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Utah's public employee retirement system appears headed for the most dramatic overhaul in decades, as the House on Friday approved a revised version of the bill.
It is a move that both advocates and opponents of the change say means the retirement battle is over, with an expected vote in the Senate on Monday a mere formality.
It was one of the few hard-fought public struggles this session, as thousands of public employees mobilizing against the change and its proponents warned of dire consequences if they were not adopted.
"Pensions are a contagion. They affect everything we do in government. They affect every financial decision we make as a Legislature," said House Majority Whip Brad Dee, R-Ogden. "If we do not change the direction, we are going to go broke. Now is that the message you want to send to your employees out there today? 'Good luck. We're going broke.'"
The House passed the bill 46-26, as scores of firefighters and police officers who had lobbied against the changes looked on.
The proposals would not affect current employees. Those hired after July 1, 2011, would no longer be eligible for the defined-benefit pension. Instead, they could choose between a slimmer 401(k)-style contributory benefit, or a hybrid system that offers a limited guaranteed benefit and a small 401(k).
The upshot is that the state will only pay 10 percent of future employees' wages toward retirement, compared to the 16 percent it pays now. That will ease the state's future liability to the retirement system, which, after the economic crisis, is facing a $6.5 billion unfunded long-term obligation.
"I'm delighted," said Sen. Dan Liljenquist, R-Bountiful, who spearheaded the retirement reform for the past year.
He said the Senate will agree to changes made in the House next week and send the bills to the governor.
Kory Holdaway, the government relations director for the Utah Education Association, indicated the House passage probably means the unions have lost the fight against the retirement changes.
"We feel like we pushed back pretty hard," he said. "It's not as good as it could've been and not as good as should have been, but the current employees looked out for the faces yet to enter the profession and tried to protect their benefits."
The House also passed a measure that seeks to eliminate future "double-dipping," in which retired employees return to the work force and are able to draw a pension and a salary simultaneously. A legislative audit found the practice would cost $897 million over the next decade.
Under the new provision, a retiree can return to public employment after a year, have their pension suspended, and gain additional credit for the future, or receive their pension and no additional credit or payments into a 401(k).
The House spent about two hours debating the pension overhaul, making a handful of amendments that made the retirement benefit more generous.
Rep. Neil Hansen, D-Ogden, said that the Legislature was reacting to the abrupt economic downturn, but the market goes up and down, and the retirement system needs time to recover.
"It will rebound. We just need to give it time. We've seen it before," he said. "Eventually it will work itself out."
Sen. Dan Liljenquist's package of bills would replace the current pension plan with a kind of 401(k) plan; eliminate so-called double dipping in which a retired public employee comes back to work and draws a retirement check and paycheck; and extend the retirement eligibility for peace officers. The changes are prospective and largely leave current employees unaffected. Liljenquist said the changes are needed because the economic crash walloped the current system, creating a $6.5 billion gap in the long-term funds and obligations.