Wednesday, 08 February 2012 16:16

Louisiana State Employees Retirement System Needs Reform Badly

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legislature_jvlastnews_thumbMaybe now we know why the Louisiana State Employees Retirement System’s investment return barely beat that of a risk-free 30-year U.S. Treasury bond over the past five years – because its top officers aren’t very good critical thinkers, as evidenced by the sloppy, if not illogical, arguments they try to make against reforms proposed for the state’s retirement system for most of its non-education employees. Or maybe this display of intellectual piffle shows they're just desperate to stop an erosion of their power and privilege.

Gov. Bobby Jindal has proposed altering regulations regarding LASERS, one of the four state (major) retirement funds and which is responsible for about a third of the unfunded accrued liability taxpayers must face (inflated in no small part by its failure in recent years to achieve its stated target of an 8.25 percent rate of return on its roughly $10 billion investment portfolio). These would have current employees pay 11 percent rather than 8 percent of their pay into retirement (the private sector average is 18 percent), and calculate the value of their defined benefit pensions (which few in the private sector offer any more) on the average of their (usually last) five years instead of three, and in addition for future employees raise the retirement age for most jobs from 55 to 67 (matching the regular retirement age for Social Security), and enroll them in a defined contribution systems that acts like an individual retirement account (which most private sector employees now offer).

Dim bulb #1 is LASERS Executive Director Cindy Rougeou, who complained that these kinds of changes ultimately would constitute a change of provisions that “would violate the constitutional restriction against impairing existing benefits.” She further declares that, because LASERS is the only state system about which these kinds of changes have been contemplated, that these changes are not comprehensive enough to merit adoption, and she promises “protracted litigation” over the matter.

As of this posting, LASERS had not deigned to issue on its website a copy of the letter to Jindal in which Rougeou’s sentiments had appeared, but perhaps the document would explain exactly which part of the Constitution is allegedly violated. The only sentence that even comes close to what she claims appears in it is found in Art. X Sec. 29, which reads, “the state shall guarantee benefits payable to a member or retiree or to his lawful beneficiary upon his death.” That’s a stretch to say that there is some blanket right of employees make a specific dollar amount claim for a generality, but let’s take at her word that this means for current employees when they retire the periodic monetary payout calculated under the present formula cannot be reduced.

But there’s nothing about Jindal’s proposal that does that. The three percent increase comes from current salary – it doesn’t cut benefits down the road at all. Nor does the calculation of the benefit level on five rather than three years – it shifts the baseline in an indeterminate way. The only proposal that could fit that interpretation would be to force employees to work as many as 12 extra years to draw full retirement, as that would imply the amount you would get at 55 is zero, which is lower than what currently would be drawn – except that this proposed change makes this voluntary for current employees. It’s a mystery to clear thinkers from where Rougoeu, who does not dispute that these alterations would pay down the UAL, draws this conclusion.

Perhaps it’s because she has a problem making logical concatenations, as shown by her argument about a “comprehensive” solution. By stating this as an objection to the changes, she implies that there is no benefit, and perhaps even harm done to paying down the UAL by their implementation without applying it to all systems. But isn’t something that addresses 35 percent of a problem better than not addressing the problem at all? So just because something beneficial is done to rectify a part of the problem and not all of it means it shouldn’t be done at all? How can Rougeou state this an as objection in any logical sense? If she didn’t mean that, then why even bring it up?

While lack of adequate argumentation from a top administrator living off taxpayers should evoke pity from observers, she merits scorn for the scorched earth tactic she threatens – using potentially millions of dollars of state employees’ and taxpayers’ money to litigate against the changes, which rest on that inadequate argumentation in the first place. Like a thug with a weapon protruding from under a coat, she chose those words to try to coerce policy-makers into abandoning these reforms.

Joining her in her lack of constitutional literacy is her subaltern LASERS associate director Trey Boudreaux. He amplified a statement of hers that insinuated Jindal personally was on a vendetta against LASERS employees, “picking on them because they have no voice.” The argument here appears to be that classified state employees, who comprise members of LASERS, constitutionally cannot run for office (except for the employee spot on the State Civil Service Commission), hold a party office, take part in party affairs including fundraising, work on behalf of a candidate including making donations, or make public expressions about policy. That is, relevant to this issue, these employees cannot formally organize to express an opinion publicly.

However, there’s a wonderful concept both in the state’s and U.S. Constitution that perhaps Rougeou and Boudreaux ought to inform themselves about that serves as the ultimate political voice of all eligible citizens, state employees included. It’s called voting, and if state employees wish to support or oppose these changes, they have a chance to evaluate candidates on the basis of actions and statements dealing with this issue, and vote accordingly. Better, nothing prevents them from privately telling officeholders and candidates this, and in a private setting telling any other eligible voters their feelings on the issue in the hopes of persuading them. Since it’s a pretty safe bet Rougeou and Boudreaux learned at some point that the state (despite the efforts of some) is a representative democracy, it’s just sheer stupidity on their part to claim LASERS members have no “voice” in all of this and thereby are targeted, if not unfairly treated.

You might think the brass would want to see their agency’s assets steered to solvency on behalf of taxpayers, but their loyalty seems to lie more with present and future retirees in trying to see that special interest has the maximum benefits for the least amount of contribution. It may be the current criticisms are a political strategy to create a firewall against the change that really scares them – the replacement of the defined benefit plan (which has been defended time and again by Rougeau, most recently here) with a defined contribution plan for new employees. As this would remove future assets from being under their control, to bureaucrats such as these this represents a loss of power and prestige. They figure if they can defeat these measures, or perhaps use them as a bargaining chip, they can forestall implementation of the change in philosophy in benefits administration – even as other states and local governments continue to make that change in accelerating numbers.

It would be one thing to try to argue against the changes because they wouldn’t lower the UAL and thereby relieve the burden on taxpayers – but they can’t – or that such changes create an unfair burden to state employees – next to impossible given the gravy train of compensation and benefits Louisiana state employees generally enjoy relative to their private sector counterparts in jobs requiring similar responsibilities and skills. But it’s another to argue so weakly, by forwarding irrelevancies, illogic, and straw men, as to raise legitimate doubts about the capabilities of these people to give taxpayers their money’s worth, or perhaps serving as a sign of desperation in their opposition indicating just how completely they have thrown in their lot against taxpayers.

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by Jeffrey Sadow, Ph.D..Read his daily blog Between the Lines

Jeffrey Sadow

Jeffrey Sadow is an associate professor of political science at Louisiana State University in Shreveport.   He writes a daily conservative blog called Between The Lines | This email address is being protected from spambots. You need JavaScript enabled to view it.

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