State pensions still broken
To the Editor:
It just needs to be said. Don’t allow the hype about the recently passed pension bill to mislead you. The General Assembly has failed the taxpayer, again. While the measure to reduce the cost of living adjustment provides near term savings, it is a drop in the bucket of the reform necessary to provide meaningful taxpayer relief. But, real relief obviously wasn’t their objective.
The bill’s measure to increase the retirement age is deceiving. It still allows state employees and teachers currently age 45 and older to retire with a full pension at the age of 60, or as young as age 55 with 30 years of service.
The savings provided won’t be fully realized for years. Moreover, the bill did little to rein in the generous monthly pension except to establish an $110,000 per year cap on which a pension is based.
Monthly pensions will still be determined as the product of 2.2 percent for each year of service and the employee’s or teacher’s average of their high 48-month incomes (high-48) (high 120-month for new employees). Thus, 20 years of service yields a monthly pension of 44 percent of the high-48/high-120 up to the new cap, 30 years of service yields 66 percent and so on up to 75 percent maximum. In contrast, a 30-year state pension is double the benefit a private sector employee can expect from Social Security for a comparable middle income high-48.
As might be expected, General Assembly members are provided with an even more generous pension which is capped at 85 percent of their final salary after 20 years of service and which can begin at age 55.
It should not come as any surprise that the majority of the pension system’s cost has been allotted to the taxpayer. This reality is the primary reason for the so-called temporary state income tax rate increase from 3 to 5 percent imposed in 2011.
But despite this reality, the new bill reduced the employee’s/teacher’s contribution by 1 percent instead of increasing it by an appropriate amount to at least achieve funding parity with the taxpayer’s contribution. As it stands, don’t expect the 3 percent income tax rate to return any time soon, if at all. The state pension system is still broken.
It is time for the taxpayer, and notably the private sector, to elect members to the General Assembly who will work for real pension reform.