By Chuck Reed and Dan Liljenquist
Retirement Systems of Alabama Executive Director David Bronner conjures Shakespeare in his most recent opinion editorial to say there has been Much Ado made of a supposed pension crisis underway in Alabama. Bronner tells of past reform efforts that did little to help the state out of its economic quagmire and insinuates that $15 billion of unfunded pension debt is really no big deal. He completely ignores the good that would come from true pension reform by way of less taxes and increased community services. As the Bard himself wrote, We know what we are, but know not what we may be.
In truth, the Alabama pension system is broken. The state now pays more than $1 billion per year toward the debt and that’s only going up. Alabama’s pension debt is skyrocketing despite huge, ever-increasing cash infusions from taxpayers and there’s no end in sight. Sadly, taxpayers’ children and grandchildren will be picking up the tab for Alabama’s pension debt 30 years from now. And the longer Mr. Bronner and the Retirement Systems of Alabama (RSA) thwarts efforts to fix the problem, the more debt the state racks up for future taxpayers.
As Alabama House Representative Lynn Greer stated in an editorial, “The haze of misinformation surrounding the debate often obscures the reality: the state has at least a $15 billion funding gap that will not be closed until 2050, at the earliest…state leaders have a duty to ensure a solvent pension system for public employees and retirees. They also have a duty to protect future generations of Alabamians from inheriting a fiscal catastrophe.” In short, Alabama needs a new retirement system for public employees that won’t bankrupt the state and better protects taxpayers.
For every new employee the state hires into the current system, it makes a likely 60-year pension commitment in which it doesn’t have the funding to guarantee. As Rep. Greer pointed out, the pension system is currently guaranteeing 8 percent returns and taxpayers are making up the difference when the market falls short. RSA’s approach is an act of faith, which depends on smooth sailing and no hiccups in the market for the next 30 years. As any economist will tell you, this is not realistic nor responsive to the market.
As in many states (including Pennsylvania, more than $66 billion in pension debt, which Mr. Bronner held up as a shining example of having accomplished pension reform) pension debt is the Pac-Man of the Alabama State budget; it’s chewing through funding for other essential programs and services. Skyrocketing pension costs are choking out funding for every key service including schools, higher education, public safety, corrections, transportation and Medicaid. Just last year “state parks and driver's license offices were closed, road projects were threatened, and law enforcement offices braced for lay-offs. All the while, Alabama's public pension system received nearly $1 billion from taxpayers,” according to Greer.
Earlier this year, Rep. Greer and the Joint Committee on Alabama Public Pensions recommended the creation of a retirement plan for new public employees that would virtually eliminate the risk of future pension liabilities going forward, providing sufficient retirement security for new workers. And importantly, the plan wouldn’t cost taxpayers anything more. Instead it better guarantees the state can meet its current obligations to current employees and retirees.
Not all pension reformers are out for the money, as Mr. Bronner will have you believe (in fact, the plan recommended by Rep. Greer and his committee clearly established that RSA would control and manage every penny of the money invested, both under the old plan and the new). Some of us are merely former state and city leaders who have seen firsthand the financial catastrophes brought about by spiraling out-of-control pension debt. We have been in the trenches and know what it takes to reform state and municipality systems, saving taxpayers billions of dollars, while protecting every penny earned by public employees. It can be done.
We’ll leave you with one more Shakespeare quote that we feel is fitting for the anti-pension reform rhetoric currently taking place in Alabama and elsewhere throughout the country, which is: Our doubts are traitors and make us lose the good we oft might win by fearing to attempt.