Public Pensions have been in the spotlight in Louisiana during the past few years. In 2012 Gov. Bobby Jindal, who had described the state’s retirement system as “inefficient, expensive and outdated,” signed legislation providing that new state employees would be put in a cash balance plan instead of the traditional defined-benefit coverage existing employees enjoy.1 The move was challenged as a violation of a provision in the state constitution requiring a two-thirds vote of the legislature on certain pension changes. That argument was upheld by the Louisiana Supreme Court.2 Jindal and other proponents of the cash balance approach plan to try again.
While many pension numbers are bandied about, the central issue is how much of an obligation is being taken on each year to provide benefits for current government employees such as teachers and first responders. The best way to measure this is to use an amount known as employer normal cost. Such costs can be found in the annual financial reports that each public pension plan has to produce. In the case of Louisiana there are two main plans administered by the state: the Louisiana State Employees’ Retirement System (LASERS) and the Teachers’ Retirement System of Louisiana (TRSL). The most recent nancial reports indicate annual employer normal costs of $132.3 million for LASERS.3 For TRSL the figure is $216.1 million.4 The total is thus $348.4 million.
How should this amount be viewed? One approach is to compare it to the financial costs incurred by the state in supporting business through economic development subsidies and other special tax provisions. While not providing an assessment of the effectiveness of any particular subsidy or provision at achieving targeted policy objectives, such as creating family-wage jobs, this approach does provide an important perspective on public sector pensions.
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