Retirement rumble ready to roll

This is an archived article that was published on sltrib.com in 2010, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Depending on whom you talk to, the state retirement system that covers 182,000 current and former public employees is either a toxic mess, or a system that suffered a setback but doesn't need an urgent overhaul.

That disagreement -- surely to be one of the defining battles of the 2010 session -- will be thrust into the forefront in the coming days as Sen. Dan Liljenquist, R-Bountiful, plows ahead with his bills to restructure the retirement system, and the public employee unions push back with opposition from the thousands of members they represent.

The economic slump cost the state 22 percent of the pension fund's overall value and blew a $6.5 billion hole in the long-term needs.

The state can either keep pumping $400 million into the system -- enough to hire 8,000 new teachers -- or it can change the system to ensure its long-term stability.

"I kind of look at this like a chemical spill," said Liljenquist. "This is a disaster that has already happened. The cleanup is going to be extraordinarily expensive for a long time, so the first thing you do is contain it ... and then over time [clean it up]."

A set of bills Liljenquist is proposing would essentially do away with the state's defined-benefit pension system for new employees. Instead, those hired after July 1, 2011, could either put 8 percent of their salary into a 401(k)-style program, or put part of it into a defined benefit pension plan with greatly reduced benefits.

That would shift the risk posed by any future economic crisis from the state and taxpayers to the workers and, over a long period of time as workers die, reduce the state's obligations to retirees.

Current state workers, Liljenquist stresses, would not see major changes.

"We are going to meet 100 percent of our obligations to current employees," he said. "I can look my neighbor in the eye who's 15 years in [as a public employee] and say, 'I'm doing this for you.'"

The public employee unions say it is expected for the retirement system to appear shaky after the economic crisis, but they say it will recover over time and want to make sure any changes are well-researched and don't harm employees.

"In a nutshell, we're willing to look at the long-term stability of the system and what needs to be done to make sure the system remains solvent," said Kim Campbell, president of the Utah Education Association. "But before we do anything drastic, let's take a hard look. We don't think it's time for such drastic proposals."

Audry Wood, executive director of the Utah Public Employees Association, said everyone recognizes the damage done by the economic downturn, and they are not opposing changes, if they are needed.

But it took 80 years to build the pension system, she said, "and in one legislative session we're going to go ahead and change it?"

Wood said reducing the employee benefit package for new workers will make it harder to recruit good employees to do hard jobs like patrol streets and protect children.

"What type of employees are you going to be able to recruit offering benefits like that?" she asks. "You're going to have crappy benefits and crappy pay?"

Liljenquist's bills also would remove the mandatory 30-year retirement date for police and firefighters, allowing them to stay on the job longer and earn retirement credit for their service.

It also seeks to stop pension payments to retired workers rehired by state or local governments, a practice known as double-dipping. Those current double-dippers would not be affected.

An audit of the retirement system finished late last year showed the double-dipping would cost the state $897 million in the coming decade.