States cutting benefits for public-sector retirees

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The security guards at the headquarters of New Jersey’s pension fund have never seen anything like it before: lines of public employees extending out the door and into the street.

Day after day, workers come in droves to apply for retirement. They often line up before dawn.

The rush has been set off in part by Republican Gov. Chris Christie’s campaign in this cash-strapped state to make government employment – and retirement – less lucrative.

Since 2008, New Jersey and at least 19 other states from Wyoming to Rhode Island have rolled back pension benefits or seriously considered doing do – and not just for new hires, but for current employees and people already retired.

After telegraphing his intentions for months, Christie spelled out the details of his proposal Tuesday. They include: repealing an increase in benefits approved years ago; eliminating automatic cost-of-living adjustments; raising the retirement age to 65 from 60 in many cases; reducing pension payouts for many future retirees; and requiring some employees to contribute more to their pensions.

“We must reverse the damage caused by fairy-tale promises that have fattened benefits and pensions to unsustainable levels,” the governor said.

To be sure, the looming benefit changes are not the only reason many public employees in New Jersey are retiring. Some say they want out for the usual reasons – to spend time with the grandchildren or go fishing, for example – or complain that government layoffs and other cutbacks are making work unbearable. But other employees figure that by retiring now, they can lock in certain benefits before it is too late.

William Liberty started as a trash collector in Lindenwold 37 years ago and worked his way up to a job as public works supervisor. But his pay has been frozen for two years and he has to take an unpaid furlough day a month. And given Christie’s pension cut proposals, “it’s going to get worse,” Liberty said.

He hoped to keep the job until he turned 65. But at 62, he went last week to the state pension office to see about retiring soon.

Christie has warned that New Jersey’s pension fund will go belly up unless something is done to close the $46 billion gap between how much the state expects to bring into the system and how much it has promised to workers. Other states’ pension funds are in shaky condition, too.

The Pew Center on the States reported this year that in eight states, at least one-third of the future pension obligations for all public employees, including teachers, are unfunded. As of 2008, Pew said, state and local governments had pension obligations totaling $3.35 trillion – $1 trillion of that not covered by the future stream of government and employee contributions specified under current law.

Only four states – Florida, New York, Washington and Wisconsin – had fully funded pension systems as of 2008.

Part of the reason for the gap is that in tough times, states often skip paying their share into retirement funds. New Jersey, for instance, is skipping its $3.1 billion in payments this year. The problem is compounded when investments lose money, as many have in recent years. In 2008, for instance, the Pennsylvania State Employees’ Retirement System fund had investment losses of nearly 29 percent – the worst in the country.

In the past, states have been more likely to reduce pensions for incoming employees, while generally leaving the benefits of current workers and retirees untouched. That strategy can be a way around objections from unions and lawsuits from those who say the government is reneging on promises.

Keith Brainard, research director for the National Association of State Retirement Administrators, says it may be unprecedented that so many states at once are raising employees’ pension contribution rates.

Among the developments around the country:

– In Mississippi, employees of state and local governments and school districts are now being required to put 9 percent of their pay into the state retirement system, up from 7.25 percent.

– Rhode Island in 2009 reduced cost-of-living increases and tightened eligibility requirements for retirement. Previously, employees could retire with 28 years of service. Now, those already employed by the state will have to meet a new standard that takes both age and years of service into account.

– In Wyoming, as of Sept. 1, employees will have to start paying 1.4 percent of their salaries into a pension fund – the first time in a decade the workers have had to contribute anything.

– Vermont earlier this year changed the retirement age for many current employees. They must be 65, or their age and years of service must add up to 90. Previously, retirees had to be 62 or have 30 years of service at any age.

– Lawmakers in Colorado, South Dakota and Minnesota rolled back cost-of-living increases this year for public employees who already have retired. In Colorado, retirees had gotten 3.5 percent annual increases. They are getting no increase at all this year, and future ones will be capped at 2 percent.

Legal challenges to the cuts have been filed in all three states.

“Whether legislatures have the power to change benefits for people who are already in the system, that’s a tough question,” said Ronald Snell, an analyst for the National Conference of State Legislatures who monitors public pension issues across the country. “It’s unresolved in a lot of places.”

Unions are on guard against the benefit cuts – and the implication that workers are to blame for states’ financial messes.

