By Sen. Arthur Orr
and Rep. Jamie Ison
The Alabama Legislature this week passed a package of pension reform bills we sponsored that will significantly improve the finances of the Retirement Systems of Alabama and also bring a measure of accountability to the benefits that state government pays its workers.
Currently in Alabama, state employees are allowed to retire at any age as long as they have at least 25 years of creditable service, and those who are at least 60 years old may begin receiving pension benefits with at least ten years of employment under their belts.
Allowing workers to retire in their 40s and 50s with full benefits has resulted in many retirees accepting long-term benefits for decades longer than the system was built to withstand. It is not uncommon for employees to draw retirement benefits for years longer than they ever worked for the state. The practice has led to our retirement system being severely underfunded and RSA demanding larger amounts of General Fund and Education Trust Fund appropriations than the state can afford to pay.
Since 2001, taxpayer contributions to the state employee pension fund have tripled, rising from $330 million to almost $1 billion this year. If allowed to continue unchecked, funding will have to increase by 77 percent over the next eight years in order for RSA to continue operating at its current pace. Without needed changes being made, the state retirement system could be in serious straights within a decade or two.
Realizing the problem had the potential of crippling our already stressed state finances. We worked with RSA Chief Executive Officer David Bronner and Gov. Robert Bentley’s Office in order to come up with a solution. These gentlemen and their staffs were invaluable to the process.
It was quickly agreed that any reforms would have to apply to new hires only as we felt it unfair to discuss the existing benefits accrued by those already retired and those currently employed. Retirement is a safety net that many people depend upon to help them get through the years when they can no longer work, and removing that safety net from those who have planned and budgeted and need it most borders on immoral, in our opinion.
Instead, we agreed that the revised benefits package would apply only to those hired after Jan. 1, 2013.
The new retirement offering, while still generous, puts a safety valve on the RSA finances and removes decades of pressure built over the years by too many young retirees, too many cost-of-living adjustments being awarded and too little return due to the stock market declines.
Under the recently passed provisions, employees enrolled in RSA will be required to work until at least age 62 before retiring with the minimum separation age for law enforcement personnel and some other first responders being set at 56 years old. Rather than applying the highest paid three years of an employee’s salary to calculate retirement benefits, the average of the highest five years will be used. A reduction in the employee’s contribution to the retirement system, which reflects the reduced benefits, will, however, result in higher take-home pay.
Estimates indicate that passage of this bill will save the state roughly $5 billion over the next 30 years – or about $162 million annually.
Another bill in the pension reform package will prevent long-serving public employees and state officials from drawing taxpayer-funded retirement benefits after being found guilty of crimes involving corruption, bribery or other violations of the public trust.
Too often in recent history corrupt public officials have continued to collect taxpayer-funded retirement benefits even after being convicted and imprisoned for the crimes they committed.
Former Two-Year College Chancellor Roy Johnson, for example, pled guilty to 15-counts of bribery and conspiracy charges involving his public position, yet he still receives his substantial retirement check each month while sitting in a South Carolina federal prison. There are several cases of public school teachers convicted of sexually abusing students also collecting retirement benefits while serving prison sentences for the horrific acts they committed. It is our hope that knowing the retirement benefits they earned over years of public service are on the line will make officials and employees think twice before succumbing to temptations and committing corrupt acts.
Sen. Arthur Orr, R-Decatur, is currently serving his second term in the upper chamber representing Morgan, Madison and Limestone counties. He chairs the Senate Finance and Taxation General Fund Committee. Rep. Jamie Ison, R-Mobile, is currently serving her third term in the lower chamber representing Mobile County. She chairs the House State Government Committee.