placed the total unfunded government pension liabilities at $66 billion. While that figure has been open to debate, pension fund managers and others acknowledged during legislative hearings that adjustments to benefits, premiums and eligibility requirements were necessary.

A study by Pension Trustee Advisors and KMS Actuaries commissioned by House Speaker William G. Batchelder, R-Medina, confirmed that reforms were needed and that the changes adopted in May by the Senate were necessary.

The pension funds’ difficulties are the result of a rise in the cost of health care, an increase in the number of retirees, and a lackluster return on investments.

The changes contained in the five bills will result in adjustments to benefits, premiums and eligibility requirements, including in some cases the age and service levels at which participants will be eligible to retire.

Allowances for cost-of-living fluctuations and the way the salary average for determining benefits is calculated are among other areas where the bills makes adjustments.

Two years ago, the Cleveland Plain Dealer reported that the amount of tax money spent on public pensions in Ohio and guaranteeing retirement payments for government workers increased by nearly a third since 2004.

The paper pegged the cost of supporting the pension funds for state and local government workers at $3.5 billion. That figure is expected to rise in the coming years when more baby boomers retire.

Median pension

Government retirees in Ohio earned a median pension of $21,804, according to an analysis by the Plain Dealer. The average for private sector workers, including Social Security, was $18,390.

Ohio’s public pension systems have generally required workers to contribute 10 percent of their salaries to the funds. Taxpayers contribute between 14 percent and 25 percent, the newspaper reported.

The rest of the funds’ revenue comes from investment earnings.

The changes that are in the offing for the five public pension funds will affect nearly 1.8 million workers, retirees and family members and in some cases the worker’s contribution rate will go up.

GOP leaders in the General Assembly have said they intend to deal with other aspects of the public pension system next year, such as double-dipping by employees. They should also address the issue of public employers (by extension, the taxpayers) picking up the employees’ share of pension contributions. Having any government entity pay 100 percent is unacceptable.

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