The Alabama public pension system is broken. The state pays more than $1 billion annually—requiring huge, ever-increasing cash infusions from Alabama taxpayers—and yet the debt still continues to skyrocket.
For every new employee the state hires into the current system, it makes a lifetime pension commitment in which it doesn’t have the funding to guarantee. It’s a never-ending cycle that requires taxpayers to continually dump money into a system that has no hope of catching up. Simply put, the system needs to be fixed.
That’s why the Retirement Security Initiative this week is recognizing six members of the Alabama Legislature’s Joint Committee on Public Pensions. In a 6-2 vote, these members last week recommended structural reform to the state’s pension system, specifically a cash balance plan, which would be implemented for future state employees. The legislative members include: Sen. Paul Bussman, Sen. Trip Pittman, Rep. Danny Garrett, Rep. Lynn Greer, Rep. Jim Patterson and Rep. Phil Williams.
Recognizing that Alabama needs a system that is much less risky for taxpayers, but still works to ensure adequate retirement security for public workers, these committee members voted for a cash balance plan, which has proven to be fair and stable in other states and won’t cost any more than Alabama’s current plan. At a minimum, the cash balance plan cuts future risk in half, while guaranteeing a 4 percent return (right now the pension system is guaranteeing 8 percent returns and taxpayers are making up the difference when the market falls short). The plan eliminates most of the risk for taxpayers going forward while ensuring that new workers have adequate retirement security.
The committee last week also agreed to other recommendations on pension governance and financial transparency in an effort to get the state’s pension system back on track. Their goal is to keep the promises made to current public employees and retirees, while protecting Alabama’s taxpayers.
The Alabama Public Pension Committee members are RSI’s Heroes of the Week for their work toward more sustainable pensions and a fiscally responsible state government.