By Brandon Moseley
Alabama Political Reporter
Alabama Governor Robert Bentley(R) announced that he will hold a news conference in Huntsville Monday to provide details of a proposed Voluntary Retirement Incentive program for eligible state employees.
Joining Governor Bentley will be joined by Speaker of the Alabama House Mike Hubbard (R) from Auburn, Alabama Senate President Pro Tem Del Marsh (R) from Anniston, and state Representative Mac McCutcheon (R) from Capshaw.
Alabama has a defined benefit pension program. As state employees accumulate years of service and increased pay the state is obligated to pay them an ever increasing pension benefit in their retirement years. Alabama’s pension fund (Retirement Systems of Alabama) is one of the poorest performing pension funds in the country over the last decade. Buying out current employees means that they will stop accruing additional pension benefits and the state can save considerable money by replacing those employees with new employees who are lower on the pay scale than the veteran employees they replace.
Since the state of Alabama has a defined benefit plan instead of a defined contribution plan, the state is obligated to guarantee that the fund grows at 8% a year. According to the Alabama Policy Institute (API) since 2003 the cost to taxpayers of maintaining such a generous program has increased from $263 million a year to $999 million.
The Alabama Policy Institute has suggested that enormous cost savings can be generated by switching from a defined benefit plan to a defined contribution plan like a 401 (k). API wrote, “The “transition costs” of reform can be handled through buyouts and one-time government borrowing. By buying out its current employees and closing the state’s DB plan, the state could transition to a DC plan immediately.”
The state largest education employees union, the Alabama Education Association (AEA) does not support an employee buyout plan. AEA Executive Secretary Dr. Henry Mabry said in a written statement “It is difficult to see how a retirement buy-out can be offered at a time when our schools have experienced 12,500 fewer educational employees, pay cuts, and benefit cost increases.”
Governor Robert Bentley said, “I believe it would allow young teachers looking for jobs right now a chance to get a job. And those teachers looking to retire would have an incentive to retire.” Bentley has said that the state could save $100 million if just 5,000 highly paid veteran teachers would retire providing jobs for 5,000 new college graduates.
Secretary Mabry said, “We encourage Gov. Bentley to consider the importance of experience in our public schools. Consider the numerous intangible benefits of having teachers with decades of experience instilling a healthy environment for stability, discipline, and efficiency in the classroom.”
Monday’s news conference will be in the Mark C. Smith Library at the HudsonAlpha Institute for Biotechnology 601 Genome Way NW Huntsville, AL.
Governor Bentley has promised the people of Alabama that he will cut the size of Alabama government by over $one billion in his first term as the state’s governor.