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Quick Fixes a Danger to State Employee and Teacher Pensions

By State Senator Cam Ward

There’s been a lot of chatter over the past year about pension reform in Alabama, both from legislators and outside groups. This chatter has been fueled by concerns about the size of the Retirement System of Alabama’s (RSA) unfunded liability and the total amount the state pays in every year.

There’s just one thing missing from these conversations. We’ve already enacted major pension reforms. In 2011 and 2012, the Alabama Legislature increased the employee contribution rate, reduced benefits for new employees, and eliminated a costly post-retirement incentive program. The reduction in benefits for new employees alone is estimated to save four billion dollars over the next thirty years and tied with Pennsylvania as some of the most extensive reforms in the nation.

I supported these reforms because they would ultimately reduce the taxpayer’s burden, would still provide a decent retirement benefit for new employees, and would protect the retirement benefits promised to current employees and retirees.

I’m skeptical of new “reforms” being discussed in the legislature. These new bills promise to instantly save the state money. That is not true and is in fact very risky. The unfunded liability (which represents the majority of the state’s current contribution) can’t be reduced because it represents promises made to current employees and retirees. We promised to provide them benefits and we intend to keep that promise. Luckily, we have enacted measures to pay down this unfunded liability. We also have time. In the meantime, RSA has billions of dollars in assets and investments that are used to pay out current benefits owed.

The only way to save any more money is to further reduce the benefits for new employees and teachers. We’ve already done this once. To do it again could hinder our ability to recruit qualified professionals.

A public pension is like a big ship. It takes time to turn around and there are no instant fixes. However, we’ve had a few years for the recent reforms to take effect and seen some improvements. RSA estimates that the state has already saved millions since 2013. And the state is contributing less than it did in 2009. After a steady decline in funding levels after the 2008 recession, RSA’s funding level went up in 2014. And again in 2015.

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We are on the right path. We just need to give the current reforms time to work.

Cam Ward
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