“What we don’t need is more scapegoating of public service workers and their benefits,” said Matt O’Connor, a spokesman for the Connecticut State Employees Association.

In some states – including South Dakota and Mississippi – public employee retirements are up by more than 20 percent, though it is not clear whether changes to pension programs there are a factor.

The retirement rush is even more dramatic in New Jersey, where by the end of July nearly 18,000 employees in the three biggest public worker pension funds had retired or declared their intent to retire this year. That is up almost 50 percent over all of last year, and several union leaders and workers considering retirement said that possible pension changes were a factor.

The exodus could end up hurting the pension funds, because retired workers will be making withdrawals, not deposits into the system.

Mike Ryer, a firefighter in Morris Township, was among employees in line at the New Jersey pension office around dawn one morning this summer, considering whether, at 59, he was in financial shape to retire after 32 years. He is afraid of changes in his benefits and also figures his retirement now might save a younger colleague from layoff. If he stays, he faces a smaller department and a bigger workload.

He blames Christie for driving him out.

“It’s hard to understand why all of this had to come at once,” he said.


Haigh reported from Hartford, Conn. Contributing to this report were Associated Press writers Steve Paulson in Denver; Ben Neary in Cheyenne, Wyo.; Michelle Smith in Providence, R.I.; Chris Williams in Minneapolis; Dirk Lammers in Sioux Falls, S.D.; and Emily Wagster Pettus in Jackson, Miss.

One Response to States cutting benefits for public-sector retirees

  1. T hink before you act for your cry for cuts and or eliminate our pay benifits we have worked our lives to be able to stand in line to collect now Ask yourself if youworked to get hired into a career that was like nine jobs and everyone but you was your boss’s where you would have to work for 30 to 40 years after having hurdles of being hired in the first kept the job or career for all those decades without layoff or what ever buzzwords they call being pink slipped then you finally qualify for your
    retiement and the youth or some democrat cut and threaten to take away or not pay you are as bassa ckwards crazy . If you do this and make cuts to people who worked their lives
    those men and women you not only destroy their lives ,hopes and dreams they have banked on for all their careers you will be cutting your own benifits and rights to your work efforts once you reach retirement age so buddy you will some day regret those actions one way or anothers you are affecting by your cuts with the whisp of a pen. Thnik before you act people.
    the youth of our country know not the struggle each and every one of those retirees went through
    the lean years when the wages were $1.75 a hour when we started 30-40years ago to todays
    years where no one got a raise for several years we earned those dollars you are trying to nix.
    you will suffer the same fate you impose on our years of labours you doom yourself to the very
    repeat of cuts come your time so it might look good on paper but you forget inflation and devaluation of
    the very dollar you are cutting are worth less today so if you cut anything look to eliminating waste
    in government spending and leaders taking 500k trips to europe before you ever touch anyones retiement income for when your time comes the dollar wont be as forgiving and the youth then will be as just as you are now. think before you cut budget money I dont think the presidents gonna stop taking trips to europe specially if he gets reelected. best cut where governemnt wastes .
    Leave the change they so easily speak of as huge payoffs we earned those dollars just as sure you will be expecting your retirements be intact when you reach our age and unable to work further
    to replace those dollars you call unaffordable people laboured to hard for decades for those
    promised earnings done without for years only to have some bureaucrats and some small minded
    youth swayed by thier paycheck cuts cuts should come from big government not pensions for where you think they are coming next once the pensions and entitlements are gone no where but in your
    incomes checks they call it tax hikes their pay has not decreased since congress voted itselfinto
    existence think about how government wastes then think how they can cut their pay when they cant pass a nations working budget ontime before you take from your own elders retirements.
    Cuts ifrom people retirment earnings are just a politicians way to avoid government cuts within
    if they were forced to change their watseful spending they could find way more money and lighten the load on all our taxes far more than any reitement account cuts. think how much money is pumped into FBI and pentagon budgets its more than thirty poor nations entire yearly income budgets in just those two no to mention the militarys all nine offices budget spending we have over 550k military
    men and women in themilitary and we cant even inforce our own borders yet they spend billions a month on a remote foreign long term war no one wants to fund. stop the madness before you cut someones earned income.

    retired reneging Democrats
    September 15, 2010 at 11:42 am